International finance

Marlene Amstad, Eli Remolona, Jimmy Shek, 28 October 2017

Global investors are assumed to differentiate between economies using economic fundamentals. This column uses returns on sovereign CDS contracts for 18 emerging markets and ten advanced countries to argue that fundamentals do not drive these decisions. Instead, most of the variation across sovereigns reflects whether or not the country is designated as an 'emerging market'. Investment strategies tend simply to replicate benchmark portfolios.

Sergei Guriev, Danny Leipziger, Jonathan D. Ostry, 17 October 2017

Globalisation and technological change present policymakers with tremendous challenges in sustaining benefits while containing the dislocations and polarisation that are plaguing many countries. This column argues that the answer is not to roll back these forces, but rather to redouble efforts to make globalisation genuinely inclusive. This involves thinking hard about the design and rules governing globalisation itself, including with respect to finance, but also with respect to trade. It also necessitates a recalibration of national economic policies that affect who benefits and who pays, and a host of complementary policies to mitigate exclusion and allow citizens to bounce back when dislocations occur.

Andrew Rose, 14 August 2017

Policymakers in small countries fear the ‘global financial cycle’ that is apparently driven by US fundamentals. This column argues, in contrast, that 25 years of financial data show that the global financial cycle has explained at most a quarter of the variation in capital flows in these countries. This result gives more wiggle room for small-economy policymakers, but it also means they cannot realistically blame the global financial cycle for domestic economic problems.

Tito Cordella, Anderson Ospino, 14 August 2017

While some studies suggest that financial globalisation increases volatility and leads to economic instability, others appear to show that it leads to more efficient stock markets, with higher returns but no increase in volatility. Using a new measure of financial globalisation, this column argues that, on average, it has no significant effect on stock market volatility in developed markets, but it decreases volatility in emerging and frontier markets, where domestic shocks are likely to play a relatively greater role.

Jacques Bughin, Jan Mischke, 04 August 2017

The economic narrative of the EU since the Global Crisis has focused on successive debt crises and persistent stagnation. This column addresses the accompanying, but less well studied, investment slump that occurred over the last decade, using evidence from an extensive survey of business decisionmakers across Europe. Business sentiment towards increased investment is affected not just by historic cash flows and expected future demand, but also the growth of digital economies as well as political concerns such as anti-Europe sentiment.

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