International finance

Simon Evenett, Johannes Fritz, 30 August 2016

In July, G20 trade ministers adopted nine 'Guiding Principles for Global Investment Policymaking'. This column introduces the latest GTA report, which shows how well the G20’s track record stacks up against these new growth-promoting goals.

Ina Simonovska, Joel David, 26 August 2016

The ‘excess co-movement puzzle’ in financial markets refers to the correlation of asset returns beyond what could be expected based on the common movements in fundamentals. Using international data, this column links excess co-movement in firm-level stock returns to the correlated beliefs of sophisticated investors. Co-movement is largely explained by investors’ reliance on common information – in other words, their lack of firm-specific information. This gives rise, in part, to the higher degree of aggregate market-wide volatility.

Gaston Gelos, Jay Surti, 19 August 2016

International financial spillovers from emerging markets have increased significantly over the last 20 years. This column argues that growing financial integration of emerging economies is more important than their rising share in global trade in driving this trend, that firms with lower liquidity and higher borrowing are more subject to spillovers, and that mutual funds are amplifying spillover effects. Policymakers in developed economies should pay increased attention to future spillovers from emerging markets, particularly from China.

Fabrice Collard, Habib Michel, Jean-Charles Rochet, 13 July 2016

Since the Global Crisis, sovereign debt levels have exploded in many OECD countries.  This column presents a new measure of government debt – maximum sustainable debt. This measure takes account of the fact that a shortfall in growth naturally increases the probability of default, while allowing for the possibility of rollover. Applications to recent data suggest that without sufficient institutional constraints, governments will generally borrow up to a level close to the maximum that can be sustained.

Friederike Niepmann, Tim Schmidt-Eisenlohr, 11 June 2016

To mitigate the risks of international trade for firms, banks offer trade finance products – specifically, letters of credit and documentary collections. This column exploits new data from the SWIFT Institute to establish key facts on the use of these instruments in world trade. Letters of credit (documentary collections) cover 12.5% (1.7%) of world trade, or $2.3 trillion ($310 billion). 

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