We develop a currency mismatch index and examine the causes of currency mismatchesin emerging market economies. This study is based on a unique dataset on 22economies from 2008 to 2017. We also construct the original sin index using granulardata on international debt securities. We find Latin American countries, followedby Central European countries, suffer from the original sin and currency mismatchproblems. The panel regression estimates show that country size, trade openness, andthe level of economic and financial development explain cross-country variations incurrency mismatches. Our empirical results suggest that unstable monetary and fiscalpolicies are the primary causes of currency mismatches. The results indicate that abetter institutional environment reduces currency mismatches. These findings call formonetary independence, stable fiscal policy, and macroprudential policy measures tominimize currency mismatches.

Purpose The purpose of this paper is to examine whether the emotions and sentiments related to the outcome of the sporting event influence the investment making process. Design/methodology/approach This study uses the data on stock prices of firms sponsoring the Indian premier league (IPL) teams and data on Indian stock market. The event-study frameworks along with autoregressive moving average and GMM regression are employed to empirical quantify the impacts of the performance of the IPL teams on the stock market returns of the sponsors’ stocks and response of Indian stock market to the outcome of T-20 international matches. Findings The paper finds that the team winning IPL title in a season has a positive impact on the returns of the sponsors’ stocks of a particular team, whereas loss of team has a negative impact on returns. The outcome of the cricket matches played by team India in the T-20 has a negligible effect on the Indian stock market. Practical implications The finding of the study implies the coexistence of emotions and rationality at different points in time and the relevance of adaptive market hypothesis to explain such time-varying behavior. Originality/value The present investigation is first of its kind to test whether the performance of the IPL cricket team can influence the stock returns of the sponsors. This research shows that sentiment related to sports event such as cricket influences the decision-making process and thus affects underlying stock prices.

We examine a theoretically robust but previously undocumented issue of what drives foreign portfolio investments into emerging markets. Foreign institutional investors (FIIs) are often blamed as fair-weather friends who pull out their investment at the first sign of trouble. Using a bottom-up approach, we explore this possibility. We demonstrate the influence of the firm-specific factors such as size, book to market ratio, the riskiness of the stocks, stock prices, dividend yield, liquidity, leverage, and earnings on the FII ownership. We find no evidence to show foreign investors as fair-weather friends. Instead, they are smart traders who follow a diligent investment strategy. We suggest reforms in corporate governance and improvement in financial fundamentals of the companies to attract FII ownership. Supplementary Information The online version contains supplementary material available at 10.1007/s40953-021-00233-3.

The emerging market economies (EMEs) are experiencing significant financial distress due to the rapid accumulation of foreign currency-denominated debt in recent years. We develop the foreign exposure indicators such as original sin and currency mismatches using a novel data set. Our computations suggest that Latin American economies suffer from the original sin problem, followed by Central European countries. We find a higher degree of currency mismatches in Argentina, Chile, Colombia, Indonesia, Poland, Mexico, and Turkey. The resurgence of currency mismatches and the Covid-19 pandemic is a stress test for monetary policy frameworks. We find that country’s size, inflation volatility, and exchange rate depreciation cause currency mismatches. We show that the currency mismatch and original sin problem are lower in countries following de-dollarization policies such as limiting debt exposure, effective monetary and fiscal policies, better institutional quality, and export openness. The EMEs need to adopt policies to control currency mismatches, which are consistent with their growth-oriented policies. We suggest the independence of monetary policy, the implementation of macroprudential policies, and the development of offshore bond markets in a local currency. These policies control currency mismatches without changing the growth orientation of the EMEs. South Africa, Hungary, and Asian economies hold lessons for EMEs in controlling currency mismatches.

This study examines the effect of global value chains (GVCs) on the association between gross exports and the exchange rate. To do so, we quantify the composition of the GVCs using output-related measures for sixty-one countries from 2007 to 2020. This approach is better than the existing measures in capturing all the linkages of GVCs. Second, we analyse the importance of GVCs on the link between gross exports and the exchange rate using an econometric techniquethe generalised method of moments. Our results show that GVC participation disconnects the exchange rate elasticity of exports. The empirical findings are robust and consistent across the sectors and income groups. Therefore, it is vital for policy-makers to consider the implications of GVCs while devising any policy related to exports. Keywords: gobal value chains, exports, generalised method of moments, exchange rate.*We would like to thank the Editor and the anonymous Reviewers for their insightful remarks and recommendations on the earlier version of the manuscript.