Abstract:This paper documents the evolution of international financial integration since the global financial crisis using an updated dataset on external assets and liabilities, covering over 210 economies for the period 1970-2015. It finds that the growth in cross-border positions in relation to world GDP has come to a halt. This reflects much weaker capital flows to and from advanced economies, with diminished cross-border banking activity, and an increase in the weight of emerging economies in global GDP, as these e… Show more
“…For instance, the majority of FDI claims and liabilities in large financial centres refers to Special Purpose Entities – i.e. entities that raise capital or hold assets/liabilities that typically perform no production – whose importance is also growing (Lane and Milesi‐Ferretti, )…”
Section: Empirical Analysismentioning
confidence: 99%
“…For instance, the majority of FDI claims and liabilities in large financial centres refers to Special Purpose Entities -i.e. entities that raise capital or hold assets/liabilities that typically perform no production -whose importance is also growing (Lane and Milesi-Ferretti, 2017). 17 Next, we used the credit to GDP ratio (Credit/GDP) and the real credit per capita (RealCredit/Pop) instead of Credit/Deposits as alternative proxies for liquidity.…”
The literature that investigates credit booms has essentially focused on their economic determinants. This paper explores the importance of political conditionings and central bank independence and provides some striking findings on this matter. Estimating a fixed effects logit model over a panel of developed and developing countries for the period 1975q1–2016q4, we find that credit booms are less likely when right‐wing parties are in office, especially in developing countries, and when there is political instability. However, they have not proven to depend on the electoral cycle. More independent Central Banks are also found to reduce the probability of credit booms. Moreover, they seem to be more likely to occur and spread within a monetary union.
“…For instance, the majority of FDI claims and liabilities in large financial centres refers to Special Purpose Entities – i.e. entities that raise capital or hold assets/liabilities that typically perform no production – whose importance is also growing (Lane and Milesi‐Ferretti, )…”
Section: Empirical Analysismentioning
confidence: 99%
“…For instance, the majority of FDI claims and liabilities in large financial centres refers to Special Purpose Entities -i.e. entities that raise capital or hold assets/liabilities that typically perform no production -whose importance is also growing (Lane and Milesi-Ferretti, 2017). 17 Next, we used the credit to GDP ratio (Credit/GDP) and the real credit per capita (RealCredit/Pop) instead of Credit/Deposits as alternative proxies for liquidity.…”
The literature that investigates credit booms has essentially focused on their economic determinants. This paper explores the importance of political conditionings and central bank independence and provides some striking findings on this matter. Estimating a fixed effects logit model over a panel of developed and developing countries for the period 1975q1–2016q4, we find that credit booms are less likely when right‐wing parties are in office, especially in developing countries, and when there is political instability. However, they have not proven to depend on the electoral cycle. More independent Central Banks are also found to reduce the probability of credit booms. Moreover, they seem to be more likely to occur and spread within a monetary union.
“…Lane and Milesi‐Ferretti () provide data for foreign assets and liabilities, and foreign debt assets and debt liabilities. From European Commission (AMECO database), we take data on trade balance, GDP at current prices, GDP deflator annual percentage change, real GDP growth rate and exchange rates .…”
Section: Empirical Analysismentioning
confidence: 99%
“…Net foreign assets and net foreign debt (both as percentage of GDP ), 1999–2015 Note : A positive value means a credit position for the NIIP but a debit position for the NED Source : Data from Lane and Milesi‐Ferretti () [Colour figure can be viewed at wileyonlinelibrary.com]…”
We assess the sustainability of the current account (CA) balance, net international investment position (NIIP) and net external debt (NED) in a sample of 22 EU countries using two complementary approaches. First, we employ time‐series stationarity tests of current account balance‐to‐GDP ratios as well as cointegration tests of exports and imports of goods and services. Second, we assess the level of trade balance that stabilises the NIIP and the NED. We find that there is sustainability of the CA balance in eight countries, NIIP in five countries and NED in 10 countries, whereas there is evidence of a lack of sustainability in five debtor nations and three creditor nations. Both approaches are consistent with each other given the relationship between flows and stocks, the existence of structural breaks, and valuation effects via exchange rate and interest rate changes.
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