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This paper examines the co-movement among stock market prices and exchange rates within a three-country Centre-Periphery dynamic equilibrium model in which agents in the Centre country face portfolio constraints. In our model, international transmission occurs through the terms of trade, through...
Persistent link: https://www.econbiz.de/10005504325
We measure the amount of income insurance and cross-sectional consumption smoothing (lending and borrowing) achieved within subgroups of states, such as regions or clubs, e.g. the club of rich states. We find that there is as much income insurance between, as well as within, regions. By...
Persistent link: https://www.econbiz.de/10005504778
Our contribution in this paper is threefold. First, we survey the empirical literature on consumption smoothing mechanisms of regional economic shocks. Second, building on the work of Asdrubali et al. (1996), we present evidence on the role played by various smoothing mechanisms for specific...
Persistent link: https://www.econbiz.de/10005536894
We study how investability, or openness to foreign equity investors, affects firm value in a sample of over 1,400 firms from 26 emerging markets. We find that, on average, investability is associated with a 9% valuation premium (as measured by Tobin's q). However, in firm-fixed effects...
Persistent link: https://www.econbiz.de/10005424458
In the crises of 1980s, ever-increasing current account deficits, fueled by unsustainable economic expansions, were invariably the main cause of rising devaluation risk that eventually led to the reversal of capital flows. By contrast, in the 1990s, considerations of financial fragility and...
Persistent link: https://www.econbiz.de/10005434820
Banks act as maturity transformers, who take liquid deposit and invest in illiquid assets. In this classical framework, we introduce uncertainty in the asset returns. We show that banks can insure individuals against the risk of illiquidity at the cost of increasing the riskIness of their...
Persistent link: https://www.econbiz.de/10005398516
The paper analyzes the e
Persistent link: https://www.econbiz.de/10005463717
Considering the extent to which progress is being made with the integration of the European Capital Market, harmonisation of the taxation of income is becoming increasingly important. Efficient allocation of capital must not be hindered by inter-governmental tax differentials.Following more than...
Persistent link: https://www.econbiz.de/10005464779
Despite large potential gains, international equity investment is less diversified across countries than predicted by the international version of the traditional capital asset pricing model (ICAPM). This paper provides empirical evidence on the impact of capital market frictions on...
Persistent link: https://www.econbiz.de/10005467821
The paper analyzes the effect of European financial integration, especially of the EMU, on gross portfolio flows between Germany and 47 countries from 1987 to 2002. A gravity model of bilateral asset trade is estimated. The results reveal that there is substantially more portfolio trade between...
Persistent link: https://www.econbiz.de/10005467834