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Begin New Search Publishing Institution Board of Governors of the Federal Reserve System Publication Year within 25 Years

81. International Diversification at Home and Abroad

Author:
Fang Cai and Francis E. Warnock
Publication Date:
12-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We analyze foreigners' and domestic institutional investors' positions in U.S. equities. Controlling for many factors, we uncover a common preference for large firms and firms that are diversified internationally. The domestic preference for internationally diversified firms implies that investors might obtain substantial international diversification by investing at home. Using an international factor model, we show that exposure to foreign equity markets is indeed greater for domestic firms that are more diversified internationally, suggesting that at least some of the home-grown foreign exposure translates into international diversification benefits. After accounting for home-grown foreign exposure, the share of 'foreign' equities in investors' portfolios nearly doubles, reducing (but not eliminating) the observed home bias.
Topic:
International Relations, Development, Economics, and International Trade and Finance
Political Geography:
United States

82. The High-Frequency Effects of U.S. Macroeconomic Data Releases on Prices and Trading Activity in the Global Interdealer Foreign Exchange Market

Author:
Jonathan H. Wright, Alain P. Chaboud, Edward Howorka, David Liu, Sergey Chernenko, and Raj S. Krishnasami Iyer
Publication Date:
11-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We introduce a new high-frequency foreign exchange dataset from EBS (Electronic Broking Service) that includes trading volume in the global interdealer spot market, data not previously available to researchers. The data also gives live transactable quotes, rather than the indicative quotes that have been used in most previous high frequency foreign exchange analysis. We describe intraday volume and volatility patterns in euro-dollar and dollar-yen trading. We study the effects of scheduled U.S. macroeconomic data releases, first confirming the finding of recent literature that the conditional mean of the exchange rate responds very quickly to the unexpected component of data releases. We next study the effects of data releases on trading volumes. News releases cause volume to rise, and to remain elevated for a longer period. However, in contrast to the result for the level of the exchange rate, even if the data release is entirely in line with expectations, we find that there is still typically a large pickup in trading volume.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
United States

83. Growth-Led Exports: Is Variety the Spice of Trade?

Author:
Joseph E. Gagnon
Publication Date:
11-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Fast-growing countries tend to experience rapid export growth with little secular change in their terms of trade. This contradicts the standard Armington trade model, which predicts that fast-growing countries can experience rapid export growth only to the extent that they accept declining terms of trade. This paper generalizes the monopolistic competition trade model of Helpman and Krugman (1985), providing a basis for growth-led exports without declining terms of trade. The key mechanism behind this result is that fast-growing countries are able to develop new varieties of products that can be exported without pushing down the prices of existing products. There is strong support for the new model in long-run export growth of many countries in the post-war era.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
United States

84. Can Long-Run Restrictions Identify Technology Shocks?

Author:
Luca Guerrieri, Christopher Gust, and Christopher J. Erceg
Publication Date:
10-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Gali's innovative approach of imposing long-run restrictions on a vector autoregression (VAR) to identify the effects of a technology shock has become widely utilized. In this paper, we investigate its reliability through Monte Carlo simulations using calibrated business cycle models. We find it encouraging that the impulse responses derived from applying the Gali methodology to the artificial data generally have the same sign and qualitative pattern as the true responses. However, we find considerable estimation uncertainty about the quantitative impact of a technology shock on macroeconomic variables, and little precision in estimating the contribution of technology shocks to business cycle fluctuations. More generally, our analysis emphasizes that the conditions under which the methodology performs well appear considerably more restrictive than implied by the key identifying assumption, and depend on model structure, the nature of the underlying shocks, and variable selection in the VAR. This cautions against interpreting responses derived from this approach as model-independent stylized.
Topic:
Conflict Resolution, Economics, International Trade and Finance, and Science and Technology

85. Global Financial Integration: A Collection of New Research

Author:
Mark Carey
Publication Date:
10-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This introductory note summarizes and draws together the work reported in eight research papers written by staff economists of the Board's Division of International Finance as part of a project on global financial integration. The eight papers are also International Discussion Finance Discussion Papers (IFDPs), the numbers of which are specified on the table of contents that appears herein. When viewing this introduction online, the paper titles appearing on the table-of-contents page are web links that may be used to navigate directly to each paper's on-line file.
Topic:
Economics, Globalization, and International Trade and Finance
Political Geography:
United States

86. Report of the Defense Science Board Task Force on Integrated Fire Support in the Battlespace

Publication Date:
10-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In 2001, the Under Secretary of Defense for Acquisition, Technology and Logistics (USD(AT)) directed the Defense Science Board (DSB) to study the precision targeting of air-delivered munitions. The results of the 2001 Task Force were well-received within Office of the Secretary of Defense (OSD), and in June 2003, USD(AT) directed the DSB to study the closely related topic of “integrated fire support in the battlespace.” In this new study the 2003 Task Force applied an approach and methodology similar to the 2001 effort but focused instead on ground-based fires, sea-based fires, and close-air support.
Topic:
Defense Policy and Science and Technology
Political Geography:
United States

87. Defense Industrial Base Capabilities Study: Force Application

Publication Date:
10-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In February 2003, the Office of the Deputy Under Secretary of Defense for Industrial Policy, ODUSD(IP), produced Transforming the Defense Industrial Base: A Roadmap. This report identified the need for systematic evaluation of the ability of the defense industrial base to develop and provide functional, operational effects-based warfighting capabilities. The Defense Industrial Base Capabilities Study (DIBCS) series is a systematic assessment of critical technologies needed in the 21st century defense industrial base to meet warfighter capabilities, as framed by the Joint Staff's functional concepts. In addition, the DIBCS series provides the basis for strengthening the industrial base required for 21st century warfighting needs. This report addresses the third of those functional concepts, Force Application.
Topic:
Defense Policy, Industrial Policy, and Science and Technology
Political Geography:
United States

88. Defense Science Board Report on Corrosion Control

Publication Date:
10-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Weapons system readiness and safety are among the highest priority challenges for the Department of Defense (DoD). As it continues to receive a large number of mission taskings, it is imperative that DoD equipment be maintained at an acceptable level of material condition so that it may be employed safely and effectively when required, often in harsh and physically demanding environments. However, both the material condition and safety of DoD equipment are routinely being undermined by the effects of corrosion. The dollar cost of corrosion to DoD has been estimated by the Government Accountability Office (GAO) to be $10-20 billion per year. Aggressive action is needed at every stage in the life cycle of this equipment — during design, materials selection, construction, operation, and maintenance — to reduce the negative effects of corrosion.
Topic:
Defense Policy, Arms Control and Proliferation, and Science and Technology
Political Geography:
United States

89. The Value of Financial Intermediaries: Empirical Evidence from Syndicated Loans to Emerging Market Borrowers

Author:
Gregory P. Nini
Publication Date:
09-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Empirical estimates of the benefit of financial intermediation are constructed by examining the role played by local banks in facilitating syndicated loans to borrowers in emerging market countries. Assuming that local banks possess a superior monitoring ability, the market is ideal for studying the value of intermediation since cross-border lending into emerging markets is plagued by particularly high information and agency costs and the supply of local bank capital is in limited short run supply. Using variation in the propensity of local banks to participate in foreign arranged syndicates, there are two economically important results. First, local banks are much more likely to participate in unconditionally riskier loans. Second, after controlling for borrower characteristics, loan characteristics, and the endogeneity of the local bank lending decision, loans with local bank participation have spreads that are 10 percent lower (29 basis points) than otherwise similar loans. Combined, the results support the conclusion that local banks, a particularly special type of financial intermediary, provide value by considerably reducing financing costs, especially for riskier borrowers.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
United States

90. What Makes Investors Over or Underweight? Explaining International Appetites for Foreign Equities

Author:
Carol C. Bertaut and Linda S. Kole
Publication Date:
09-2004
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Using data from the IMF Coordinated Portfolio Investment Surveys conducted in 2001, we analyze the determinants of 31 countries' international equity holdings. We show that investors in all countries underweight U.S. equities in their portfolios, many by more than they underweight foreign equities in general. Such behavior is surprising given the common perception of the United States as a desirable investment destination due to its well-developed legal and regulatory environment. Instead we find that investors in some countries are overweight in equities from other countries with which they have close regional or political ties. Such ties, along with distance, trade, issuance of U.S. ADRs or cross-listing on the London Stock exchange, market concentration, and estimated betas help explain patterns of diversification. However, even when all these variables are included, we find significant fixed effects for most countries, suggesting that a considerable amount of cross-country variation in investment positions and in home bias remains to be explained. Our work confirms previous findings and extends results most completely documented for the United States to other major investor countries. But it also suggests caution should be used when interpreting results derived from studies of one or a few countries.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
United States and London