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Begin New Search Topic Risk Political Geography United States of America

11. The Rise of Global Innovation by US Multinationals Poses Risks and Opportunities

Author:
Lee G. Branstetter, Britta Glennon, and J. Bradford Jensen
Publication Date:
06-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
For decades, US multinational corporations (MNCs) conducted nearly all their research and development (R&D) within the United States. Their focus on R&D at home helped establish the United States as the unrivaled leader of innovation and technology advances in the world economy. Since the late 1990s, however, the amount of R&D conducted overseas by US MNCs has grown nearly fourfold and its geographic distribution has expanded from a few advanced industrial countries to many parts of the developing world, creating an innovation system that spans the globe. Like many aspects of globalization, including the offshoring of manufacturing over recent decades, the globalization of R&D raises concerns about US competitiveness and loss of technological leadership. At the same time, the spreading geographic location of innovation presents opportunities for US-based companies if the right policies are adopted to seize them. The research presented in this Policy Brief demonstrates that US innovators continue to remain involved in important ways in US MNCs' global R&D activities, and fears of a hollowing out of US capacity to innovate—based probably on previous fears about the hollowing out of US-based manufacturing—may be overstated. Indeed, the large and growing pool of highly educated scientists and engineers in the developing world could increase the rate of global productivity growth, to the advantage of US-based companies and the world in general. The authors conclude that a productive way to capitalize on the globalization of MNC R&D is not to oppose it but to combine emerging-market talent with MNC experience so that innovation can flourish to improve global living standards and fuel economic progress.
Topic:
International Trade and Finance, Science and Technology, Multinational Corporations, Risk, and Private Sector
Political Geography:
North America, Global Focus, and United States of America

12. Whither US-China Trade War? Impacts on global trade, technology and finance, and strategies to mitigate risks

Author:
Lia Valls Pereira, Tatiana Rosito, and Gabriel de Barros Torres
Publication Date:
06-2019
Content Type:
Special Report
Institution:
Brazilian Center for International Relations (CEBRI)
Abstract:
For its twelthth meeting, CEBRI's China Analysis Group organized discussions on the economic and geopolitical causes and consequences of trade frictions between China and the United States, considering its impact on different actors and on the multilateral trading system at large. Despite the original focus on trade imbalances, participants noted that the bilateral rivalry’s underlying drivers relate to competition for leadership in high-tech sectors and, fundamentally, to the conciliation of practices associated with different development models. Notwithstanding the uncertainty surrounding the next steps in the dispute, there was a consensus among participants that a complete decoupling between both economies is virtually unfeasible in the short-term and not likely in the long-term. The speakers at the event were Marcos Troyjo, Jin Canrong, Kellie Meiman and Niu Haibin and comments were made by Lia Valls and Tatiana Prazeres. The event was coordinated by CEBRI Senior Fellow Tatiana Rosito.
Topic:
Science and Technology, Bilateral Relations, Finance, Trade Wars, Risk, and Trade
Political Geography:
China, Asia, North America, and United States of America

13. Risk and Resiliency: China’s Emerging Air Base Strike Threat

Author:
Ian Easton
Publication Date:
11-2017
Content Type:
Working Paper
Institution:
Project 2049 Institute
Abstract:
Given the centrality of air power for U.S. power projection in the Western Pacific, the Chinese People’s Liberation Army (PLA) has focused on prioritizing the development of asymmetric capabilities to target American air superiority where it is weakest―on the ground. China’s military modernization program is closely associated with a number of maturing precision strike capabilities designed for attacking air bases. This paper seeks to provide an overview of the evolving airpower challenge that the United States faces in the Western Pacific and beyond. It explores Chinese military writings on air base strike operations, evaluates the current trajectory of the PLA’s precision strike capabilities, and concludes with recommendations for how American airpower in Asia can be more resilient against threats.
Topic:
Power Politics, Weapons, Risk, Strategic Competition, and Resilience
Political Geography:
China, Asia, North America, and United States of America

14. Realized Bank Risk during the Great Recession

Author:
Yener Altunbas, Simone Manganelli, and David Marques-Ibanez
Publication Date:
08-2015
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In the years preceding the 2007-2009 financial crisis, forward-looking indicators of bank risk concentrated and suggested unusually low expectations of bank default. We assess whether the ex-ante (i.e. prior to the crisis) cross-sectional variability in bank characteristics is related to the ex-post (i.e. during the crisis) materialization of bank risk. Our tailor-made dataset crucially accounts for the different dimensions of realized bank risk including access to central bank liquidity during the crisis. We consistently find that less reliance on deposit funding, more aggressive credit growth, larger size and leverage were associated with larger levels of realized risk. The impact of these characteristics is particularly relevant for capturing the systemic dimensions of bank risk and tends to become stronger for the tail of the riskier banks. The majority of these characteristics also predicted bank risk as materialized before the financial crisis.
Topic:
Global Recession, Financial Crisis, Risk, and Banking
Political Geography:
North America and United States of America

15. Uncovered Equity Parity and Rebalancing in International Portfolios

Author:
Stephanie E. Curcuru, Charles P. Thomas, Francis E. Warnock, and Jon Wongswan
Publication Date:
05-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Portfolio rebalancing is a key driver of the Uncovered Equity Parity (UEP) condition. According to UEP, when foreign equity holdings outperform domestic holdings, domestic investors are exposed to higher exchange rate exposure and hence repatriate some of the foreign equity to decrease their exchange rate risk. By doing so, foreign currency is sold, leading to foreign currency depreciation. We examine the relationship between U.S. investors' portfolio reallocations and returns and find some evidence consistent with UEP: Portfolio shifts are related to past returns in the underlying equity markets. But we argue that a motive other than reducing currency risk exposure is likely behind this rebalancing. In particular, U.S. investors may be exploiting mean reversion in underlying equity markets, rebalancing away from equity markets that recently performed well and moving into equity markets market just prior to relatively strong performance. Such behavior suggests tactical reallocations to increase returns rather than reduce risk.
Topic:
Economics, Markets, Risk, International Portfolios, and Equity
Political Geography:
North America and United States of America

16. Liquidity Risk and U.S. Bank Lending at Home and Abroad

Author:
Ricardo Correa, Linda Goldberg, and Tara Rice
Publication Date:
05-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
While the balance sheet structure of U.S. banks influences how they respond to liquidity risks, the mechanisms for the effects on and consequences for lending vary widely across banks. We demonstrate fundamental differences across banks without foreign affiliates versus those with foreign affiliates. Among the nonglobal banks (those without a foreign affiliate), cross-sectional differences in response to liquidity risk depend on the banks' shares of core deposit funding. By contrast, differences across global banks (those with foreign affiliates) are associated with ex ante liquidity management strategies as reflected in internal borrowing across the global organization. This intra-firm borrowing by banks serves as a shock absorber and affects lending patterns to domestic and foreign customers. The use of official-sector emergency liquidity facilities by global and nonglobal banks in response to market liquidity risks tends to reduce the importance of ex ante differences in balance sheets as drivers of cross-sectional differences in lending.
Topic:
Risk, Lending, Banking, and Liquidity
Political Geography:
North America and United States of America

17. Returns to Active Management: The Case of Hedge Funds

Author:
Maziar Kazemi and Ergys Islamaj
Publication Date:
08-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Do more active hedge fund managers generate higher returns than their less active peers? We attempt to answer this question. Using Kalman Filter techniques, we estimate the risk exposure dynamics of a large sample of live and dead equity long-short hedge funds. These estimates are then used to develop a measure of activeness for each hedge fund. Our results show that there exists a nonlinear relationship between activeness and performance. Using raw returns as a measure of performance, it is found that more active funds outperform the less active ones. However, when risk adjusted returns are used to measure performance, we find the opposite results; that is, activeness is inversely related to returns. Still, we find that a few very active managers outperform the moderately active funds and generate higher returns. We conclude that the most active managers use their skills to manage the riskiness of their portfolios and are, therefore, able to provide higher risk adjusted returns. Finally, we find that compared to the least active managers, the most active managers are less homogeneous and, therefore, due diligence is far more important when selecting an active manager.
Topic:
Markets, Risk, Business Management, and Stock Markets
Political Geography:
North America and United States of America

18. Bank Interventions and Options-based Systemic Risk: Evidence from the Global and Euro-area Crisis

Author:
Juan M. Londono and Mary Tian
Publication Date:
09-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Using a novel dataset on central bank interventions to financial institutions, we examine the impact of capital injection announcements on systemic risk for the banking sector in the U.S. and the euro area between 2008 and 2013. We propose a new measure of options-based systemic risk called downside correlation risk premium (DCRP), which quantifies the compensation investors demand for being exposed to the risk of large correlated drops in bank stock prices. DCRP is calculated using options that provide a hedge against large drops in the price of a bank index and its individual components. We find that, irrespective of their characteristics, intervention announcements significantly reduce DCRP in the U.S. while for the euro area, interventions were largely unsuccessful at reducing DCRP.
Topic:
Financial Crisis, Institutions, Risk, and Banking
Political Geography:
Europe, North America, and United States of America

19. International Evidence on Government Support and Risk Taking in the Banking Sector

Author:
Luis Brandao-Marques, Ricardo Correa, and Horacio Sapriza
Publication Date:
08-2013
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Government support to banks through the provision of explicit or implicit guarantees affects the willingness of banks to take on risk by reducing market discipline or by increasing charter value. We use an international sample of rated banks and find that government support is associated with more risk taking by banks, especially prior and during the 2008-2009 financial crisis. We also find that restricting banks range of activities ameliorates the link between government support and bank risk taking. We conclude that strengthening market discipline by reducing bank complexity is needed to address this moral hazard problem.
Topic:
Governance, Regulation, Risk, and Banking
Political Geography:
North America and United States of America

20. The Effect of TARP on Bank Risk-Taking

Author:
Lamont Black and Lieu Hazelwood
Publication Date:
03-2012
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
One of the largest responses of the U.S. government to the recent financial crisis was the Troubled Asset Relief Program (TARP). TARP was originally intended to stabilize the financial sector through the increased capitalization of banks. However, recipients of TARP funds were then encouraged to make additional loans despite increased borrower risk. In this paper, we consider the effect of the TARP capital injections on bank risk taking by analyzing the risk ratings of banks’ commercial loan originations during the crisis. The results indicate that, relative to non-TARP banks, the risk of loan originations increased at large TARP banks but decreased at small TARP banks. Interest spreads and loan levels also moved in different directions for large and small banks. For large banks, the increase in risk-taking without an increase in lending is suggestive of moral hazard due to government ownership. These results may also be due to the conflicting goals of the TARP program for bank capitalization and bank lending.
Topic:
Governance, Interest Rates, Risk, Welfare, Capital, and Banking
Political Geography:
North America and United States of America