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11. Do Fundamentals Explain the International Impact of U.S. Interest Rates? Evidence at the Firm Level

Author:
John Ammer, Clara Vega, and Jon Wongswan
Publication Date:
10-2008
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper analyzes the impact of U.S. monetary policy announcement surprises on U.S. and foreign firm-level equity prices. We find that U.S. monetary policy has important influences on foreign equity prices on average, but with considerable variation across firms. We have found that this differing response reflects a range of factors, including the extent of a foreign firm's exposure to U.S. demand, its dependence on external financing, the behavior of interest rates in its home country, and its sensitivity to portfolio adjustment by U.S. investors. The cross-firm variation in the response is correlated with the firm’s CAPM beta; but it cannot fully explain this variation. More generally, we see these results as shedding some additional light on the nature and extent of the monetary and financial linkages between the United States and the rest of the world. In particular, since we are able to explain differences across foreign firms’ responses through established theories of monetary transmission, our results are consistent with the surprisingly large average foreign response to U.S. rates reflecting fundamentals, rather than an across-the-board behavioral over-reaction.
Topic:
Monetary Policy, Investment, Interest Rates, and Credit
Political Geography:
United States and North America

12. Finding the Money: Informal Credit Practices in Rural Afghanistan

Author:
Floortje Klijin and Adam Pain
Publication Date:
06-2007
Content Type:
Research Paper
Institution:
Afghanistan Research and Evaluation Unit (AREU)
Abstract:
It is widely believed that there is a strong demand for credit in Afghanistan and that much of this demand is unmet, justifying a major programme in microcredit provision. But there is very little understanding of the extent and the workings of informal credit systems, particularly outside opium poppy growing areas. Is there such an absence of credit available to poor rural households as is assumed? Do microfinance and informal credit respond to the same needs? Is informal credit simply the same thing as formal credit, except that it takes place outside formal institutions? And if there is more informal credit available than is believed, what does this mean for the development and role of formal credit systems? These key questions informed a detailed anthropological study of informal credit practices in three contrasting villages in Herat, Ghor and Kapisa. Drawing from a detailed presentation of eight households case studies, and amplified with addition case material, a number of key conclusions can be drawn from the findings.
Topic:
Development, Economics, Monetary Policy, Microcredit, Rural, Money, Demand, and Credit
Political Geography:
Afghanistan and South Asia