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AbstractFreezing or the danger of freezing the assets of many countries can make the run away from the US dollar an uncontrolled process. Whereas in the long term this process may be beneficial for the US and the world economy, the short- and medium-term adjustment costs can be extremely high. To ensure a soft landing the New Development Bank of BRICS countries can issue bonds that would be sold to countries, whose assets have been frozen or are afraid that they might be frozen by the West, so that they can store their foreign exchange reserves in these bonds. The Bank will invest the proceeds from the sale of these bonds in the traditional financial instruments for storing foreign exchange reserves—US and EU treasury bills and bonds denominated in the same dollars and euros. These BRICS bonds would be less prone to sanctions and thus considered safe investment. [ABSTRACT FROM AUTHOR]

This study aims to analyze the expected impacts of Saudi Arabia’s accession to the BRICS bloc, which is intergovernmental organization comprising Brazil, Russia, India, China, and South Africa. By analyzing the intra-trade flows of Saudi Arabia with the BRICS countries from the implementation of the bloc until 2023 and measuring the impact of Saudi exports and imports with BRICS on the balance of merchandise trade, and to discuss the extent of the impact of the net intra-trade situation of Saudi Arabia with BRICS on the balance of merchandise trade. The most prominent Saudi export sectors were diagnosed, and their corresponding customs tariff averages in the BRICS countries were analyzed to determine the expected effects of implementing a regional trade agreement (RTA) between the BRICS bloc. The study is based on the ARDL model and Saudi data from (2003-2022), using three models by applying on exports, imports, and trade balance of Saudi Arabia, the findings suggests that there is no significant relationship between Saudi Arabia’s trade balance on the one hand, and exports, imports and the trade balance with BRICS on the other hand, which reduces the impact of Saudi Arabia’s accession to BRICS on Saudi exports. which requires further negotiation of mutual obligations and potential gains between the member states of BRICS.

We study how the growth of exchange-traded funds (ETFs) affects the sensitivity of international capital flows to the global financial cycle. Using comprehensive fund-level data on investor flows, we show that their sensitivity to global financial conditions for equity (bond) ETFs is 2.5 (2.25) times higher than for equity (bond) mutual funds. This higher sensitivity can be directly linked to ETFs underlying shorter-trading-horizon clientele that trades more often in response to shocks. Using country-level data, we find that where ETFs hold a larger share of financial assets, equity inflows and prices become more sensitive to global risk. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

The paper explains the origin of the financial crisis in one country and its spread to other countries—contagion, in a dynamic model of international capital inflow. The origin of the crisis is rooted in this model in the common international loan market, and crisis can occur even when the countries are not interconnected via bi-lateral or multi-lateral trade and commerce, when connected via trade or commerce the contagion hits with a stronger effect. The paper introduces country-level heterogeneity of risk of default for individual countries in the borrowing group which generates interesting cases of the contagion effect. A change in the risk of default of an individual country adversely affects the total supply in the international loan market leading to crises in other countries via increased international interest rates. It has an enhanced effect when the risk of default depends on the lagged domestic productivity of the borrowing country. The model can explain various episodes of financial crisis in a common framework and can be usefully employed for policy formulation. [ABSTRACT FROM AUTHOR]

This paper globally analyzes the bivariate relation between large current account imbalances and the real exchange rate over different degrees of nominal exchange rate variability. Employing both linear and nonlinear panel estimation procedures, we typically find an inverse long-run link between large imbalances and the real exchange rate at lower nominal exchange rate rigidity levels. This is in contrast to the often non-existent or positive comovement that materializes under lower nominal exchange rate variation. Our results thus suggest that greater nominal exchange rate adjustment can induce a stabilizing "current account"-"real exchange rate" relation. Meanwhile, current account adjustment speeds up with more flexible nominal exchange rates. Along the cross-section, the most salient findings are i) the striking positive relation between current account persistence and real exchange rate persistence based on country-specific estimates and ii) the inverse correlation between persistence in either the current account or real exchange rate and nominal exchange rate volatility. [ABSTRACT FROM AUTHOR]

The financial haemorrhaging of lower income countries in the form of capital flight is a leading cause of global economic inequality. On an annual basis, trillions of dollars bypass the already starved fiscal spaces of nations mired in poverty, making their way instead to lucrative offshore bank accounts governed by secrecy jurisdictions. The present article relates this phenomenon to the institutional architecture of the global financial system and provides causal evidence that structural adjustment programmes implemented at the behest of international financial organizations amplify such capital flight. In particular, by isolating exogenous variation in policy conditionalities through the use of instrumental variables, we find that trade liberalization, financial sector reforms and privatization measures mandated by the International Monetary Fund in developing contexts substantially increase financial outflows occurring via current and capital account transactions. Our findings thus document the contribution that structural adjustment makes to an underappreciated facet of contemporary global inequality. [ABSTRACT FROM AUTHOR]

AbstractHow has financial globalization changed the nature of external vulnerability of emerging economies? To answer this question, we first present an overview of the changes in international capital flows and cross-border stocks involving emerging economies from the 1970s to the COVID-19 crisis and then identify relevant recent shifts in financial globalization. We adapt the concept of currency hierarchy to the most recent features of financial globalization. We deploy a stylized balance sheet analysis to better understand the metamorphosis of these economies’ vulnerabilities. We find the occurrence of the phenomenon of ‘original sin’ during financial internationalization. In contrast, in more recent times of financial globalization, the diversification of financial flows and investors and the increase of securities denominated in domestic currency have created additional channels of vulnerability, labeled as ‘original sin redux’. We find that the private sector in Southern economies is mostly exposed to these new vulnerabilities. At first sight, it is good news because it preserves the fiscal space of Southern States in the case of capital outflows. However, it might create new contingent liabilities for the public sector. We call for capital account regulation in a broad sense to target these new complex vulnerabilities. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this study is to examine two issues, namely the degree of current account deficit (CAD) sustainability and the degree of capital mobility. Design/methodology/approach: The sample for this study comprises 24 Latin American and Caribbean countries, including three regional agreements: Andean Community, MERCOSUR (Mercado Común del Sur), and SICA (Central American Integration System). This study employs the dynamic common correlated effects mean group (DCCEMG) estimator in a panel data set to investigate the long-run relationship between savings and investment along with short-run dynamics. Findings: The findings indicate that CAD is weakly sustainable in the Latin American and Caribbean region, MERCOSUR, and SICA, while CAD is strongly unsustainable in the Andean Community. The sub-period analysis reveals that CAD has been adversely affected by the 2008 crisis. However, in the post-crisis period, CAD has been slowly decreasing in the Latin American and Caribbean region and Andean Community, whereas CAD has continued increasing in MERCOSUR and SICA. Further, the estimates of error-correction terms and short-run coefficients indicate that the Andean Community and MERCOSUR observe a higher degree of long-run and short-run capital mobility than SICA. Practical implications: The results carry fundamental implications for policy-making processes aimed at maintaining sustainable CADs. Originality/value: This study gives an alternative interpretation of the "Feldstein-Horioka" coefficient in terms of CAD sustainability and analyses the saving–investment relationship in light of Chudik and Pesaran (2015). [ABSTRACT FROM AUTHOR]

Policymakers have relied on a wide range of policy tools to cope with capital flow shocks. And yet, the effects and interaction of these policies remain under debate, as does the motivation for using them. In this paper, quantile local projections are used to estimate the entire distribution of future policy responses to portfolio flow shocks for 20 emerging markets and understand the variety of policy choices across the sample. To assuage endogeneity concerns, estimates rely on the fact that global capital flows are exogenous from the viewpoint of any one of these countries. The paper finds that: (i) policy responses to capital flow shocks are heterogeneous across countries, fat-tailed—"extreme" responses tend to be more elastic than "typical" responses—and asymmetric—"extreme" responses tend to be more elastic with respect to outflows than to inflows; (ii) country characteristics are linked to policy choices—with cross-country differences in forex intervention relating to the size of balance sheet vulnerabilities and the depth of the forex market; (iii) the use of targeted macroprudential policy and capital flows management measures can help "free the hands" of monetary policy by allowing it to focus more squarely on domestic cyclical developments. [ABSTRACT FROM AUTHOR]

We present a comprehensive analysis of the shock absorption role of external positions using the currency exposures dataset by Bénétrix et al. (2020). While the literature has frequently studied how the net international investment position and its currency composition determine the direction and scale of valuation effects, we focus on their amplitude. This is of central importance for global financial stability given the large and increasing scale of external balance sheets. To that end, we propose an indicator showing the extent to which external positions absorb or amplify exchange rate shocks. Analysing a set of 50 countries over the period 1990-2017, we find the external shock absorption role to be present for advanced economies, while this was initially not the case for emerging markets economies (EMEs). In recent years, however, EMEs' external positions increasingly showed a shock absorption capacity. Our regression-based analysis reveals that the level of economic and financial development is associated with a greater capacity to absorb exchange rate shocks. [ABSTRACT FROM AUTHOR]

This article examines the Marshall-Lerner (ML) condition from a broader perspective. Mundell (1968) regarded ML as the stability condition of the equilibrium, but not of the system. The violation of the ML condition by Japan's estimates is interpreted as a possible symptom of a negative exchange rate depreciation spiral in Thorbecke (2022). By constructing an open-economy macroeconomic model with three endogenous variables in three markets, and solving the model for the exchange rate, we examined the model's stability. Stability depends not only on the ML condition, but also on the configuration of the model's parameters. This implies that the ML condition alone is not responsible for the stability/instability of the model. Using the ML parameter estimated by Thorbecke (2022) and previously obtained money market parameters for the Japanese economy, we found that a simple model satisfies the necessary and sufficient conditions for stability. However, for an extended model, some cases fail to satisfy stability conditions. We further investigate the possible cause of this failure, and suggest that the Bank of Japan's (BOJ) unconventional monetary policies implemented after the economic bubble burst may be responsible.

We investigate whether the impacts of the main push (global financial conditions, GFC) and pull (growth) factors on capital inflows are invariant to endogenously estimated thresholds for exchange rate regimes (ERRs) in emerging market economies. The impact of GFC is higher under more flexible ERRs for aggregate capital and portfolio inflows. FDI inflows are determined by growth. The sensitivity of aggregate and other investment inflows to growth is higher under more rigid ERRs. Our results also suggest that managed ERRs encourage capital inflows by allowing countries to import the monetary policy credibility of the anchored country and to provide an exchange rate guarantee.

Migrations of the resident population in Serbia, with the Western European countries as the main destination, have influenced remittances becoming an important source of income from abroad. Relevant economic literature, as well as the influential views expressed in the international financial institutions’ reports, indicate that remittances are a more stable type of inflow of funds from abroad to developing countries compared to other types of capital movements. In addition to the positive economic effects of remittances, they also play a significant role in the balance of payments deficit reduction. The subject of this research refers to the examination of the role of remittances in financing the current account deficit in Serbia. The research goal is to explore whether the importance of remittances as a factor in the balance of payments deficit reduction in Serbia increased in the period 2007-2021. The results of the research show that remittances have become an important factor in current account deficit reduction in Serbia during the observed period.

This paper investigates the effects of institutional quality on current account balance in a sample of 44 sub-Saharan African countries over the period 1996–2019. The system generalized method of moments approach is privileged for estimations. Our findings show that institutional quality is a determinant of current account balance for sub-Saharan African countries. Specifically, political stability and absence of violence, regulatory quality, control of corruption, and government effectiveness are indicators that are robust and significant determinants of current account balance. Some robustness tests performed confirm our results. These findings indicate that governments in this region should improve institutional quality through strengthening the political environment, reducing corruption, and enabling conditions of private sector development. [ABSTRACT FROM AUTHOR]

This paper examines the influence of energy price fluctuations on the current account balances of 47 countries between 1995 and 2023, with a particular focus on the varying responses contingent on countries' economic profiles, energy dependence, and the moderating impact of renewable energy development. The study employs a global vector autoregression (GVAR) model to elucidate the intricate interdependencies intrinsic to the global economy. The findings indicate that oil, natural gas, and coal price shocks have a positive impact on the current account balances of energy exporting countries and a negative impact on those of energy importing countries. This effect is more pronounced in countries with a higher level of energy dependency, while the development of renewable energy sources plays a role in mitigating the adverse effects of energy price volatility. In terms of economic characteristics, countries with a structural current account surplus, a higher level of development, a large services sector, a more open capital account, and a flexible exchange rate regime are less affected by energy price shocks.

AbstractThis study offers a novel examination of the mean-reversion properties of the current account balances, expressed as a percentage of GDP, for the Asian-5 economies: Indonesia, Korea, Malaysia, the Philippines, and Thailand. While prior studies mainly employed traditional unit-root tests, our research stands out for its use of novel panel stationarity tests that account for cross-sectional dependence and incorporate both sharp and smooth structural breaks via a Fourier function. Our findings robustly indicate the sustainability of the current accounts of the Asian-5 nations. The emphasis on the significance of structural breaks with a Fourier component sets this research apart, offering fresh perspectives on the intricacies of current account mean-reversion dynamics and the long-term sustainability implications for these economies.

Objective: We examined trainees in surgery and internal medicine who received National Institutes of Health (NIH) F32 postdoctoral awards to determine their success rates in obtaining future NIH funding. Background: Trainees participate in dedicated research years during residency (surgery) and fellowship (internal medicine). They can obtain an NIH F32 grant to fund their research time and have structured mentorship. Methods: We collected NIH F32 grants (1992–2021) for Surgery Departments and Internal Medicine Departments from NIH RePORTER, an online database of NIH grants. Nonsurgeons and noninternal medicine physicians were excluded. We collected demographic information on each recipient, including gender, current specialty, leadership positions, graduate degrees, and any future NIH grants they received. A Mann-Whitney U test was used for continuous variables, and a χ2 test was utilized to analyze categorical variables. An alpha value of 0.05 was used to determine significance. Results: We identified 269 surgeons and 735 internal medicine trainees who received F32 grants. A total of 48 surgeons (17.8%) and 339 internal medicine trainees (50.2%) received future NIH funding (P < 0.0001). Similarly, 24 surgeons (8.9%) and 145 internal medicine trainees (19.7%) received an R01 in the future (P < 0.0001). Surgeons who received F32 grants were more likely to be department chair or division chiefs (P =0.0055 and P < 0.0001). Conclusions: Surgery trainees who obtain NIH F32 grants during dedicated research years are less likely to receive any form of NIH funding in the future compared with their internal medicine colleagues who received F32 grants. [ABSTRACT FROM AUTHOR]

In recent years, political rhetoric implying international trade hinder employment has gained momentum. We argue that the dynamics between the unemployment rate and the current account balance have both economic and political relevance. The presence of cointegration between the unemployment rate and the current account balance to GDP ratio and the nature of their short-run fluctuations will help us analyze the dynamics between the two objectively to evaluate the political rhetoric. We use quarterly data from 1948: Q1 to 2020: Q1 on the unemployment rate and current account balance to GDP ratio in the United States. Traditional cointegration tests fail to detect any cointegration. However, threshold cointegration tests confirm statistical evidence of threshold cointegration between the two. The estimated threshold vector error-correction model shows statistically significant evidence of falling unemployment rate coupled with deteriorating current account balance. This finding indicates that as unemployment rates go down, the current account balance deteriorates to maintain the long-run co-movement. Arguably, as the unemployment rate decline, concurrently imports rise faster than exports causing the current account balance to deteriorate. This finding thereby refutes the political rhetoric. [ABSTRACT FROM AUTHOR]

We examine the dynamic impact of household borrowing on the trade balance using data from 32 developing countries and 36 developed countries over the 1980-2020 period. Our findings suggest that the impact of household borrowing on the trade balance is negative, both in the short and long run, but the effects are more pronounced in developing countries. Moreover, we find that for developing countries the negative effect of household borrowing on the trade balance is achieved via boosting imports. In developed countries, household borrowing stimulates both imports and exports, where the effect on imports is larger. [ABSTRACT FROM AUTHOR]

Pakistan experienced consistent rise in budget deficit and current account deficit that dampened the country's abilities to achieve sustained economic growth over the last several years. To this aim, this study intends to investigate the existence of twin deficit hypothesis in the presence structural breaks over the last four decades. Utilizing time series data for the years 1980–2019 and employing Zivot-Andrew unit root test, ADF, PP and ARDL approaches, we find that budget deficit being statistically significant in the short-run and long-run positively affect the current account deficit of the country. The effects are unaltered when we run regression with structural break and without structural breaks. The study, thus, confirms the presence of twin deficit hypothesis in both the short-run and long-run periods in case of Pakistan. Thus, a consistent, well devised and prudent fiscal policy help alleviate the current account deficit of Pakistan over the last four decades. [ABSTRACT FROM AUTHOR]

Over the years, policymakers have explored various combinations of varying degrees of monetary policy independence, exchange rate stability, and financial openness while recognizing that not all three policies can be achieved to the fullest extent – the "monetary trilemma" hypothesis. In recent years, holding international reserves (IR) has become an important policy instrument as a buffer or insurance against liquidity shortages. Significant and fundamental economic events such as currency crises have often changed the policy mix. In this paper, we find that countries' policy mixes have been diverse and varied over time from the perspective of the trilemma and also IR holding. We then illustrate how the combination of the three trilemma policies and IR holding drastically changed before and after the Asian Financial Crisis (AFC). However, the Global Financial Crisis did not lead to a drastic change in the policy arrangements. We find that countries that faced large terms of trade shocks or negative economic growth during the crisis increase IR holding in the post-AFC. Countries that had negative growth during the crisis also tend to pursue more exchange rate flexibility and more open financial markets. This characteristic is true for commodity exporters, but not for manufacturing exporters. Countries with large current account deficit (i.e., "large capital borrowers") tend to be more sensitive to economic growth at the time of the AFC. Countries that are under IMF stabilization programs or those with sovereign wealth funds tend to hold more IR. These characteristics were not found in the aftermath of the GFC. In general, countries increased their IR holdings after the GFC, but did not respond to the during-crisis economic and institutional conditions. [ABSTRACT FROM AUTHOR]