Publications
Latest Additions
Publications
Recent Manuscripts
Miscellaneous: notes, discussions, newspaper articles
Working Papers
Latest Additions
'The Cross-Section of Country News, Decoupling Expectations, and Global Business Cycles' with Wei Liao, HKIMR Working Paper No.34, Nov. 2011. Summary: Fluctuations in the output- stock price (yp) ratio reflect changes in perceptions about future real activity (output growth) or changes in the expectation of long-term stock market returns or both. Shocks to the cross-country dispersion of yp-ratios therefore provide information on the heterogeneity of the international cross-section of country-specific news about future real (output growth) and financial (return) opportunities. We show that shocks to the international cross-section of news have particularly high trend growth effects in Emerging Asia including China, particularly in the period since the Asian financial crisis. A factor analysis of the cross-section of stock market and output growth expectations reveals an increasing role for regional factors in both financial markets and for output growth. Whereas the role of regional factors in output growth has increased at the expense of global factors -- a possible instance of decoupling -- financial factors have become more regional at the expense of purely country-specific influences. |
| 'Banking Deregulaton, Entrepreneurial Risk, and the Predictability of Stock Returns' Oct. 2011. Revised version of 'Proprietary Income, Entrepreneurial Risk and the Predictability of U.S. Stock Returns' |
| 'Emerging from theWar: Gold Standard Mentality, Current
Accounts and the International Business Cycle 1885-1939', May 2011. Summary: For the UK, the US and the emerging periphery, the same model, based on the same set of parameters, explains current account dynamics under both the Classical Gold Standard and during the Interwar period. We interpret this as evidence for Gold Standard mentality: the expectation formation mechanism with respect to major macroeconomic variables has remained |
| How Europe should harness market forces to deal with sovereign credit risk' VoxEU.org, March 20th 2010. Summary: This column proposes a European Sovereign Insurance Scheme to sell bond insurance on EMU members' sovereign debt. Coverage in the Wall Street Journal |
| (new version: October 2011) (forthcoming as HKIMR working paper) April 2010.Summary: China's current account predicts rising prices for non-tradeables (housing and medical care) and shocks to the current account depress the world real interest rate. All this suggests that precautionary motives are important in explaining China's surplus. |
| 'The Macroeconomic Benefits of Mortgage-Backed Securities' (with Thomas Nitschka), VoxEU.org, June 20th 2009. Short summary: There seem to be measurable macroeconomc benefits from securitization and policymakers should be careful not to jeopardise them in regulating markets for securitized debt. |
Publications
 | 'Securitization of Mortgage Debt, Domestic
Lending and International Risk Sharing' with Thomas Nitschka, forthcoming in Canadian Journal of Economics, 2012, vol 45 (1). Formerly circulated under: 'Securitization of Mortgage Debt, Asset Prices and International Risk Sharing', IEW WP 376, Dec. 2008. Summary: Securitization in mortgage markets contributes significantly to international diversification of macroeconomic risk. | |||||
 | 'Has Risk Sharing increased in Asia (and elsewhere)?' forthcoming in Seoul Journal of Economics, 2011, vol 24 (4). Summary: Short answer: yes, risk sharing has increased in Asia after the crisis of the late 1990s. This traces the trend that started among industrialized countries in the early 1990s. | |||||
 | 'The Home Bias, Capital Income Flows and
improved Long-Term Consumption Risk
Sharing between Industrialized Countries', with Micheal J. Artis, forthcoming, International Finance. Formerly circulated under: | |||||
 | 'The Impact of the Euro on International Stability and Volatility' with Stefan Gerlach. In: Marco Buti , Servaas Deroose , Vitor Gaspar and João Nogueira Martins (eds), 2010. The Euro: the first decade. Cambridge University Press, pp. 648-670. Earlier version: European Economy, Economic Papers, 309, March 2008 Summary: China's current account predicts rising prices for non-tradeables (housing and medical care) and shocks to the current account depress the world real interest rate. All this suggests that precautionary motives are important in explaining China's surplus. Short summary: From 1999-2007 macroeconomic volatility among EMU countries has declined more than in the rest of the world. This is particularly true for consumption. | |||||
 | 'Consumption Risk Sharing over the Business Cycle: The Role of Small Firms' Access to Credit Markets' with Iryna Shcherbakova, Review of Economics and Statistics. Short summary: Risk Sharing among U.S. federal states used to increase in booms and decrease in recessions, in particular in states with lots of small businesses. State-level banking deregulation has changed that by making access to finance easier in particular during recessions. | |||||
 | 'The Swiss Franc Exchange Rate and Deviations from Uncovered Interest Parity: Global vs Domestic Factors' with Rahel Suter, Swiss Journal of Economics and Statistics, Mar. 2010, vol 146 (I), pp. 349-371. Short summary: The role of the Swiss franc as a safe haven currency depends on the home currency of the investor and the nature of global shocks. Overall, the role of the franc as a safe haven appeared limited in the global low interest rate environment of the last decade but may well resurface in circumstances where global shocks lead to widening international interest rate differentials. | |||||
 | 'Equity Fund Ownership and the Cross-Regional Diversification of Household Risk' with Sascha O. Becker (Stirling) Journal of Banking and Finance, Jan. 2010, vol 34 (1), pp 90.102.Previous versions were CESifo WP 2205 and Stirling Discussion Paper 2008/25 Summary: Simple portfolio theory can help explain patterns of fund ownership across Italian regions: people hold more funds if they are very exposed to region-specific shocks. Fund ownership helps pool risk at the national level. | |||||
 | 'Real Exchange Rates and Real Interest Rate Differentials: a Present Value Interpretation' (with Ronald MacDonald, U Glasgow) European
Economic Review, Nov. 2009, vol 53 (8), pp 952-970. Summary: Changes in the expected long-term rate of exchange rate depreciation explain movements in interest differentials well -- the link between real exchange rates and real interest rates is tighther than you might think. | |||||
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'Declining Home Bias and the Increase in International Risk Sharing: Lessons from European Integration' in Lars Jonung, Christoph Walker and Max Watson (eds.) Building the Financial Foundations of the Euro: Experiences and Challenges, Routledge. An almost final version can be downloaded here (CEPR-DP6617). Summary: Risk sharing among EMU countries is not necessarily higher than among other industrialised countries. However, it happens through different channels that look much like those that prevail among U.S. federal states. | |||||
 | 'Financial Globalization, International Business Cycles and Consumption Risk Sharing' (with Michael J. Artis), Scandinavian Journal of Economics, 2008, vol 110 (3), pp 447-471 (lead article) Almost final version: here; previous version: CEPR-DP 4697. Summary: In spite of financial globalization, conditional consumption volatility has not decreased much. The reason: business cycles have changed as well, permanent shocks play a relatively bigger role. | |||||
 | 'The Lack of International Consumption Risk Sharing: Can Inflation Differentials and Trading Costs Help Explain the Puzzle?' Open Economies Review, 2008, vol.19(2), pp.183-201. Short summary: Movements in inflation differentials help allocate a much bigger part of idiosyncratic risk in international than in regional data. This finding casts new light on the consumption-real exchange rate anomaly. | |||||
 | 'Consumption, Wealth and Business Cycles: Why is Germany different?' with Britta Hamburg and Joachim Keller, Deutsche Bundesbank, Empirical Economics, 2008, 34:451-476. | |||||
| 'Intra- and International Risk-Sharing in the Short Run and the Long Run', with Becker, S., European Economic Review, 2006, vol. 50, pp.777–806. also appeared in CESifo Working Paper Series as No. 1111 Short summary: International consumption risk sharing is low mainly because a lack of international capital income flows leads to poor insurance against permanent country-specific shocks. This is contrary to what we find within the United States where capital income flows are the single most important channel of risk sharing both in the short run and the long run. | |||||
 | 'Comment on Michael D. Bordo and Thomas F. Helbling 'Have National Business Cycles become more synchronized?' in Siebert, Horst (ed.) Macroeconomic Policies in the World Economy, Springer Verlag (Berlin and Heidelberg), 2004. Short summary: 'Bordo and Helbling argue 'yes'. I agree. Some simple calculations show that changes in the volatility of shocks alone cannot for the increased synchronization of business cycles over the 20th century. Quicker transmission ('Globalization?') must have played a role. | |||||
 | "International Capital Mobility in the Short Run and the Long Run: Can we still learn from savings and investment data?"
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| 'International Macroeconomic Fluctuations and the Current Account', Canadian Journal of Economics, May 2003, vol. 36 no. 2, pp. 401-420. Short summary: Global shocks cannot affect the current account for the average country. The paper uses this restriction to disentangle country-specific and globals output fluctuations. For the G7, global shocks are more persistent and more volatile than country-specific disturbances. | |||||
 | "Long Run Recursive VAR Models and QR Decompositions", Economics Letters, October 2001, vol. 73 no. 1, pp. 15-20 Summary: Shows how to extract permanent and transitory shocks from a | |||||
 | 'The Relative Dynamics of the Current Account and Investment in the G7 Economies', The Economic Journal, May 2001, vol. 111, no. 471, pp. C 148-C163.Short summary: The Glick and Rogoff (1995 J Mon Econ) puzzle vanishes once I control for permanent and transistory shocks to country-specific TFP: as implied by theory, the current account overshoots investment in response to permanent shocks and undershoots in response to transitory shocks. The paper also offers a simple identification of permanent and transitory components of country-specific shocks based on a cointegrated VAR (VECM). |
Recent Manuscripts
| 'Heterogeneous Expectations, International Consumption correlations, and Common Risk Factors in World Stock Markets' with Victoria Galsband, March 2008, IEW Working Paper 262. |
| 'The Consumption- Real Exchange Rate Anomaly: an Asset Pricing Perspective' with Thomas Nitschka, IEW Working Paper 331, September 2007. |
| October 2006. |
Miscellaneous: notes, discussions, newspaper articles
| Deutsche Bundesbank Spring Conference, May 27/28, 2010. |
| SNB-IMF Conference on Exchange Rates, Zurich, Nov. 24-25 2008. |
| Antrittsvorlesung zum Thema "Was nützt dem Privatverbraucher die Globalisierung der Finanzmärkte?", 21.04.2007 |
| NZZ, Nr. 173, 26./27.07.2008, p.27 Message: Only by keeping global capital markets open can we cushion the fallout from the crisis. |
| 10th Bundesbank Spring Conference, May 22-23 2008. |
| Vorlesung zum Thema "Wie globalisiert sind Finanzmärkte wirklich?" gehalten im Rahmen des Themenabends VWL zum 175-jährigen Bestehen der Universität Zürich, 10.04.2008 |
| 'Discussion of Harald Uhlig's paper Macroeconomics and Asset Markets - Some Mutual Implications', Bundesbank Kleistvilla-Workshop, June 2006 |