Publications des chercheurs de PSE

Using both macro- and industry-level data this paper analyses the non-linear effects of financial development and international financial integration on economic growth in Europe. Special attention is devoted to modeling threshold effects with respect to the depth of financial markets as a measure of economies' absorption capacity. Results reveal evidence of significant non-linear effects, with less developed European countries gaining more from financial development. In contrast, benefits of international financial integration become significant at higher levels of financial development. The data show that monetary integration in Europe significantly contributed to a higher degree of financial integration. Entry of new EU members to the European Monetary Union may thus be the mechanism ensuring a virtuous development circle, as the adoption of the Euro may allow the development of domestic financial markets and financial integration to go hand-in-hand.

Etant donné leur surexposition au risque domestique, les investisseurs internationaux devraient essayer de couvrir ce risque en choisissant parmi les actifs étrangers ceux qui sont peu corrélés à leurs actifs domestiques. Dans les données néanmoins, nous trouvons une relation positive et robuste entre les détentions bilatérales d'actions et les corrélations bilatérales des rendements boursiers. Est-ce à dire que les investisseurs ignorent complètement les principes de base de la théorie du choix de portefeuille ? Selon nous, la relation positive que nous documentons provient de l'impact simultané du degré (bilatéral) d'intégration financière sur les portefeuilles et sur les co-mouvements des rendements. Lorsque nous instrumentons les corrélations contemporaines par les corrélations passées pour contrôler pour ce problème d'endogénéité, nous trouvons que – toutes choses égales par ailleurs – la demande pour un actif étranger est bien décroissante de sa corrélation avec l'indice domestique.

Nous proposons un modèle dynamique d'équilibre général d'une économie d'échanges à deux pays en présence de taxes au rapatriement des dividendes étrangers. Nous trouvons des approximations des formes analytiques pour les prix des actifs, la dynamique jointe des rendements boursiers et les portefeuilles de titres. Nous donnons ainsi une description complète de l'équilibre entre les deux cas polaires de parfaite intégration et d'autarcie financière. Nous montrons que les portefeuilles peuvent être fortement biaisés vers les actifs domestiques alors même que les frictions sur les marchés financiers internationaux sont faibles. En effet, un niveau élevé de la corrélation d'équilibre des rendements boursiers entre les deux pays, due en partie à des effets de "rebalancement" de portefeuille, rend les actifs très substituables et amplifie l'effet des frictions sur la composition du portefeuille.

We analyze the dual role of currency mismatch: as a vehicle that exposes the economy to systemic risk, but also as an engine of growth. We do so at the macro and the micro levels for emerging European economies in recent years. At the aggregate level, we construct a new index of currency mismatch in the banking sector that controls for lending made by banks to unhedged borrowers–i.e., those with no foreign currency income. Using our index, we find that across emerging European economies, increases in currency mismatch are associated with higher growth in tranquil times, but with a greater severity of crisis. These results are also confirmed for a broader sample of emerging economies. On net, after taking into account the crisis period, we find a positive link between currency mismatch and growth. In our firm-level analysis, we find that currency mismatch helps relax borrowing constraints and enhances firms' growth in emerging Europe. These effects are stronger across sets of financially constrained firms–those that are small and are in nontradables sectors.

We would like to thank Enrique Alberola, Joshua Aizenman, Erik Berglöf, Guillermo Calvo, Jin Han, Andrea Ichino, Jean Imbs, Maurizio Mazzocco, Joe Ostroy, Amine Ouazad and Romain Wacziarg as well as participants at the Economic Policy panel meeting for helpful comments, and the following people for sharing their data sets with us: Reza Baqir (IMF Vulnerability Exercise for Emerging Economies); Herman Kamil (foreign currency borrowing by sector in Latin America); Stephanie Prat (foreign currency foreign assets and liabilities for various emerging economies); and Christoph Rosenberg and Marcel Tirpak (direct borrowing in East Europe from abroad). The views expressed in this paper are those of the authors and do not necessarily represent those of the IMF or IMF policy.The Managing Editor in charge of this paper was Tullio Jappelli.

I present some evidence showing that the advanced economies' banks were contributing in spreading the Euro-crisis to the emerging economies. For this purpose, I test the common lender channel among other channels of contagion, by using international banking flows data. Based on a constructed crisis-index for the Euro area, I find that countries with higher level of exposure to GIIPS, deleveraged more in riskier periods, i.e. during periods with high crisis index. Among all emerging economies in our sample, the Latin American countries were not affected as much as the emerging economies Asia and Europe, despite their high exposures to Spain. While the impact of the Euro-crisis stopped to show sign in Asia after 2011, it continued to affect the emerging Europe. The Euro-area banks were deleveraging more in the Emerging Europe than their peers in non-Euro advanced economies, whereas most of their deleveraging in Asia happened in 2010. Although the results present evidence in favour of local impacts of the Euro-crisis, they show the importance of spillover through multinational banks.