Abstract
We analyze persistence in patterns of bilateral financial investment using data on US investors’ holdings of foreign bonds. We document a “history effect” in which the pattern of holdings seven decades ago continues to influence holdings today. 10 to 15% of the cross-country variation in US investors’ foreign bond holdings is explained by holdings 70 years ago, plausibly reflecting fixed costs of market entry and exit. This effect is twice as large for bonds denominated in currencies other than the dollar, suggesting the existence of even higher fixed costs of initiating US foreign investment in currencies other than the dollar. Our findings point to history and path dependence as key sources of financial market segmentation.
Karolin Kirschenmann
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Abstract
We analyse the impact of fiscal policy shocks in the euro area as a whole, using a newly available quarterly dataset of fiscal variables for the period 1981-2007. To allow for comparability with previous results on euro area countries and the US, we use a standard structural VAR framework, and study the impact of aggregated and disaggregated government spending and net taxes shocks. In addition, to frame euro area results, we apply the same methodology for the same sample period to US data. We also explore the sensitivity of the provided results to the inclusion of variables aiming at measuring “financial stress” (increases in risk) and “fiscal stress” (sustainability concerns). Analysing US and euro area data with a common methodology provides some interesting insights on the interpretation of fiscal policy shocks.
Abstract
We derive forecast weights and uncertainty measures for assessing the role of individual series in a dynamic factor model (DFM) to forecast euro area GDP from monthly indicators. The use of the Kalman filter allows us to deal with publication lags when calculating the above measures. We find that surveys and financial data contain important information beyond the monthly real activity measures for the GDP forecasts. However, this is discovered only, if their more timely publication is properly taken into account. Differences in publication lags play a very important role and should be considered in forecast evaluation.
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