International Macro & Finance. Dave Backus

Transcription

1 International Macro & Finance Dave Backus NYU Stern School of Business, October 2004

2 Accounting

3 BOP: Net exports + capital inflows = 0 Goods Country 1 Country 2 IOUs If Country 1 runs a trade surplus: There is a capital outflow for Country 1, inflow for Country 2.

4 US balance of payments Net exports Net labor income from ROW Net capital income from ROW Net taxes and transfers from ROW Current account Net direct investment in US Net purchase of private securities Net purchase of US govt securities Net loans and other Capital and financial account ( inflows ) Statistical discrepancy US$b, 2003, from BEA.

5 More balance of payments Arg Auz France Mexico Poland Net exports Net foreign income Net transfers Current account Net direct investment Net portfolio investment Net loans and other Official reserves Capital transfers Capital and financial acct Errors & omissions US$b, 2000, from IMF, BOP Yearbook, 2001.

6 US international investment position US-owned assets abroad Direct investment Corporate equity Bonds Loans and other Reserves & govt Foreign-owned assets in the US Direct investment Corporate equity Corporate bonds US govt (treasuries, currency, official) Loans and other Net investment position 7, , , , , , , , , US$b, 2003, from BEA.

7 International investment positions Auz Chile France Poland Spain Assets , Direct investment 82.0 na 1, Portfolio investment 58.4 na Loans and other Reserves Liabilities , Direct investment na Portfolio investment Loans and other Net investment position US$b, 2000, from IMF, BOP Yearbook, 2001.

8 Net international asset positions Source: Lane and Milesi-Ferretti, JIE, 2001.

9 Net international asset positions Source: Lane and Milesi-Ferretti, JIE, 2001.

10 Net international asset positions Source: Lane and Milesi-Ferretti, JIE, 2001.

11 Facts Arbitrage opportunities in arbitrage-free models

12 Growth Associated with quality of internal capital markets Not associated with openness of capital markets (except Cam Harvey) Conjecture: interaction of bad markets and openness leads to crises

13 Globalization: world trade Source: Bergoeing and Kehoe, Trade theory and trade facts, ms, 2003.

14 Globalization: US trade Source: Bergoeing and Kehoe, Trade theory and trade facts, ms, 2003.

15 Globalization: rich countries Source: Prasad, Rogoff, Wei, and Kose.

16 Globalization: poor countries Source: Prasad, Rogoff, Wei, and Kose.

17 Globalization: investment restrictions Source: Edison and Warnock, JEF, 2003.

18 1. Net capital flows are small Investment Rate Source: Feldstein & Horioka, EJ, Saving Rate

19 Net capital flows were larger < WW I Source: Jones and Obstfeld, NBER 6103.

20 Net exports before WW II Percent of GDP, Auz (green), Canada (red), Sweden (yellow).

21 2. Net exports are countercyclical Country Std(y) Std(nx/y) Std(c)/Std(y) Corr(nx,y) Corr(r,y) Argentina Brazil Korea Mexico Philippines Avg Australia Canada Netherlands New Zealand Sweden Avg Source: Neumeyer and Perri, NBER

22 Economist forecasts CH 8 CA Balance (percent of GDP) FR SW Jap 2 IT UK 4 ES Auz GDP Growth US Source: The Economist, Aug 7, 2004.

23 Capital flows in Mexico CA def FDI Portfolio

24 Capital flows in Indonesia CA def FDI Loans

25 3. North-South flows are small Ratio of Net Foreign Assets to GDP for rich and poor countries. Source: Lane and Milesi-Ferretti, JIE, 2001.

26 4. Direct investment is less volatile Source: Albuquerque, JIE, 2003.

27 Direct investment and corruption Source: Wei, BPEA, 2001.

28 Direct investment and rating Source: Albuquerque, JIE, 2003.

29 5. Home bias in equity portfolios Source: Ahearne, Griever, and Warnock, JIE, 2004.

30 6. Real exchange rates Volatile and persistent Not associated with any obvious fundamentals ( disconnect ) But: Related to industry output, investment, and employment once input/output structure has been considered Relative price of nontraded goods

31 Exchange rates and nontraded goods Canada Source: Betts and Kehoe, ms, 2004.

32 7. International equity returns Source: Dumas, Harvey, and Ruiz, JIMF, 2003.

33 8. US current account Source: Obstfeld and Rogoff, ms, 2004.