It is a matter of debate in how far credit ratings contribute to allocative efficiency or to excessive volatility of asset prices and cross-border capital flows. Yet it is generally taken for granted that ratings play a significant role in the transnationalization of financial relations. This paper tests that hypothesis with data on sovereign credit ratings and foreign portfolio investment. A rating-related gravity model of finance is derived from the choice-theoretical framework of Okawa and van Wincoop (Gravity in International Finance, 2012) and estimated in three stages. At the first stage, the authors find that the introduction and evolution of sovereign ratings since the 1970s has affected inward portfolio investment in host countries. At the second stage, they examine to which extent sovereign ratings help to predict the degree of investors' home bias, and whether they can account for the divergent dynamics before and after the global financial crisis. At the third stage, the authors look at the explanatory content of ratings for the determination of the size of bilateral portfolio investment. Evidence for a significant role of sovereign ratings is found at all three stages.
Leistungsbilanz; Auenwirtschaftliches Gleichgewicht; Allgemeines Gleichgewicht; Internationale Staatsschulden; Auslandsinvestition; Kaufkraftparität; Theorie
'Global imbalances' are almost universally regarded as a disequilibrium phenomenon. Caballero, Farhi, and Gourinchas (2008) challenge this notion with their dynamic general equilibrium model of global imbalances. The authors conclude that current account deficit nations need not worry about long-lasting deficits as long as the model is in equilibrium. The joint model in this paper combines the two model extensions for exchange rates and FDI which are disjunct in the original model. An analytical solution to the new joint model is neither as straightforward as for the separate models nor can previous results from calibrated simulation be confirmed without restriction. The model is highly dependent on parameter assumptions: A variation of calibrated parameters highlights the prime impact of investment costs previously assumed away. Sustainable equilibrium paths for global imbalances are much narrower in updated simulations than previously predicted. Policy recommendations on the sustainability of international debt holdings therefore need to be a lot more cautious. -- international debt ; financial market development ; foreign direct investment ; real exchange rate ; international macro-finance
Schriftenreihe des Promotionsschwerpunkts Globalisierung und Beschäftigung / Evangelisches Studienwerk e.V.
Schriftenreihe des Promotionsschwerpunkts Globalisierung und Beschäftigung / Evangelisches Studienwerk e.V. ; 33/2011
Leistungsbilanz; Außenwirtschaftliches Gleichgewicht; Kapitalbilanz; China; USA; Finanzkrise; Internationales Währungssystem; Keynesianismus; Welt; Aufsatz im Buch
Gemeinsame Tagung des Arbeitskreises Politische Ökonomie und der Keynes-Gesellschaft (2009 : Karlsruhe) Keynes 2.0 1. Aufl. Marburg : Metropolis-Verlag, 2011 (2011), Seite 217-239 434 Seiten
