The Three Phases of Global Liquidity

Azis, Iwan J.; Shin, Hyun Song

doi:10.1007/978-981-287-284-5_2

Cited by 4 publications

(4 citation statements)

References 14 publications

(13 reference statements)

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“…Financing constraints for the firms with foreign-currency borrowing are found to be lower in the years following the global financial crisis, compared to the pre-crisis period. This is most likely attributable to accommodative global monetary conditions and easier access to foreign credit (Azis and Shin, 2015). The firms that have relationships with either privately-owned banks or foreign-owned banks are found to face higher financing constraints when undertaking new foreign borrowing than those firms that have exclusive relationships with governmentowned banks.…”

Section: Introductionmentioning

confidence: 96%

Foreign currency borrowing and firm financing constraints in emerging markets: evidence from India

Mohapatra

Nagar²

2020

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PurposeFirst, the purpose of this study is to examine the relationship between foreign-currency debt and firms' financing constraints for India, the second-largest emerging market economy after China. Second, this study provides insights into how firms' financing constraints evolve prior to, during and after foreign currency borrowing. Third, it demonstrates the extent to which banks' ownership status and firms' characteristics influence the relationship between foreign currency borrowing and firms' financing constraints.Design/methodology/approachThis study uses detailed balance sheet data for 2,512 nonfinancial listed firms in India for the 1996–2016 period to provide new evidence on the relationship between foreign currency borrowing and firms' financing constraints. This study uses a well-known measure of firms' financing constraints, the sensitivity of investment to internal cash flows (Fazzari et al., 1988, 2000; Hubbard, 1999; Love, 2003).FindingsFinancing constraints tend to be higher for firms with foreign currency debt exposure compared to other firms. Financing constraints are higher prior to new foreign currency borrowing (FCB), but decrease subsequently. Firms that have relationships with privately owned banks or foreign banks have higher financing constraints when undertaking new FCB than those with exclusive relationships with government-owned banks. Financing constraints for firms with FCB are higher during domestic credit booms than other periods. Nonmanufacturing firms and those with lower than median export revenues and higher than median tangible assets experience greater financing constraints compared to other firms when they undertake FCB.Originality/valueThe findings of this study suggest that although firms which borrow in foreign currencies are initially more financially constrained than other firms, the foreign currency borrowing reduces their financing constraints. The findings on how global and domestic macroeconomic conditions and firm-specific characteristics influence the relationship between financing constraints and foreign currency borrowing can provide directions for policy to better leverage the benefits of international financial integration.

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Section: Introductionmentioning

confidence: 96%

Foreign currency borrowing and firm financing constraints in emerging markets: evidence from India

Mohapatra

Nagar²

2020

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“…For instance, capital flow reversals can increase the likelihood of domestic financial crises and can have a deleterious impact on economic growth (Caballero, 2016;Azis and Shin, 2013). De Haan and Sturm (2016) argue that the benefit of inflow increase unfairly benefit agents who are better able to capitalize on them, aggravating the skewness of income distribution.…”

Section: Introductionmentioning

confidence: 99%

International Portfolio Investment, Institutional Quality, and Income Inequality: Evidence from Global Sample

Arogundade,

Yeboua,

Mdud

2023

Preprint

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This study examines the effect of total portfolio investment and its sub-categories (debt and equity) on income inequality using a sample of 76 countries. The empirical results show that foreign portfolio flows worsen income inequality in recipient countries, regardless of the inequality indicators used. The study also digs deeper to examine the conditions under which international portfolio investment can have an inequality-reducing effect. The empirical evidence confirms our hunch that FPI, in the presence of good institutions, serves as a catalyst for bridging the gap between the rich and poor. In other words, domestic factors such as the quality of institutions modulate the link between portfolio investment flows and income inequality. The estimated results are reassuringly robust to alternative measures of inequality (Gini-index and Palma ratio), sub-categories of total portfolio investment (debt and equity), and various estimators such as IV-2SLS, Machado and Silva quantile regression, and JKS Granger non-causality results. JEL classification: F3; P0; I30

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“…Aizenman et al (2008) found that the level of financial openness in both developed and emerging countries in Asia and Latin America tended to increase over the period of 1991-2006, along with the lax rules of international exchange flows and international capital flows. The activities of multinational corporations and financial innovations-such as corporate bond issuance and stock listing abroad-also further complicate the interstate financial linkages in the present (Azis and Shin 2013). These global monetary and financial conditions are generally summarized under the umbrella term "global liquidity", which refers to the availability of funding in global financial markets.…”

Section: Introductionmentioning

confidence: 99%

“…For developing countries, economic development is measured by several variables, including GDP, inflation, trade flow, capital Economies 2021, 9, 162 2 of 20 inflow, capital account transactions, and foreign exchange, among others (Aizenman et al 2008). As identified by Azis and Shin (2013), the first surge period (1995Q4-1998Q2) culminated in the Asian financial crisis, while the second surge (2006Q4-2008Q2) was closely related to the credit boom that created preconditions for the global financial crisis. The current global economy may be in a third surge, fueled by a highly accommodative monetary policy in the wake of global recession, along with high commodity prices.…”

Section: Introductionmentioning

confidence: 99%

The Influence of Global Financial Liquidity on the Indonesian Economy: Dynamic Analysis with Threshold VAR

Ekananda

Suryanto

2021

Economies

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Empirical studies of the global liquidity spillover on Indonesia’s economy are still relatively limited. Most of the global contagion literature on Indonesia’s economy focuses only on the effects of real shock (on output) due to financial shock. We assert that the effect of global output on Indonesia macroeconomic conditions is a fairly relevant issue to be studied. This research aims to investigate the interdependent relationships between world GDP, world commodity prices, world inflation, trade flows, capital inflow, capital account transactions, reserve accumulation, global liquidity (e.g., global broad money), and monetary aggregates, with regard to Indonesia’s GDP variables and inflation. This paper uses threshold vector autoregression (TVAR) to capture regime changes in the variables of the world economy. World economic data and Indonesia’s economic data were utilized to prove different responses to the world economic situation in two different regimes. This research identified two groups of upper regime and lower regime world variables—namely, world inflation, world GDP, and world commodity prices. TVAR estimation resulted in a smaller residual sum of squares compared to VAR estimation. Different regimes resulted in differences in Indonesia’s economic responses due to the shock of world economic variables. The findings generated by this research are expected to be insightful to monetary policymakers in Indonesia.

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The Three Phases of Global Liquidity

Cited by 4 publications

References 14 publications

Foreign currency borrowing and firm financing constraints in emerging markets: evidence from India

Foreign currency borrowing and firm financing constraints in emerging markets: evidence from India

International Portfolio Investment, Institutional Quality, and Income Inequality: Evidence from Global Sample

The Influence of Global Financial Liquidity on the Indonesian Economy: Dynamic Analysis with Threshold VAR

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