Sergio Schmukler - Profile on Academia.edu (original) (raw)

Papers by Sergio Schmukler

Social Science Research Network, 2015

published by Elsevier. It is posted here by agreement between them. Changes resulting from the pu... more published by Elsevier. It is posted here by agreement between them. Changes resulting from the publishing process-such as editing, corrections, structural formatting, and other quality control mechanisms-may not be reflected in this version of the text.

International Economics and Economic Policy, Nov 18, 2006

This note evaluates the prospects for a world currency, using as a departure point the papers by ... more This note evaluates the prospects for a world currency, using as a departure point the papers by . The note argues that a world currency is unlikely in the foreseeable future and probably undesirable. Although more evidence is needed, there seem to be no strong forces towards the creation of new monetary unions among the countries with major currencies or between those countries and the periphery. Based on recent experience, the note also argues that one of the main benefits to establish a world currency, the elimination of exchange rate uncertainty, is likely less important than commonly believed. No matter how rigid a currency arrangement is, initiatives to dissolve it tend to appear as bad times arise. Still, the present equilibrium of no world currency leaves unresolved many difficult issues related to the functioning of the domestic and international monetary systems.

The World Bank eBooks, Sep 24, 2009

The Policy Research Working Paper Series disseminates the findings of work in progress to encoura... more The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Emerging economies have tried to promote long-term debt because it reduces maturity mismatches and the probability of crises. This paper uses unique evidence from the leading case of Chile to study to what extent there is domestic demand for long-term instruments. The authors analyze monthly asset-level portfolios of Chilean institutional investors (mutual funds, pension funds, and insurance companies) and compare their maturity structure to that of US bond mutual funds. Despite being thought to invest long term, Chilean asset-management This paper-a product of the Macroeconomics and Growth Team, Development Research Group-is part of a larger effort in the department to understand financial development and the role of institutional investors. Policy Research Working Papers are also posted on the Web at . The authors may be contacted at craddatz@worldbank. org and sschmukler@worldbank.org. institutions (mutual and pension funds) hold large amounts of short-term assets relative to US mutual funds and Chilean insurance companies. Short-termism is not driven by lack of instrument availability or tactical behavior. Instead, it seems to be explained by the desire to minimize inflation risk and, more importantly, by manager incentives that tilt demand toward short-term instruments. Extending the maturity of emerging market debt may require reducing risk and reshaping investor incentives.

National Bureau of Economic Research, 2002

Hard pegs, such as currency boards, intend to reduce or even eliminate currency risk. This paper ... more Hard pegs, such as currency boards, intend to reduce or even eliminate currency risk. This paper investigates the patterns and determinants of the currency risk premium in two currency boards -Argentina and Hong Kong. Despite the presumed rigidity of currency boards, the currency premium is almost always positive and at times very large. Its term structure is usually upward sloping, but flattens out or even becomes inverted at times of turbulence. Currency premia differ across markets. The forward discount typically exceeds the currency premium derived from interbank rates, particularly during crisis times. The large magnitude of these cross-market differences can be the consequence of unexploited arbitrage opportunities, market segmentation, or other risks embedded in typical measures of currency risk. The premium and its term structure depend on domestic and global factors, related to devaluation expectations and risk perceptions.

International Finance, Dec 1, 2004

This paper argues that short termism, dollarization, and the use of foreign jurisdictions are end... more This paper argues that short termism, dollarization, and the use of foreign jurisdictions are endogenous ways of coping with systemic risks prevalent in emerging markets. They represent a symptom at least as much as a problem. These coping mechanisms are jointly determined and the choice of one of them involves risk tradeoffs. Various conclusions can be derived from the analysis. First, because of the dominance of dollar contracts over short-duration contracts, dedollarization might be much more difficult to achieve than often believed. Second, one-dimensional policies aimed at reducing currency and duration mismatches might just displace risk and not diminish it. Third, as systemic risks rise, the market equilibrium settles in favor of investor protection against price risk (through dollar and short-duration contracts) at the expense of exposure to credit risk. Finally, the option value to litigate in the event of default might explain this equilibrium outcome.

Journal of International Money and Finance, Sep 1, 2007

This paper studies international financial integration analyzing firms from various countries rai... more This paper studies international financial integration analyzing firms from various countries raising capital, trading equity, and/or cross-listing in major world stock markets. Using a large sample of 39,517 firms from 111 countries covering the period 1989-2000, we find that, although international financial integration increases substantially over this period, only relatively few countries and firms actively participate in international markets. Firms more likely to internationalize are from larger and more open economies, with higher income, better macroeconomic policies, and worse institutional environments. These firms tend to be larger, grow faster, and have higher returns and more foreign sales. While changes occur with internationalization, these firm attributes are present before internationalization takes place. The results suggest that international financial integration will likely remain constrained by country and firm characteristics.

Development Digest : Navigating the New Normal

Malaysia is no stranger to external shocks affecting its macroeconomy. Over the past two decades,... more Malaysia is no stranger to external shocks affecting its macroeconomy. Over the past two decades, it was buffeted by the 1997 Asian Financial Crisis (AFC), the 2001 global slowdown after 9/11, and the 2008 Global Financial Crisis, each shock affecting the Malaysian economy in different ways. The first one resulted in the steepest economic contraction in Malaysia's history – reversing growth to negative 7.35 percent in 1998. The country surmounted this massive crisis through prudent policymaking, and drew important lessons to protect itself from the latter two economic shocks. This latest global COVID-19 (coronavirus) crisis is particularly unique, given the context in which it emerged and the dual threats it poses to states and societies across the world. Prior to COVID-19's global spread during the last two months, economic growth in almost all countries had already slowed on the back of trade tensions between the United States and China. Against this softening economic backdrop entered the COVID-19 virus. What began as a localized epidemic in Wuhan, China has now transformed into an international public health crisis and an international economic crisis creating supply and demand shocks in over 180 countries. Amidst this unfolding global pandemic, international oil prices, too, began to plummet in early March adding additional fiscal pressure on oil-producing countries including Malaysia.

World Bank policy research working paper, May 6, 2003

What is the impact of firms that cross-list, issue depositary receipts, or raise capital in inter... more What is the impact of firms that cross-list, issue depositary receipts, or raise capital in international stock markets on the liquidity of remaining firms in domestic markets? Using a panel of over 3,200 firms from 55 countries during 1989-2000, we find that internationalization reduces the liquidity of domestic firms through two channels. First, the trading of international firms migrates from domestic to international markets and the reduction in domestic liquidity of international firms has negative spillover effects on domestic firm liquidity. Second, there is trade diversion within domestic markets as liquidity shifts out of domestic firms and into international firms.

NBER working papers are circulated for discussion and comment purposes. They have not been peerre... more NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

The World Bank eBooks, Aug 12, 2008

Economía, 2004

ho pays for financial crises? What are the mechanisms for spreading the cost across different soc... more ho pays for financial crises? What are the mechanisms for spreading the cost across different social groups? The literature is only beginning to provide answers to these crucial questions. Several papers measure the depth and duration of crises, defined as the cumulative output loss and recovery time, and conclude that these crises have been very costly for developed and emerging economies. The period 1973-97 registered more than forty-four crises in developed countries and ninetyfive in emerging markets, with average output losses of 6.25 percent and 9.21 percent of gross domestic product (GDP), respectively. Crises do not hit all groups of people equally. Several papers analyze how crises affect different ranges of the income distribution; they identify four main channels through which crises affect households and, in particular, the poor. 2 First, financial crises generally lead to slowdowns in economic activity and, consequently, to a reduction in labor demand.

Journal of Development Economics, Dec 1, 2002

Currency risk is one of the two components of the total interest rate differential. Hard pegs, su... more Currency risk is one of the two components of the total interest rate differential. Hard pegs, such as currency boards, are meant to reduce or even eliminate currency risk, thus, reducing domestic interest rates. This paper investigates the patterns and determinants of the currency risk premium in two currency boards-Argentina and Hong Kong. Despite the presumed rigidity of currency boards, the currency premium is almost always positive and at times very large. Its term structure is usually upward sloping, but flattens out or even becomes inverted at times of turbulence. The premium and its term structure depend on domestic and global factors related to devaluation expectations and risk perceptions.

IMF working paper, Feb 1, 2023

China's equity markets internationalization process started in the early 2000s but accelerated af... more China's equity markets internationalization process started in the early 2000s but accelerated after 2012, when Chinese firms' shares listed in Shanghai and Shenzhen gradually became available to international investors. This paper studies the effects of the post-2012 internationalization events by comparing the evolution of equity financing and investment activities for: (i) domestic listed firms relative to firms that already had access to international investors and (ii) domestic listed firms that were directly connected to international markets relative to those that were not. The paper finds large increases in financial and investment activities for domestic listed and for connected firms, with significant aggregate effects. The evidence also suggests the rise in firms' equity issuances was primarily and initially financed by domestic investors. International investors' portfolio holdings in Chinese equity markets and ownership in firms increased markedly only once Chinese firms' locally issued shares became part of the MSCI Emerging Markets Index.

Open Economies Review, May 24, 2007

Three main features characterize the international financial integration of China and India. Firs... more Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities, these countries are large holders of official reserves. Second, their international balance sheets are highly asymmetric: both are "short equity, long debt." Third, China and India have improved their net external positions over the last decade although neoclassical models would predict them to be net borrowers. We argue that domestic financial policies are key to understanding these patterns and the future role of China in the international financial system.

We are indeed grateful to Juan Carlos Gozzi Valdez for truly outstanding research assistance and ... more We are indeed grateful to Juan Carlos Gozzi Valdez for truly outstanding research assistance and for giving us very useful suggestions. We are also grateful to Tatiana Didier, who also helped us at the initial stages of the paper. For helpful comments, we thank seminar participants at the University of Minnesota, Paul Povel, Raj Singh, and David Smith. We thank the World Bank Latin American Regional Studies Program and Research Support Budget for ample financial support. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors and do not necessarily represent the views of the World Bank. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.

L'essor des marchés des obligations d'entreprise en Asie de l'Est et en Amérique latine

Revue d'économie financière, 2021

Small Fish, Big Pond

finance and development, Jun 6, 2005

The Boom in Corporate Borrowing after the Global Financial Crisis

World Bank Publications - Reports, Feb 18, 2021

This paper provides a theoretical framework for quantitatively investigating the optimal accumula... more This paper provides a theoretical framework for quantitatively investigating the optimal accumulation of international reserves as a hedge against rollover risk. We study a dynamic model of endogenous default in which the government faces a tradeoff between the insurance benefits of reserves and the cost of keeping larger gross debt positions. A calibrated version of our model is able to rationalize large holdings of international reserves, as well as the procyclicality of reserves and gross debt positions. Model simulations are also consistent with spread dynamics and other key macroeconomic variables in emerging economies. The benefits of insurance arrangements and the effects of restricting the use of

Maximizing knowledge for development

The World Bank Group (WBG) is strengthening its partnerships with upper-middle-income countries a... more The World Bank Group (WBG) is strengthening its partnerships with upper-middle-income countries and high-income countries to leverage private and public finance, and to create knowledge and new solutions based on the experiences of graduates for the benefit of clients. Malaysia is a leading contributor to a stronger ecosystem of new research and knowledge, through the embedding of the Malaysia Experience in global discussions on development. This digest is widely disseminated to development practitioners and policy-makers in the East Asia and Pacific region and internally within WBG. The authors begin this issue with their experience with the Hub as they enter their second year, and how it is a pioneering example of how the Bank is leveraging knowledge for development finance. Then, the authors move into an update on the Bank’s involvement in the concluded World Urban Forum 9 in Kuala Lumpur. The authors also delve into topics like Malaysia’s lessons from the Asian Financial Crisis....