Structural analysis with mixed-frequency data: A model of US capital flows (original) (raw)

Structural analysis with mixed frequencies: monetary policy, uncertainty and gross capital flows

2016

In this paper we study how monetary policy, economic uncertainty and economic policy uncertainty impact on the dynamics of gross capital inflows in the US. Particular attention is paid to the mixed frequency-nature of the economic time series involved in the analysis. A MIDAS-SVAR model is presented and estimated over the period 1988-2013. While no relation is found when using standard quarterly data, exploiting the variability present in the series within the quarter shows that the effect of a monetary policy shock is greater the longer the time lag between the month of the shock and the end of the quarter. In general, the effect of economic and policy uncertainty on US capital inflows are negative and significant. Finally, the effect of the three shocks is different when distinguishing between financial and bank capital inflows from one side, and FDI from the other.

A structural analysis of US entry and exit dynamics. Technical appendix

2018

A. The optimizing programs of the model and other technical details (pages 1-7) B. Short-run and long-run equilibria in the DSGE model with endogenous entry and exit (pages 8-12) C. Average productivity (pages 13-15) D. Data and measurement equations (pages 16 and 17) E. The loglinearized equation for short-run fluctuations of critical productivity, zcr (pages 18 and 19) F. Aggregation (pages 20-24) G. The overall resources constraint (pages 25 and 26) H. Estimated shock decomposition for US data (pages 27-31) I. The sources of fluctuations in the Great Recession (pages 32-37).

Structural Estimation of Dynamic Macroeconomic Models using Higher-Frequency Financial Data

2018

In this paper we show how high-frequency financial data can be used in a combined macro-finance framework to estimate the underlying structural parameters. Our formulation of the model allows for substituting macro variables by asset prices in a way that enables casting the relevant estimation equations partly (or completely) in terms of financial data. We show that using only financial data allows for identification of the majority of the relevant parameters. Adding macro data allows for identification of all parameters. In our simulation study, we find that it also improves the accuracy of the parameter estimates. In the empirical application we use interest rate, macro, and S&P500 stock index data, and compare the results using different combinations of macro and financial variables.

Industrial Structure and Financial Capital Flows

Factor-proportions trade and financial asset trade are both integral parts of globalization, yet little has been studied on their interplay. In a framework that integrates these two paradigms of trade, a new force driving international capital flows emerges: financial capital tends to flow towards countries that become more specialized in capital-intensive industries (the composition effect). This force competes with the neoclassical force in response to shocks such as globalization, country-specific labor force or labor productivity shocks. If the composition effect dominates, capital flows away from the country hit by the positive shock ("a flow reversal"), and asset prices rise globally rather than locally. Two implications arise: rich countries' current account deficits may be a consequence of their shifting towards capital-intensive industries; young and fast growing developing countries may help sustain asset prices in an aging industrialized world. Predictions of the current account and specialization patterns are shown to be consistent with the data. JEL Classification: F21, F32, F41

Industrial Structure and Capital Flows

2012

This paper provides a new theory of international capital flows. In a framework that integrates factor-proportions-based trade and financial capital flows, a novel force emerges: capital tends to flow toward countries that become more specialized in capital-intensive industries. This "composition" effect competes with the standard force that channels capital toward the location where it is scarcer. If the composition effect dominates, capital flows away from the country hit by a positive labor force/productivity shock-a flow "reversal.'' Extended to a quantitative framework, the model generates sizable current account imbalances between developing and developed countries broadly consistent with the data. (JEL F14, F21, F32, F41, L16, O19) Commodity trade and capital flows are the two engines of globalization. Until now, little has been known about how they interact. The conventional analyses of international macroeconomics and trade theory in separation fails to account for the influence of macroeconomic dynamics on the structure of trade as well as the aggregate feedback effects of trade patterns. This paper demonstrates that their interaction can be crucial in determining the global allocation of capital, shedding new light on widely-debated issues surrounding global imbalances.

Analysis of Capital Flows: A Cross-Country Study

2017

The present paper tries to find out the factors affecting Net capital flow in top 40 countries in terms of net capital flow (UNCTAD 2014). We have used panel data for our analysis. We found that market capitalization positively and significantly affects net inflow of FII's to a particular country. Interest rate also positively and significantly affects net capital flows. So our analysis supports validity of Mundell-Fleming model. Inflation negatively affects Net capital flows as real return on assets get reduce because of inflation. Increase in the GDP growth positively and significantly affects net inflow of total capital. Individuals, firms and corporates invest more in a country where there is potential of increase in growth and expansion of market. So, if there is increase in GDP growth rate it attracts total foreign capital. Our result suggests that whenever there is increase in the GDP growth rate of USA then there is no effect of total capital flow. But whenever here is i...

Structural identification of high and low investment regimes

Journal of Monetary Economics, 2007

We propose a structural model to investigate the existence and possible differences between low and high regimes of investment expenditures in equipment at the firm level. The existence of such differences is predicted by recent theoretical studies of investment behavior stressing the role of asymmetries and non-convexities in the adjustment cost technology. The structural spike model is estimated for a balanced panel of Dutch firms operating in 13 different industrial sectors. The flexibility of the structural approach explains why the proposed method outperforms models ARTICLE IN PRESS www.elsevier.com/locate/jme 0304-3932/$ -see front matter r (W.A. Letterie).