Jiyoun An

Capital and Credit Market Integration and Real Economic Contagion During the Global Financial Crisis

This study investigates the role of financial integration in the spread of the global financial crisis. In particular, this study shows how the effect of the crisis on real business cycle co-movement varied for capital and credit market integration, using a sample of 58 countries in 2001–2013. During the global financial crisis, the United States — the epicenter of the crisis — experienced a severe downturn in the real economy, and other countries followed suit. We find that during the global financial crisis, the business cycle co-movements between the United States and the rest of the world were stronger when the level of capital market integration between them was higher. However, the co-movements were weaker when the level of credit market integration was higher. These findings are robust even when including investment channels, local fundamental factors, endogenous policy responses across countries, and alternative measures for financial integration and business cycle co-movements.

Can Capital Account Liberalization Lessen Capital Volatility in a Country with “Original Sin”?

The term “original sin” refers to countries that cannot take out foreign loans that are denominated in its own currency. This study investigates how capital account liberalization affects capital flow volatility in countries with and without original sin. Overall, we find that the level of capital openness increases capital flow volatility, and that countries with original sin experience additional volatility in their capital flows. When the data sample is limited to countries with high institutional quality, the difference remains between the two groups—confirming that the different effects of capital openness on volatility should be attributed to differences in the international status of currencies rather than in institutional quality. Emerging economies whose currencies are not internationalized should therefore be more cautious of capital account liberalization.

Warranted Multiples and Future Returns

We propose an alternative way of using accounting multiples to predict future returns. We define excess multiple as the difference between an accounting multiple and the warranted multiple based on a firms fundamental value drivers. Firms with low excess multiples have higher one-to-three years ahead stock returns than firms that have high excess multiples. This difference in returns is economically and statistically significant and cannot be explained by Fama-French three factors or a momentum factor.

Election Cycles and Stock Market Reaction: International Evidence*

This study investigates movements of the stock return volatility during election periods (from one-year before an election to one-year after the election) with the use of data from 16 countries. The main findings of this study are (1) stock return volatility declines over time as elections approach, (2) the level of the stock return volatility during election periods is lower than that during non-election periods, and (3) the stock return volatility rises quickly during election months and immediately after the elections. The first and second findings confirm conjectures made on the dynamic pattern of the volatility in previous studies such as Pantzalis et al. (2000) and Wisniewski (2009).

Impacts of Large Disasters on the Macroeconomy and Financial Markets

1. Introduction. 2. Case Studies. 3. Direct Effects and International Spillover Effects on the Macroeconomy: Dynamic Panel GMM Analysis. 4. Direct Effects and International Spillover Effects on Financial Markets: Event Study Approach.