Natalia T. Tamirisa

Exchange and Capital Controls as Barriers to Trade

This paper considers the effect of exchange and capital controls on trade in the gravity-equation framework, in which bilateral exports depend on the distance between countries, the countries size and wealth, tariff barriers, and exchange and capital controls. The extent of exchange and capital controls is measured by unique indices. In view of the degree to which countries have liberalized their exchange systems, controls on current payments and transfers are found to be a minor impediment to trade, while capital controls significantly reduce exports into developing and transition economies. Thus, further capital account liberalization could significantly foster trade.

The Missing Globalization Puzzle

The failure of declining trade-related costs to be reflected in estimates of the standard gravity model of bilateral trade might be called the missing globalization puzzle. This puzzle is most apparent in the estimated distance coefficients found in the literature, which show no evidence of declining in absolute value over time. In contrast, we find evidence of globalization, on both cross-section and panel data, reflected in a variety of measures of geography. Our estimation procedure is consistent with recent theoretical developments that emphasize the importance of relative costs for determining bilateral trade patterns. But the main reason our findings differ from previous studies is our nonlinear specification, which has a number of advantages over the standard log-linear specification.

Macroeconomic fundamentals, price discovery, and volatility dynamics in emerging bond markets.

This study characterizes volatility dynamics in external emerging bond markets and examines how prices and volatility respond to news about macroeconomic fundamentals. As in mature bond markets, macroeconomic surprises in external emerging bond markets are found to a¤ect both conditional returns and volatility, with the effects on volatility being more pronounced and longer lasting than those on prices. Yet the process of information absorption tends to be more drawn out than in mature bond markets. International and regional macroeconomic news is at least as important as local news for both asset valuations and volatility dynamics in external emerging bond markets.

Africa's Trade Revisted

The popular impression that Africa has not integrated into world trade, as suggested by the evolution in simple indicators, has been called into question recently by more formal analysis. This paper refines and generalizes this analysis, but lends support to the popular view of disintegration. Africa, especially Francophone Africa, is currently under-exploiting its trading opportunities and has witnessed disintegration over time, a trend that is most pronounced in its trade with the technologically advanced countries.

Bilateral Financial Linkages and Global Imbalances: A View on the Eve of the Financial Crisis

We present a novel and comprehensive dataset of bilateral gross and net external positions in various financial instruments for the main advanced and emerging economies and regions, designed to improve our understanding of cross-border financial linkages. The data show no strong correspondence between country or region pairs with the largest gross versus net external positions, and the importance of international financial centers, including offshore centers, in intermediating financial flows. We also highlight some important data gaps in completing a network of cross-border holdings, related to the limited available information on the size and geographical pattern of external claims and liabilities of offshore centers, oil exporters, and other mostly emerging markets.

Is Africa Integrated in the Global Economy

The popular impression that Africa has not integrated into world trade, as suggested by the evolution in simple indicators, has been called into question recently by more formal analysis. This paper refines and generalizes this analysis and lends support to the popular view of disintegration, but only for countries in Francophone Africa. These countries are currently underexploiting their trading opportunities and have witnessed disintegration over time, a trend that is most pronounced in their trade with technologically advanced countries. There is some evidence, on the other hand, that countries in Anglophone Africa are reversing the trend of disintegration, particularly in their trade with advanced countries.

The impact of macroeconomic announcements on emerging market bonds

Abstract This paper examines how emerging market bonds react to macroeconomic announcements. Global bond spreads respond to rating actions and changes in U.S. interest rates rather than domestic data and policy announcements. All announcements affect market volatility. Macroeconomic data and policy announcements reduce uncertainty and stabilize spreads, while rating actions cause greater volatility. Results are robust to country-specific and panel analyses, assuming conditional variance and controlling for the surprise content of news. In subsamples, announcements matter less for countries with more transparent policies and higher credit ratings. In a crisis, rating actions become less important, and investors focus on simple and timely indicators.

International Transmission of Bank and Corporate Distress

The paper evaluates how increases in banks’ and nonfinancial corporates’ default risk are transmitted in the global economy, using in a vector autoregression model for 30 advanced and emerging economies for the period from January 1996 to December 2008. The results point to two-way causality between bank and corporate distress and to significant global macroeconomic and financial spillovers from either type of distress when it originates in a systemic economy. Corporate distress in advanced economies has a larger impact on economic growth in emerging economies than bank distress in advanced economies has. In contrast, activity in advanced economies is more vulnerable to bank distress than to corporate distress.

Malaysian Capital Controls; Macroeconomics and Institutions

We analyze the capital controls imposed in Malaysia in September 1998. In macroeconomic terms, these controls neither yielded major benefits nor were costly. At the same time, the stock market interpreted the capital controls (and associated events) as favoring firms with stronger political connections, and some connected firms reportedly received advantages immediately following the crisis. Analysis of financial accounts indicates that connected firms outperformed unconnected firms before the 1997-98 crisis but not afterward. After the crisis, connected firms were either not supported as much as the market had expected or the benefits they received were not manifest in their published accounts.

Do Macroeconomic Effects of Capital Controls Vary by Their Type? Evidence from Malaysia

This paper examines how the macroeconomic effects of capital controls vary depending on which type of international financial transaction they cover. Drawing on Malaysias experiences in regulating the capital account during the 1990s, it finds, in an error-correction model, that capital controls generally have statistically insignificant effects on the exchange rate. Controls on portfolio outflows and on bank and foreign exchange operations facilitate reductions in the domestic interest rate, while controls on portfolio inflows have the opposite effect, in line with the theoretical priors. Controls on international transactions in the domestic currency and stock market operations have statistically insignificant effects on the interest rate differential.