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Submitted by CARLA MARIA GOULART DE MORAES (carlagm) on 2015-04-09T15:25:50Z No. of bitstreams: 1 RafaelGiaretta.pdf: 506222 bytes, checksum: e353f74cbe4c2189a43a03748eb4b9cc (MD5) / Made available in DSpace on 2015-04-09T15:25:50Z (GMT). No. of bitstreams: 1 RafaelGiaretta.pdf: 506222 bytes, checksum: e353f74cbe4c2189a43a03748eb4b9cc (MD5) Previous issue date: 2011 / Nenhuma / Este estudo teve o objetivo de analisar a integração financeira entre o Brasil e o mercado internacional no período de 2002 a junho de 2010. A metodologia empregada foi a revisão teórica e empírica sobre o processo de integração financeira, o fluxo de capitais para o Brasil e a paridade de juros. Os principais resultados são que o Brasil se tornou mais integrado ao mercado internacional durante o período analisado, não somente pelo aumento do volume comercial, mas também pela maior integração financeira. / The present study had the objective to analyze the financial integration between Brazil and the international market from 2002 to June 2010. The methodology used was a review theoretical and empirical the process about financial integration, capital flows to Brazil and the rate of interest. The main results are that Brazil has become more integrated into the international market during the period analyzed, not only by increasing the volume of trade, but also by most financial integration.

This study aims to investigate currency substitution and financial dollarization in Turkey. The extend of dollarization in Turkey appears to be very high according to both the conventional currency substitution and the recently developed financial dollarization measures. This has serious policy implications as a source of financial fragility through currency/maturity mismatches and balance sheet effects. The empirical part of this study contained an investigation of the long run relationships between the variables in a system containing currency substitution ratio, expected exchange rate change and rates of return on domestic and foreign currency denominated assets. The results of the Johansen cointegration analysis based on quarterly data for the 1987-2004 period appeared not to be strongly supporting the General Portfolio Balance Model (GPBM). The theoretical part of this study suggests that the GPBM can be reduced to the Sequential Portfolio Balance Model (SPBM) under the uncovered interest parity (UIP) hypothesis. Consequently, the GPBM may be misleading under UIP. The Johansen cointegration results suggested the validity of the UIP for the Turkish data. The estimation of the SPBM suggested that there is a long-run relationship between currency substitution and expected exchange rate change in Turkey. The elasticity of currency substitution appeared to be high but consistent with those estimated for other high inflation developing countries. The results further supported the presence of a ratchet/hysteresis effect proxied by a trend variable. All these results are consistent with the argument that currency substitution and financial dollarization are important especially in high inflation countries.

One of the most popular investment and trading strategies over the last decade, has been the currency carry trade, which allows traders and investors to buy high-yielding currencies in the Foreign Exchange spot market by borrowing, low or zero interest rate currencies in the form of pairs, such as the Australian Dollar/Japanese Yen (AUD/JPY), with the purpose of investing the proceeds afterwards into fixed-income securities.To be able to determine the causality between the returns of equity markets and the foreign exchange market, we choose to observe the sensitivity and influence of two equity indexes on several pairs involved in carry trading. The reason for studying these relationships is to further explain the causes of the uncovered interest parity puzzle, thus adding our contribution to the academic field through this thesis.To accomplish our goals, data was gathered for daily quotes of 16 different currency pairs, grouped by interest differentials, and two equity indexes, the S&P 500 and FTSE All-World, along with data for the VIX volatility index, for the 2003-2012 period. The data was collected from Thomson Reuters Datastream and the selected ten year span was divided into three different periods. This was done in order to discover the differences on how equity indexes relate to typical carry trade currency pairs, depending on market developments before, during and after the world financial crisis.The tests conducted on the collected data measured the correlations, influences and sensitivity for the 16 different currency pairs with the S&P 500 Index, the FTSE All-World index, and the volatility index between the years of 2003-2012. For influences and sensitivity, we performed Maximum Likelihood (ML) regressions with Generalized Autoregressive Conditional Heteroscedasticity (GARCH) [1,1], in Eviews software.After analyzing the results, we found that, during our chosen time period, the majority of currency pair daily returns are positively correlated with the equity indexes and that the FX pairs show greater correlation with the FTSE All-World, than with the S&P 500. Factors such as the interest rate of a currency and the choice of funding currency played an important role in the foreign exchange markets, during the ten year time span, for every yield group of FX pairs.Regarding the influence and sensitivity between currency pairs and the S&P 500 with its VIX index, we found that our models explanatory power seems to be stronger when the interest rate differential between the currency pairs is smaller. Our regression analysis also uncovered that the characteristics of an individual currency can show noticeable effects for the relationship between its pair and the two indexes.

Submitted by joao barbosa campbell penna (joao.penna@vale.com) on 2015-02-20T19:44:37Z No. of bitstreams: 1 TESEFINAL_20022015.pdf: 1480842 bytes, checksum: 11e3f73bc5b243b7ed4a73b63fe90c59 (MD5) / Approved for entry into archive by GILSON ROCHA MIRANDA (gilson.miranda@fgv.br) on 2015-06-08T18:42:08Z (GMT) No. of bitstreams: 1 TESEFINAL_20022015.pdf: 1480842 bytes, checksum: 11e3f73bc5b243b7ed4a73b63fe90c59 (MD5) / Approved for entry into archive by Marcia Bacha (marcia.bacha@fgv.br) on 2015-06-12T17:55:33Z (GMT) No. of bitstreams: 1 TESEFINAL_20022015.pdf: 1480842 bytes, checksum: 11e3f73bc5b243b7ed4a73b63fe90c59 (MD5) / Made available in DSpace on 2015-06-12T17:56:53Z (GMT). No. of bitstreams: 1 TESEFINAL_20022015.pdf: 1480842 bytes, checksum: 11e3f73bc5b243b7ed4a73b63fe90c59 (MD5) Previous issue date: 2014-12-20 / Medimos a validade da paridade descoberta de juros – PDJ - para o mercado brasileiro no período de janeiro de 2010 a julho de 2014. Testamos a equação clássica da PDJ usando o Método dos Mínimos Quadrados Ordinários. Após a estimação dos parâmetros, aplicamos o Teste de Wald e verificamos que a paridade descoberta de juros não foi validada. Estendemos a equação tradicional da PDJ para uma especificação alternativa que captura medidas de risco Brasil e de alteração na liquidez internacional. Especificamente, acrescentamos três variáveis de controle: duas variáveis dummy que capturam condições de liquidez externa e o índice de commoditie CRB, que captura o risco Brasil. Com a especificação alternativa, a hipótese de que os retornos das taxas de juros em Real, dolarizadas, são iguais aos retornos da taxas de juros contratadas em dólares, ambas sujeitas ao risco Brasil, não foi rejeitada. Em complemento à análise das taxas representativas do mercado brasileiro, procurou-se avaliar a predominância da PDJ nas operações de swap cambial realizadas pela Vale S.A.. Para tanto, a série de taxa de juros em dólares do mercado brasileiro foi substituída pela taxa em dólar dos swaps contratados pela Vale. Os resultados encontrados demonstram que, quando comparado ao comportamento do mercado, as taxas em dólares da VALE são mais sensíveis às variações das taxas em Reais. / We measure the validity of uncovered interest parity - UIP - for the Brazilian market from January, 2010 to July, 2014. We tested the classical equation of UIP using the ordinary least squares method. After the estimation, we apply the Wald test and we verify that the uncovered interest parity has not been validated. We extend the traditional UIP equation for an alternative specification that captures Brazil risk and changes in liquidity of the international market. Specifically, we add three control variables: two dummy variables that capture external liquidity conditions and the commodity index CRB, which captures Brazil risk. With the alternative specification, the hypothesis that the returns in interest rates in Real, dollarized, are equal to the return of interest rate contracted in dollars, both subject to Brazil risk, was not rejected. To complement the analysis using the interest rates existing in the Brazilian market, we tried to evaluate the prevalence of UIP in cross currency interest rate swaps carried out by Vale SA. The interest rate in dollar of the Brazilian market was replaced by the dollar rate of swaps contracted by Vale. The results show that, when compared to market behavior, the dollar rates of Vale SA. are more sensitive to changes in Reais interest rates.

The aim of this diploma thesis is based on the empirical analysis to identify the relationship between the exchange rate and the interest rates in selected countries and verify the validity of the uncovered interest rate parity. In the first part, the author deals with basic theoretical and exchange rate determinants from a fundamental analysis point of view, which attempts to explain the causality between these two variables. The actual analysis was performed at three levels on monthly time series from 2010 to 2016. Graphical analysis was selected as the first stage of the analysis, also including verification of the validity of the Fisher International Effect. Later, regression and vector autoregressive analysis followed. However, the conclusions of the individual empirical parts show that the exchange rate is determined by many factors, not only by the interest rate differential, as assumed the theory of uncovered interest rate parity. These results are also related to the low quality of the estimated models. Uncovered interest rate parity has been confirmed in very few cases, but none of the monitored currency pairs has been validated at all three levels of empirical analysis at the same time. The work offers valuable insight into the trend appreciation or depreciation of the exchange rates at the positive interest rate differential in the selected period.

This thesis provides a thorough analysis of the covered- and uncovered interest parity conditions (CIP, UIP) as well as the forward rate unbiasedness hypothesis (FRUH) for Sweden and the European Economic and Monetary Union (EMU). By studying data on interbank rates in Sweden (STIBOR) and the EMU (EURIBOR) as well as the corresponding spot- and forward exchange rates, monetary integration and country-specific risks are determined and analyzed with direct applications to the potential entry of Sweden into the EMU. As interest rate parity in general gives insight into market efficiency and frictions between the chosen regions, such points are discussed in addition to EMU entry. Drawing on past studies that mainly studied one condition in isolation, a nested formulation of interest rate parity is instead derived and tested using cointegration and robust estimation methods. The results point to a strict rejection of the FRUH for all horizons except the shortest and a case where CIP only holds for the 6-month horizon and partially over one year. This implies, based on the nested formulation, that UIP is rejected for all horizons as well. Ultimately, the study concludes that a Swedish entry into the EMU is not motivated given the lackluster results on UIP and due to the lack of monetary integration. / Den här uppsatsen presenterar en djupgående analys av det kurssäkrade- och icke-kurssäkrade ränteparitetsvillkoret samt den effektiva marknadshypotesen på valutaterminer för Sverige och den europeiska ekonomiska och monetära unionen (EMU). Genom att studera data på interbankräntor i Sverige (STIBOR) och EMU (EURIBOR) samt respektive spot- och valutaterminskurser så skattas och analyseras monetär integration samt landsspecifika risker med en direkt tillämpning på Sveriges eventuella inträde i EMU. Eftersom ränteparitet generellt ger insikt i marknadseffektivitet och friktioner regioner emellan, diskuteras även dessa punkter utöver ett eventuellt EMU-inträde. Genom att bygga på föregående studier som i huvudsak studerar ränteparitetsvillkoren var för sig, härleds en sekventiell formulering av villkoren som sedan testas med kointegration och robusta estimeringsmetoder. Resultaten ger att den effektiva marknadshypotesen strikt förkastas på alla tidshorisonter förutom på en dag respektive en vecka, samt att kurssäkrad ränteparitet håller på 6 och delvis 12 månaders sikt. Baserat på den sekventiella formuleringen så innebär detta att icke-kurssäkrad ränteparitet inte håller på någon tidshorisont. Slutligen, baserat på både resultat och diskussion, är ett svenskt inträde i EMU inte motiverbart givet negativa resultat för icke-kurssäkrad ränteparitet och avsaknaden av fullständig monetär integration mellan regionerna.

How do financial variables, such as firms’ cash flow and banks’ capital, affect macroeconomic variables, such as investment and GDP growth? What are the macroeconomic effects of exchange rate depreciation in countries where firms and households have extensive foreign-currency liabilities? The doctoral thesis Empirical Essays on Macro-Financial Linkages consists of four separate papers in the field of empirical macroeconomics. The first three papers investigate the macroeconomic implications of financial-market imperfections. Imperfect information between borrowers and lenders makes it more costly for firms to finance investments with external funds than with internal funds. The external finance risk premium depends on the strength of firm balance sheets, which hence affects firm investment. The first paper, The Effect of Cash Flow on Investment: An Empirical Test of the Balance Sheet Channel, examines the importance of financial constraints for investment using a large Swedish firm-level data set which includes many smaller firms (where balance sheet effects are likely to be especially important). I find a positive effect of cash flow on investment, controlling for fundamental determinants of investment and any information in cash flow about investment opportunities. As predicted by the balance sheet channel, the estimated effect of cash flow on investment is especially large for firms which, a priori, are more likely to be financially constrained (low-dividend, small and non-group firms). Moreover, the investment-cash flow sensitivity is significantly larger and more persistent during the first half of the sample period, which includes a severe banking crisis and recession. The second paper, Credit Matters: Empirical Evidence on U.S. Macro-Financial Linkages, written jointly with Tamim Bayoumi, estimates the impact of an adverse shock to bank capital on credit availability and spending in the United States, allowing for feedback from spending and income through the balance sheets of banks, firms and households. We find that an exogenous fall in the bank capital/asset ratio by one percentage point reduces real GDP by some 1 ½ percent through its effects on credit availability, while an exogenous fall in demand of 1 percent of GDP is gradually magnified to around 2 percent through financial feedback effects. The third paper, The Effects of Real Exchange Rate Shocks in an Economy with Extreme Liability Dollarization, studies the effects of real exchange rate depreciation in Bolivia, where over 95 percent of bank credit is denominated in dollars. Currency depreciation increases the domestic-currency value of foreign-currency liabilities and the debt service burden, thus adversely affecting firm balance sheets. A key issue for policymakers in countries with widespread foreign-currency borrowing is whether depreciation would have the standard, expansionary effect on output, or if an adverse balance sheet would dominate. I find that real exchange depreciation has negligible effects on output, since a contractionary balance-sheet effect on investment is counteracted by the standard expansionary effect on net exports. The fourth paper, Uncovered Interest Parity in a Partially Dollarized Developing Country: Does UIP Hold in Bolivia? (And If Not, Why Not?), studies another aspect of macro-financial linkages. The so-called uncovered interest parity (UIP) condition states that interest rate differentials compensate for expected exchange rate changes, equalizing the expected returns from holding assets which only differ in terms of currency denomination. Because of data availability problems, there is a lack of empirical tests of UIP for developing countries. The paper studies the case of Bolivia, where there are bank accounts which only differ in terms of currency denomination (bolivianos or U.S. dollars). I find that UIP does not hold in Bolivia, but that the deviations are smaller than in most other studies of developed and emerging economies. / Diss. Stockholm : Handelshögskolan, 2009 Sammanfattning jämte 4 uppsatser

[pt] Tradicionalmente, muitos trabalhos têm estudado os efeitos das intervenções cambiais esterilizadas nas taxas de câmbio, tanto empiricamente quanto teoricamente, encontrando resultados mistos. Mais recentemente, a literatura de finanças internacionais têm procurado explicar os desvios na Paridade Coberta da Taxa de Juros (PCJ), que vem sendo observado entre as moedas das economias desenvolvidas após a Grande Crise Financeira de 2008. Neste trabalho, ligamos as duas literaturas ao estudar o efeito das intervenções cambiais nos desvios na paridade coberta de juros. Nossa amostra consiste nas intervenções realizadas pelo Banco Central do Brasil entre os anos de 2009 e 2020. Este período contempla o programa de intervenções pré-anunciadas de 2013, implementado no contexto do Taper Tantrum, e que já mostrou ter afetado significantemente as taxas de câmbio (Chamon, Garcia e Souza (2017) ). Para avaliar os efeitos, construímos uma série contrafactual utilizando a metodologia ArCo, desenvolvida por Carvalho, Masini e Medeiros (2018), e também estimando funções impulso resposta utilizando Local Projection, desenvolvida por Jordà (2005). Os resultados indicam que a venda de dólares no mercado futuro aumentam os desvios na PCJ, enquanto que compras de dólares tem o efeito oposto. A oferta de dólares via contratos de recompra diminui os desvios no curto prazo. As intervenções no mercado a vista apresentam resultados inconclusivos. / [en] Traditionally, much has been written about the effects of FX (foreign exchange) sterilized interventions on exchange rates, both theoretically and empirically, with mixed results. More recently, the international finance literature has tried to explain the deviations from the well-known Covered Interest Parity (CIP) condition that have, since the 2008 Great Financial Crisis, arisen among advanced economies currencies. Here, we originally merge these two strands of the literature by analyzing the effects of sterilized FX interventions on the CIP (Covered Interest Parity) deviation. Our sample is composed of Brazilian Central Bank FX interventions between 2009 and 2020. This period contains a major program of announced FX interventions in response to the Taper Tantrum, in 2013, which has already been shown to have significantly affected the level of the exchange rate (Chamon, Garcia, and Souza (2017)). To gauge the effects, we build a counterfactual employing the ArCo methodology, developed by Carvalho, Masini, and Medeiros (2018), and also make use of Jordà (2005) Local Projections. The results indicate that selling US dollars in the futures market increases CIP deviations while buying US dollar futures has the opposite effect. Offering US dollar repo credit lines points to a short-lived decrease in the deviation. The number of sterilized sales or purchases of spot currency seems not to be high enough to lead to conclusive results.