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29411. What do the Crimean Tatars face in Crimea?

Author:
Alexander Osipov
Publication Date:
04-2014
Content Type:
Policy Brief
Institution:
European Centre for Minority Issues (ECMI)
Abstract:
The Issue Brief concerns further developments which the Crimean Tatars may experience after the Russian annexation of Crimea. The Crimean Tatars are the second largest minority in the Crimean peninsula, and they are represented by politically active movements with far-reaching claims concerning the status of Crimean Tatars and territorial self-determination. Within less than one month these people as well as their homeland have been transferred to another country with different political and legal systems and potentially a less friendly social environment. Since the contours of the future legal and institutional framework for the accommodation of Crimean Tatars are not fully clear, one can project the major organizational setups and patterns of Russian ethno-politics onto Crimea and tentatively assess their applicability. We can conclude that in a formal sense the Russian rule does not promise the Crimean Tatars much more than they already had in Ukraine, but puts them at risk of a strict police control and pressure. Such arrangements as territorial and non-territorial autonomy, power-sharing, 'rehabilitation' of the Crimean Tatars as victims of the past repressions may take place but they would have limited practical sense. Cultural programmes and recruitment of Crimean Tatars to the regional administration are unlikely to be legally guaranteed and will be fully dependent on the discretion of Russian and Crimean authorities.
Topic:
Culture, Minorities, Ethnicity, Conflict, and Identity
Political Geography:
Russia, Europe, Ukraine, and Crimea

29412. What next for Moldova's Minorities after Crimea?

Author:
Federica Prina
Publication Date:
07-2014
Content Type:
Policy Brief
Institution:
European Centre for Minority Issues (ECMI)
Abstract:
This Issue Brief examines the possible consequences of Russia's annexation of Crimea on Moldova and its national minorities. It further reflects on the factors that hinder greater integration of persons belonging to minorities, and the expression of minority identity in Moldova/Transnistria. The Issue Brief argues there are two indirect consequences of the annexation of Crimea by Russia. First, the annexation deepens the polarization between the pro-Russia and pro-EU camps in Moldova, which manifests itself in multiple ruptures within Moldovan society. Second, such a polarization furthers a tendency to marginalize (non-Russian) minorities, which implies a reduction of the spaces for the articulation of minority concerns and the expression of minority identity.
Topic:
Minorities, Ethnicity, Discrimination, Conflict, and Identity
Political Geography:
Russia, Europe, Ukraine, Moldova, and Crimea

29413. Are Long-Term Inflation Expectations Well Anchored in Brazil, Chile and Mexico?

Author:
Michiel De Pooter, Patrice Robitaille, Ian Walker, and Michael Zdinak
Publication Date:
03-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
In this paper, we consider whether long-term inflation expectations have become better anchored in Brazil, Chile, and Mexico. We do so using survey-based measures as well as financial market-based measures of long-term inflation expectations, where we construct the market-based measures from daily prices on nominal and inflation-linked bonds. This paper is the first to examine the evidence from Brazil and Mexico, making use of the fact that markets for longterm government debt have become better developed over the past decade. We find that inflation expectations have become much better anchored over the past decade in all three countries, as a testament to the improved credibility of the central banks in these countries when it comes to keeping inflation low. That said, one-year inflation compensation in the far future displays some sensitivity to at least one macroeconomic data release per country. However, the impact of these releases is small and it does not appear that investors systematically alter their expectations for inflation as a result of surprises in monetary policy, consumer prices, or real activity variables. Finally, long-run inflation expectations in Brazil appear to have been less well anchored than in Chile and Mexico.
Topic:
Development, Economics, Inflation, and Bonds
Political Geography:
Brazil, South America, North America, Mexico, and Chile

29414. Bank Ownership, Lending, and Local Economic Performance During the 2008-2010 Financial Crisis

Author:
Nicholas Coleman and Leo Feler
Publication Date:
03-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
While the finance literature often equates government banks with political capture and capital misallocation, these banks can help mitigate financial shocks. This paper examines the role of Brazil's government banks in preventing a recession during the 2008-2010 financial crisis. Government banks in Brazil provided more credit, which offset declines in lending by private banks. Areas in Brazil with a high share of government banks experienced increases in lending, production, and employment during the crisis compared to areas with a low share of these banks. We find no evidence that lending was politically targeted or that it caused productivity to decline in the short-run.
Topic:
Economics, Financial Crisis, Governance, Local, Lending, and Banking
Political Geography:
Brazil and South America

29415. Inference Based on SVARs Identified with Sign and Zero Restrictions: Theory and Applications

Author:
Jonas E. Arias, Juan F. Rubio-Ramirez, and Daniel F. Waggoner
Publication Date:
03-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Are optimism shocks an important source of business cycle fluctuations? Are deficit-financed tax cuts better than deficit-financed spending to increase output? These questions have been previously studied using SVARs identified with sign and zero restrictions and the answers have been positive and definite in both cases. While the identification of SVARs with sign and zero restrictions is theoretically attractive because it allows the researcher to remain agnostic with respect to the responses of the key variables of interest, we show that current implementation of these techniques does not respect the agnosticism of the theory. These algorithms impose additional sign restrictions on variables that are seemingly unrestricted that bias the results and produce misleading confidence intervals. We provide an alternative and efficient algorithm that does not introduce any additional sign restriction, hence preserving the agnosticism of the theory. Without the additional restrictions, it is hard to support the claim that either optimism shocks are an important source of business cycle fluctuations or deficit-financed tax cuts work best at improving output. Our algorithm is not only correct but also faster than current ones.
Topic:
Economics, Business, Tax Systems, Economic Theory, and Deficit
Political Geography:
Global Focus

29416. Evaluating Asset-Market Effects of Unconventional Monetary Policy: A Cross-Country Comparison

Author:
John Rogers, Chiara Scotti, and Jonathan H. Wright
Publication Date:
03-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper examines the effects of unconventional monetary policy by the Federal Reserve, Bank of England, European Central Bank and Bank of Japan on bond yields, stock prices and exchange rates. We use common methodologies for the four central banks, with daily and intradaily asset price data. We emphasize the use of intradaily data to identify the causal effect of monetary policy surprises. We find that these policies are effective in easing financial conditions when policy rates are stuck at the zero lower bound, apparently largely by reducing term premia.
Topic:
Economics, Monetary Policy, Exchange Rate Policy, and Banking
Political Geography:
Japan, Europe, Asia, and England

29417. Menu Costs, Trade Flows, and Exchange Rate Volatility

Author:
Logan T. Lewis
Publication Date:
04-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
U.S. imports and exports respond little to exchange rate changes in the short run. Pricing behavior has long been thought central to explaining this response: if local prices do not respond to exchange rates, neither will trade flows. Sticky prices and strategic complementarities in price setting generate sluggish responses, and they are necessary to match newly available international micro price data. Using trade flow data, I test models capable of replicating these trade price data. Even with significant pricing frictions, the models still imply a trade response to exchange rates stronger than found in the data. Moreover, using significant cross-sector heterogeneity, comparative statics implied by the model find little to no support in the data. These results suggest that while complementarity in price setting and sticky prices can explain pricing patterns, some other short-run friction is needed to match actual trade flows. Furthermore, the muted response found for sectors with high long-run substitutability implies that simply assuming low elasticities may be inappropriate. Finally, there is evidence of an asymmetric response to exchange rate changes.
Topic:
Economics, International Trade and Finance, Exchange Rate Policy, and Capital Flows
Political Geography:
North America and United States of America

29418. Uncovered Equity Parity and Rebalancing in International Portfolios

Author:
Stephanie E. Curcuru, Charles P. Thomas, Francis E. Warnock, and Jon Wongswan
Publication Date:
05-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Portfolio rebalancing is a key driver of the Uncovered Equity Parity (UEP) condition. According to UEP, when foreign equity holdings outperform domestic holdings, domestic investors are exposed to higher exchange rate exposure and hence repatriate some of the foreign equity to decrease their exchange rate risk. By doing so, foreign currency is sold, leading to foreign currency depreciation. We examine the relationship between U.S. investors' portfolio reallocations and returns and find some evidence consistent with UEP: Portfolio shifts are related to past returns in the underlying equity markets. But we argue that a motive other than reducing currency risk exposure is likely behind this rebalancing. In particular, U.S. investors may be exploiting mean reversion in underlying equity markets, rebalancing away from equity markets that recently performed well and moving into equity markets market just prior to relatively strong performance. Such behavior suggests tactical reallocations to increase returns rather than reduce risk.
Topic:
Economics, Markets, Risk, International Portfolios, and Equity
Political Geography:
North America and United States of America

29419. Sovereign Debt Crises

Author:
Ricardo Correa and Horacio Sapriza
Publication Date:
05-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Sovereign debt crises have been recurrent events over the past two centuries. In recent years, the timing of sovereign crises has coincided or has directly followed banking crises. The link between sovereigns and banks tightened as the contingent liability that the banking sector represents for the sovereign grew, as financial "safety nets" became more common. This chapter analyzes the transmission channels between sovereigns and banks, with a focus on the effect of sovereign distress on bank solvency and financing. It then highlights the notable cost to the real economy of the close connection between sovereigns and banks. Breaking the "feedback loop" between these two sectors should be an important policy priority.
Topic:
Debt, Sovereignty, Banking, and Economic Crisis
Political Geography:
Global Focus

29420. Liquidity Risk and U.S. Bank Lending at Home and Abroad

Author:
Ricardo Correa, Linda Goldberg, and Tara Rice
Publication Date:
05-2014
Content Type:
Commentary and Analysis
Institution:
Board of Governors of the Federal Reserve System
Abstract:
While the balance sheet structure of U.S. banks influences how they respond to liquidity risks, the mechanisms for the effects on and consequences for lending vary widely across banks. We demonstrate fundamental differences across banks without foreign affiliates versus those with foreign affiliates. Among the nonglobal banks (those without a foreign affiliate), cross-sectional differences in response to liquidity risk depend on the banks' shares of core deposit funding. By contrast, differences across global banks (those with foreign affiliates) are associated with ex ante liquidity management strategies as reflected in internal borrowing across the global organization. This intra-firm borrowing by banks serves as a shock absorber and affects lending patterns to domestic and foreign customers. The use of official-sector emergency liquidity facilities by global and nonglobal banks in response to market liquidity risks tends to reduce the importance of ex ante differences in balance sheets as drivers of cross-sectional differences in lending.
Topic:
Risk, Lending, Banking, and Liquidity
Political Geography:
North America and United States of America