International Capital Flows and Monetary Policy Spillovers

This dissertation examines the drivers and implications of international capital flows. The overarching motivation is the observation that countries not at the centre of global financial markets are subject to considerable spillovers from centre countries, notably from their monetary policy. I present new empirical evidence on the determinants of the observed patterns of international capital flows and monetary policy spillovers, and study their effect on both financial markets and the real economy. In Chapter 2 I provide evidence on the determinants of a puzzling negative correlation observed between productivity growth and net capital inflows to developing and emerging market economies (EMEs) since 1980. By disaggregating net capital inflows into their gross components, I show that this negative correlation is explained by capital outflows related to purchases of very liquid assets from the fastest growing countries. My results suggest a desire for international portfolio diversification in liquid assets by fast growing countries is driving much of the original puzzle. In the reminder of my dissertation I pivot to study the foreign characteristics that drive international capital flows and monetary policy spillovers, with a particular focus on the role of unconventional monetary policy in the United States (U.S.). In Chapter 3 I show that a significant portion of the heterogeneity in EMEs' asset price adjustment following the quantitative easing operations by the Federal Reserve (the Fed) during 2008-2014 can be explained by the degree of bilateral capital market frictions between these countries and the U.S. This is true even after accounting for capital controls, exchange rate regimes, and domestic monetary policies. Chapter 4, co-authored with Michal Ksawery Popiel, studies unconventional monetary policy in a small open economy, looking specifically at the case of Canada since the global financial crisis. We quantify the effect Canadian unconventional monetary policy shocks had on the real economy, while carefully controlling for and quantifying spillovers from U.S. unconventional monetary policy. Our results indicate that the Bank of Canada's unconventional monetary policy increased Canadian output significantly from 2009-2010, but that spillovers from the Fed's policy were even more important for increasing Canadian output after 2008.

A Comparison of the Impacts of Lithium Extraction and Lithium Recycling Processes

Lithium is used in the cathode and electrolyte of rechargeable batteries in many portable electronics and electric vehicles, and is thus seen as a critical component of modern technology (Gruber et al., 2011). Electric vehicles are promoted as a way to reduce carbon emissions associated with the transportation sector, which accounts for 14.3% of anthropogenic greenhouse gas emissions (OECD International Transport Forum, 2010). However, the sustainability of lithium procurement will influence the overall environmental impact of this proposed “green” solution. It is estimated that 66% of the world’s lithium resource is contained in natural brines, 24% in pegmatites, and 8% in sedimentary rocks such as hectorite clays (Gruber et al., 2011). It has been shown that “[r]ecycling of lithium from Li-ion batteries may be a critical factor in balancing the supply of lithium with future demand” (Gruber et al., 2011). In an attempt to quantify energy and materials consumption associated with production of a unit of useful lithium compounds, industry reports and peer-reviewed scientific literature concerning lithium mining and lithium recycling were reviewed and compared. Other aspects of sustainability, such as waste or by-products produced in the production of a unit of useful lithium, were also explored. Thus, this paper will serve to further the evaluation of the comparative environmental consequences associated with lithium production via extraction versus recycling. Efficiencies must be made in both processes to maximize productivity while minimizing ecological harm.