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.

The Informational Commons at Risk (Working Paper 8)

Conventional wisdom says that we are on the cusp of a Global Information Society, in which new technologies will provide citizens with unprecedented access to information. This is an appealing but flawed vision of the future. Governments are still reluctant to disclose information about core functions. At the same time, neoliberal reforms have caused a diffusion of power across sectors and borders, confounding efforts to promote governmental openness. Economic liberalization has also made it more difficult to enforce corporate disclosure requirements. Meanwhile, technological change has spurred efforts by businesses and citizens to strengthen their control over corporate and personal information. Efforts to defend the borders of the “informational commons” — the domain of publicly-accessible information — will be also be complicated by problems of policy design and political mobilization. Imposing transparency requirements was easier when authority was closely held by national and sub-national governments. The task is more difficult when power is widely diffused.