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.

Novel Formulation and Efficient Solution Strategy for Strategic Optimization of an Industrial Chemical Supply Chain Under Demand Uncertainty

This paper is concerned with strategic optimization of a typical industrial chemical supply chain, which involves a material purchase and transportation network, several manufacturing plants with on-site material and product inventories, a product transportation network and several regional markets. In order to address large uncertainties in customer demands at the different regional markets, a novel robust scenario formulation, which has been developed by the authors recently, is tailored and applied for the strategic optimization. Case study results show that the robust scenario formulation works well for this real industrial supply chain system, and it outperforms the deterministic formulation and the classical scenario-based stochastic programming formulation by generating better expected economic performance and solutions that are guaranteed to be feasible for all uncertainty realizations. The robust scenario problem exhibits a decomposable structure that can be taken advantage of by Benders decomposition for efficient solution, so the application of Benders decomposition to the solution of the strategic optimization is also discussed. The case study results show that Benders decomposition can reduce the solution time by almost an order of magnitude when the number of scenarios in the problem is large.