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.

Strategic Diplomacies: Indigenous Governance, International Politics, and Natural Resources in Canada

International Relations theory would predict that central governments, with their considerable material resources, would be unlikely to face a challenge from a substate government. However, substate governments, and particularly Indigenous governments, are pushing back against central government control in both domestic and international spheres. Indigenous governments are leveraging their local mining sectors to realize their interests and express local identities—interests and identities that may not be congruent with those of the central government. Applying the case study of the resource extraction sector in Canada, this thesis asks: under what conditions are substate governments able to challenge the authority of central governments in the international arena? Canada’s reliance on the global extractive resource sector is a major driver of its international policy preferences, but the increased engagement of Indigenous governments in the sector challenges the control of the federal government. Focusing on the resource extraction sectors in British Columbia, Saskatchewan, and Ontario, this thesis argues that there is a mutually reinforcing relationship between Indigenous governments’ international engagement and their domestic autonomy; both challenge the parameters of state authority. Both force the state to respond to claims of control from multiple sites and to clarify convoluted policy environments. A confluence of factors—including increased Indigenous connections to the globalized economy, new Canadian regulatory frameworks, and recent Supreme Court of Canada cases regarding Indigenous lands—have all altered the space in which Indigenous governments in Canada participate in the resource extraction sector and produce overlapping or multilevel governance structures. This thesis demonstrates that Indigenous international engagement entrenches the authority and political legitimacy manifest in Indigenous governments’ insistence on equitable and horizontal negotiations in Canada’s lucrative resource extraction sector. A cumulative process occurs in which domestic and international expressions of political autonomy reinforce each other, produce further opportunities to express authority in both environments, and trouble the state’s capacity to fully realize its international policy preferences.