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.

Short Communication Over-Winter Channel Bed Temperature Regimes Generated by Contrasting Snow Accumulation in a High Arctic River

We report experimental results of near-surface winter temperatures along and adjacent to the channel bed of a High Arctic river on Melville Island, Canada. Temperature loggers 5cm below the ground surface in areas where the terrain suggests varying snow accumulation patterns revealed that the maximum winter difference between air and near-surface temperatures ranged from 0 to +30°C during the winter of 2012–13, and that shallow near-surface freezing conditions were delayed for up to 21 days in some locations. Cooling to -10°C was delayed for up to 117 days. Modelled temperature at the top of permafrost indicates that permafrost at locations with thick snow can be up to 8°C warmer than those with thin snow. This thermal evidence for an ameliorated surface environment indicates the potential for substantial extended microbial and biogeochemical cycling during early winter. Rapid thaw of the bed during initiation of snowmelt in spring also indicates a high degree of hydrological connectivity. Therefore, snow-filled channels may contribute to biogeochemical and aquatic cycling in High Arctic rivers.