PEPP Seminar (July 7th, 2022): “International reserve management, global financial shocks, and firm investment in emerging market economies”
2022/06/02
By Dr. QIAN Xingwang, Professor, Economics and Finance Department, SUNY Buffalo State
Date：Thursday, July 7, 2022
Time：16:45～18:15 (JST)
Venue：University of Tsukuba (Rm A101, Institutes of Humanities and Social Sciences Building)
ABSTRACT
We examine the effects of active international reserve management (IRM) conducted by central banks of emerging market economies (EMEs) on firm investment in the presence of global financial shocks. Using firm level data from 46 EMEs from 2000 to 2018, we document four findings. First, active IRM positively affects firm investment – the effect strengthens with the magnitude of adverse external financial shocks. Second, financially constrained firms, compared to unconstrained ones, are less responsive to active IRM. Third, our results suggest that the country credit spread is a plausible causal channel of the positive IRM effect on firm investment. Fourth, the policies of capital controls and exchange rate managements are complementary to the IRM – it is beneficial to form a macro policy mix that includes active IRM to safeguard firm investment against global financial shocks. Further, our results indicate the IRM effect on firm investment is of both statistical and economical significance and is relevant to the aggregate economy.
Full Text：https://www.nber.org/papers/w29303
