Working Paper: NBER ID: w12587
Authors: Marco Cipriani; Graciela L. Kaminsky
Abstract: We study the pattern of volatility of gross issuance in international capital markets since 1980. We find several short-lived episodes of high volatility. Over the long run, however, volatility has declined, suggesting that international financial integration has not made financial markets more erratic. We use VAR analysis to examine the determinants of the time-varying pattern of volatility, focusing in particular on the role of financial centers. Our results suggest that a significant portion of the decline in volatility of issuance in international capital markets can be explained by the reduction in the volatility of U.S. interest rates.
Keywords: volatility; international capital markets; financial centers
JEL Codes: F3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| US interest rate volatility (E43) | volatility of issuance in international capital markets (G15) |
| US economic and financial fundamentals (N12) | movements in global issuance volatility (F29) |
| US interest rate volatility (E43) | volatility of issuance in bond markets (G10) |
| US interest rate volatility (E43) | volatility of issuance in syndicated loan markets (G19) |
| shocks in the US financial center (F65) | volatility of issuance in mature economies (E32) |
| domestic factors (F55) | volatility of issuance in emerging economies (F31) |