Martina Hengge's Books

Effective Fiscal-Monetary Interactions in Severe Recessions

By: Mr. Jiaqian Chen,Mr. Raphael A Espinoza,Carlos Goncalves,Tryggvi Gudmundsson,Martina Hengge,Zoltan Jakab,Jesper Lindé

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Effective Fiscal-Monetary Interactions in Severe Recessions

By: Mr. Jiaqian Chen,Mr. Raphael A Espinoza,Carlos Goncalves,Tryggvi Gudmundsson,Martina Hengge,Zoltan Jakab,Jesper Lindé

The COVID-19 pandemic and the subsequent need for policy support have called the traditional separation between fiscal and monetary policies into question. Based on simulations of an open economy DSGE model calibrated to emerging and advance economies and case study evidence, the analysis shows when constraints are binding a more integrated approach of looking at policies can lead to a better policy mix and ultimately better macroeconomic outcomes under certain circumstances. Nonetheless, such an approach entails risks, necessitating a clear assessment of each country’s circumstances as well as safeguards to protect the credibility of the existing institutional framework.

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International Monetary Fund

Published Date

ISBN 13

9798400218880

Fear Thy Neighbor: Spillovers from Economic Policy Uncertainty

By: Nina Biljanovska,Francesco Grigoli,Martina Hengge

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Fear Thy Neighbor: Spillovers from Economic Policy Uncertainty

By: Nina Biljanovska,Francesco Grigoli,Martina Hengge

High levels of economic policy uncertainty in various parts of the world revamped the de- bate about its impact on economic activity. With increasingly stronger economic, financial, and political ties among countries, economic agents have more reasons to be vigilant of for- eign economic policy. Employing heterogeneous panel structural vector autoregressions, this paper tests for spillovers from economic policy uncertainty on other countries' economic ac- tivity. Furthermore, using local projections, the paper zooms in on shocks originating in the United States, Europe, and China. Our results suggest that economic policy uncertainty re- duces growth in real output, private consumption, and private investment, and that spillovers from abroad account for about two-thirds of the negative effect. Moreover, uncertainty in the United States, Europe, and China reduces economic activity in the rest of the world, with the effects being mostly felt in Europe and the Western Hemisphere.

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International Monetary Fund

Published Date

ISBN 10

1484328906

ISBN 13

9781484328903

Carbon Policy and Stock Returns: Signals from Financial Markets

By: Martina Hengge,Ugo Panizza,Mr. Richard Varghese

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Carbon Policy and Stock Returns: Signals from Financial Markets

By: Martina Hengge,Ugo Panizza,Mr. Richard Varghese

Understanding the impact of climate mitigation policies is key to designing effective carbon pricing tools. We use institutional features of the EU Emissions Trading System (ETS) and high-frequency data on more than 2,000 publicly listed European firms over 2011-21 to study the impact of carbon policies on stock returns. After extracting the surprise component of regulatory actions, we show that events resulting in higher carbon prices lead to negative abnormal returns which increase with a firm's carbon intensity. This negative relationship is even stronger for firms in sectors which do not participate in the EU ETS suggesting that investors price in transition risk stemming from the shift towards a low-carbon economy. We conclude that policies which increase carbon prices are effective in raising the cost of capital for emission-intensive firms.

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International Monetary Fund

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ISBN 13

9798400229329

A Primer on Bitcoin Cross-Border Flows: Measurement and Drivers

By: Eugenio Cerutti,Mr. Eugenio M Cerutti,Mr. Jiaqian Chen,Martina Hengge

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A Primer on Bitcoin Cross-Border Flows: Measurement and Drivers

By: Eugenio Cerutti,Mr. Eugenio M Cerutti,Mr. Jiaqian Chen,Martina Hengge

The rapid growth of crypto assets raises important questions about their cross-border usage. To gain a better understanding of cross-border Bitcoin flows, we use raw data covering both on-chain (on the Bitcoin blockchain) and off-chain (outside the Bitcoin blockchain) transactions globally. We provide a detailed description of available methodologies and datasets, and discuss the crucial assumptions behind the quantification of cross-border flows. We then present novel stylized facts about Bitcoin cross-border flows and study their global and domestic drivers. Bitcoin cross-border flows respond differently than capital flows to traditional drivers of capital flows, and differences appear between on-chain and off-chain Bitcoin cross-border flows. Off-chain cross-border flows seem correlated with incentives to avoid capital flow restrictions.

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International Monetary Fund

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ISBN 13

9798400274879

Capital Markets, COVID-19 and Policy Measures

By: Khalid ElFayoumi,Martina Hengge

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Capital Markets, COVID-19 and Policy Measures

By: Khalid ElFayoumi,Martina Hengge

The COVID-19 pandemic and associated policy responses triggered a historically large wave of capital reallocation between markets and asset classes. Using high-frequency country-level data, this paper examines if and how the number of COVID cases, the stringency of the lockdown, and the fiscal and monetary policy response determined the dynamics of portfolio flows. Despite more dominant global factors, we find that these domestic factors played an important role, particularly for emerging markets and bond flows, contributing to a global wave of reallocation to safer asset classes. Our results indicate that rising domestic COVID cases had a strong positive effect on portfolio flows, which responded to an increase in financing needs in affected economies. Lockdown and fiscal policy measures also led to an increase in portfolio flows; however, evidence from the CDS market suggests that the increase in flows was dominated by supply forces, reflecting investors' preference for stronger policy responses. In contrast, we find that interest rate cuts led to a decline in portfolio flows as investors searched for higher yield. Finally, we show that COVID policy responses also affected countries' exposure to the global shock and that pre-COVID macroeconomic conditions, such as lower sovereign risk and higher trade openness, contributed to larger flows during the COVID episode.

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