Essays on balance sheet effects and international capital markets.

摘要

The recent economic crisis in Asia exposed the severity of the region's financial fragility, and underlined the roles of international capital markets in an occurrence of a crisis. In retrospect, the crisis emphasized the relationship between financial factors and macroeconomic stability. This dissertation explores this relationship from three different perspectives.;Chapter 2 focuses on the balance sheet effects of currency depreciation in the nonfinancial corporate sector. It explains why a series of previous empirical studies, using firm-level data, have failed to uncover the negative "balance sheet" effect of currency depreciation on firms with foreign currency debt. Using a simple theoretical framework and empirical support from a sample of firms in East Asia, I argue that firms with foreign currency debt naturally hedged their exposures. Hence, they benefit from a currency depreciation through price effects. When currencies depreciated, the positive price effects outweighed the negative balance sheet effects.;Chapter 3 investigates the case of the underdeveloped bond markets in Asia. I find that the slow development of Asia's local bond markets is a phenomenon with multiple dimensions. Larger market size, better quality of institutions, stable exchange rates, and bigger and less concentrated banking sector tend to have a positive effect on the size of bond markets. Asia's strong fiscal balances, while admirable on other grounds, have not been conducive to the growth of bond markets. Nonetheless, the empirical results suggest that there is no residual "Asia Effect" after controlling for the region's structural characteristics and macroeconomics and financial policies.;The last chapter considers the determinants of the magnitude and the direction of cross-border portfolio equity investment. The empirical results reveal different patterns of international portfolio equity investment. Among developed countries, cross-border equity investment seems to be driven by gains from international diversification. However, such pattern is not evident from the equity investment from developed countries to developing countries. I argue that the diversification gains from the investment to developing countries are not sufficient to warrant the high costs associated with investing in these countries.