Capital Flows / International Investment
John Burger, Francis E. Warnock and Veronica Cacdac Warnock, 2022. A Natural Level of Capital Flows. Journal of Monetary Economics 130: 1-16. (lead article) https://doi.org/10.1016/j.jmoneco.2022.05.009
Burger, J., F. Warnock, and V. Warnock, 2018. Benchmarking Portfolio Flows. IMF Economic Review 66(3): 527–563. Creates a benchmark to gauge the amount of portfolio inflows a country can expect to receive. Think of it as the natural rate of portfolio inflows.
Ahmed, S., S. Curcuru, F. Warnock, and A. Zlate, 2020. Decomposing International Capital Flows. Working paper. Decomposes top-line flows and international investment data into two components, one that can be characterized as passive and another that is active.
Holland, S., S. Sarkissian, M. Schill, and F. Warnock, 2021. Nonlinearities and a Pecking Order in Cross-Border Investment. NBER WP 29432. Starts from the notion that bilateral investment barriers, which are both direct and indirect, are largely unobservable but important factors behind observed investment levels.
Portfolio Rebalancing
Curcuru, S., C. Thomas, F. Warnock, and J. Wongswan, 2011, U.S. international equity investment and past and prospective returns. American Economic Review 101(7): 3440-3455. Using quality data and careful techniques, US investors do not chase returns (at the monthly frequency).
Curcuru, S., C. Thomas, F. Warnock, and J. Wongswan, 2014. Uncovered Equity Parity and Rebalancing in International Portfolios. Journal of International Money and Finance 47: 86-99.
The Effects of Capital Flows
Warnock, Francis E., and Veronica Cacdac Warnock, 2009. International Capital Flows and U.S. Interest Rates, Journal of International Money and Finance 28: 903-919. Before there was QE there was foreign purchases of domestic bonds. Documents the effect on US interest rates of foreign central banks’ acquisitions of US bonds.
Capital Controls
Edison, Hali, and Francis E. Warnock, 2003. A Simple Measure of the Intensity of Capital Controls, Journal of Empirical Finance 10(1/2): 81-103.
Capital Flows: Sudden Stops
Traditionally, papers on sudden stops used data on net inflows (or, actually, data on current account balances and reserve flows). In a series of papers I helped shift the focus from net flows to gross flows.
Forbes, K., and F. Warnock, 2012. Capital Flow Waves: Surges, Stops, Flight and Retrenchment. Journal of International Economics 88(2): 235-251.
Forbes, K., and F. Warnock, 2014. Debt- and Equity-Led Capital Flow Episodes. in Capital Mobility and Monetary Policy, edited by Miguel Fuentes, Claudio Raddatz and Carmen M. Reinhart. Santiago: Central Bank of Chile. Working Paper version: NBER WP 18329. A version of Forbes and Warnock (2012) that splits flows into debt and equity.
Forbes, Kristin, and F. Warnock, 2011. Capital Flow Waves. Macroeconomic Review, X(2), Monetary Authority of Singapore. A short policy version of Forbes and Warnock (2012).
Two early papers that started to shift the focus to gross flows:
Rothenberg, A., and F. Warnock, 2011. Sudden Flight and True Sudden Stops. Review of International Economics 19(3): 509-524.
Faucette, Jillian E., Alex Rothenberg, and Francis E. Warnock, 2005. Outflows-Induced Sudden Stops, Journal of Policy Reform 8: 119-130.
Freund, Caroline, and Francis E. Warnock, 2007. Current Account Deficits in Industrial Countries: The Bigger They Are, The Harder They Fall? in R. Clarida, ed. G7 Current Account Imbalances: Sustainability and Adjustment. University of Chicago Press, 133-162. This one is more in the old tradition (i.e., it’s focused on net flows).
The Home Bias
Home Currency Bias
Burger, J., F. Warnock, and V. Warnock, 2018. Currency Matters: Analyzing International Bond Portfolios. Journal of International Economics 114: 376-388.
Cross-Listing and the Home Bias
Ammer, J., S. Holland, D. Smith, and F. Warnock, 2012.U.S. International Equity Investment. Journal of Accounting Research 50(5): 1109-1139 (lead article).
Ahearne, Alan, William Griever, and Francis E. Warnock, 2004. Information Costs and Home Bias: An Analysis of U.S. Holdings of Foreign Equities, Journal of International Economics 62: 313-336.
Edison, Hali, and Francis E. Warnock, 2004. U.S. Investors’ Emerging Market Equity Portfolios: A Security-Level Analysis, Review of Economics and Statistics 86: 691 - 704.
Edison, Hali, and Francis E. Warnock, 2008. Cross-Border Listings, Capital Controls, and Equity Flows to Emerging Markets, Journal of International Money and Finance 27: 1013-1027.
Governance and the Home Bias
Leuz, Christian, Karl Lins, and Francis E. Warnock, 2009. Do Foreigners Invest Less in Poorly Governed Firms?, Review of Financial Studies 22(8): 3245-3285.
Kho, Bong-Chan, Rene M. Stulz, and Francis E. Warnock, 2009. Financial Globalization, Governance, and the Evolution of the Home Bias, Journal of Accounting Research 47: 597-635.
Other Home Bias Papers
Cai, F., and F. Warnock, 2012. Foreign Exposure through Domestic Equities. Finance Research Letters 9(1): 8-20. Makes the simple point that investors can and do gain foreign exposure through their holdings of domestic MNCs.
van Wincoop, Eric, and Francis E. Warnock, 2010. Is Home Bias in Assets Related to Home Bias in Goods? Journal of International Money and Finance 29: 1108-1123.
Warnock, Francis E., 2002. Home Bias and High Turnover Reconsidered, Journal of International Money and Finance 21: 795-805. Shows that a seminal result—that home bias and high turnover somehow co-existed—isn’t supported by newly available data. That said, the new data do support the main conclusion of the seminal Tesar and Werner (1995) paper that transaction costs cannot explain the home bias.
Bond Market Development (It’s Not Original, Just Sin) and Cross-Border Investment in Bonds
My two most important papers on this topic are Burger and Warnock (2006) and Burger, Warnock and Warnock (2018).
Burger, John D., and Francis E. Warnock, 2006. Local Currency Bond Markets, IMF Staff Papers 53: 115-132. The January 2003 Fed working paper version of this provided convincing evidence that there was no original sin. Countries, even small ones, could develop their local bond markets.
Burger, J., F. Warnock, and V. Warnock, 2018. Currency Matters: Analyzing International Bond Portfolios. Journal of International Economics 114: 376-388. Documents that the home bias is at least in part a home currency bias.
Other papers on cross-border investment in bonds
Burger, J., R. Sengupta, F. Warnock, and V. Warnock, 2015. U.S. Investment in Global Bonds: As the Fed Pushes, Some EMEs Pull. Economic Policy 30 (84): 729-766.
Burger, John D., and Francis E. Warnock, 2007. Foreign Participation in Local-Currency Bond Markets, Review of Financial Economics 16: 291-304.
Burger, J., F. Warnock, and V. Warnock, 2012. Emerging local currency bond markets. Financial Analysts Journal 68(4): 73-93.
Burger, J., F. Warnock, and V. Warnock, 2018. The Effects of U.S. Monetary Policy on Emerging Market Economies’ Sovereign and Corporate Bond Markets. Central Banking, Analysis, and Economic Policies Book Series in: Enrique G. Mendoza & Ernesto Pastén & Diego Saravia (ed.), Monetary Policy and Global Spillovers: Mechanisms, Effects, and Policy Measures, edition 1, volume 25, chapter 3, pages 49-96 Central Bank of Chile.
Other policy papers on bond market development
Burger, J., F. Warnock, and V. Warnock, 2015. Bond Market Development in Developing Asia. in From Stress to Growth: Strengthening Asia's Financial Systems in a Post-Crisis World, edited by Marcus Noland and Donghyun Park. Peterson Institute for International Economics. Also ADB Economics Working Paper 448.
Burger, John D., Veronica Cacdac Warnock, and Francis E. Warnock, 2008, Ingredients of a Well-Functioning Capital Market, Korea's Economy 2008 (Korea Economic Institute), vol. 24: 31-38.
Housing Finance
Warnock, Veronica Cacdac, and Francis E. Warnock, 2008. Markets and Housing Finance, Journal of Housing Economics 17: 239-251. The first paper to explore, across a wide range of countries, factors that enable the development of housing finance systems.
Warnock VC and Warnock FE, 2012. Developing Housing Finance Systems. Proceedings of a Conference Held in Sydney on 20–21 August 2012. Editors: Alexandra Heath, Frank Packer, and Callan Windsor. Reserve Bank of Australia and Bank for International Settlements. An update of Warnock and Warnock (2008).
Galindo, Arturo, Alessandro Rebucci, Francis E. Warnock, and Veronica Cacdac Warnock, 2012. Too Small to Thrive: Housing Finance Markets in Latin America and the Caribbean. IDB Working Paper and Chapter 7 in Room for Development: Housing Markets in Latin America and the Caribbean. A chapter summarizing the two-year ten-team research project we co-led with IDB.
Warnock, Veronica Cacdac, and Francis E. Warnock, 2007, Why Credit Scoring for Housing Micro Lenders? ACCESS Housing No. 7: 6-7 (FinMark Trust). A short piece describing some of our credit scoring work in South Africa.
Returns Differentials (or the Less-than-Exorbitant Privilege)
Curcuru, Stephanie, E., Tomas Dvorak, and Francis E. Warnock, 2008. Cross-Border Returns Differentials, Quarterly Journal of Economics 123(4): 1495–1530. Shows that the notion that US investors earn outsized returns on their foreign portfolios is a figment of poor quality data.
Curcuru, S., C. Thomas, and F. Warnock, 2013. On Returns Differentials. Journal of International Money and Finance 36: 1-25 (lead article). Summarizes the waves of research on returns differentials and highlights the Curcuru and Thomas result that the US returns differential owes to a well-understood differential on DI yields.
Curcuru, S., T. Dvorak, and F. Warnock, 2010. Decomposing the U.S. External Returns Differential. Journal of International Economics 80: 22-32. Poor timing by foreign investors contributes positively to the U.S. external returns differential.
Warnock, F., 2011. Review of Barry Eichengreen’s “Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System”, Journal of International Economics 85(2): 336-337.
Curcuru, Stephanie E., Charles Thomas, and Francis E. Warnock, 2015. Cross-border portfolios: assets, liabilities, and nonflow adjustments. in Cross-border financial linkages: challenges for monetary policy and financial stability (BIS Papers 82): 7-24.
Papers about Data Issues
Curcuru, Stephanie E., Charles Thomas, and Francis E. Warnock, 2009. Current Account Sustainability and Relative Reliability. in J. Frankel and C. Pissarides (ed) NBER International Seminar on Macroeconomics 2008. University of Chicago Press, pgs 67-109.
Warnock, Francis E. and Chad Cleaver, 2003. Financial Centers and the Geography of Capital Flows, International Finance 6(1): 27-59.
Griever, William, Gary Lee, and Francis E. Warnock, 2001, The U.S. System for Measuring Cross-Border Investment in Securities: A Primer with a Discussion of Recent Developments, Federal Reserve Bulletin 87: 633-650.
Warnock, Francis E., 2000, U.S. International Transactions in 1999, Federal Reserve Bulletin 86: 301-314.
My Dissertation
Warnock, Francis E., 2003. Exchange Rate Dynamics and the Welfare Effects of Monetary Policy in a Two-Country Model with Home-Product Bias, Journal of International Money and Finance 22: 343-363.