As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Graduate Institute is pleased to invite you to a public talk given by John Rogers, Senior Adviser and Economist at the Board of Governors of the Federal Reserve System.
The paper presented is coauthored with Chang Ma (Fudan University) and Sili Zhou (Fudan University).
Abstract: We study an important capital account liberalization in China: the Shanghai (Shenzhen)-Hong Kong Stock Connect of the mid-2010’s. This program created a channel for cross-border equity investments into a selected set of stocks while the overall capital controls policy remained in place. Using a difference-in-difference approach, we find that firm-level investment is negatively affected by US monetary policy shocks, argued in the literature to be the crucial driver of the Global Financial Cycle, and that firms in the Connect are relatively more adversely affected than those that remained outside of it. These effects are economically large, robust, and stronger for firms with a weaker financial condition, higher level of financial constraints, higher equity return volatility, operating in the non-tradable sector. These empirical findings point to the adverse consequences that capital liberalization policies can have, and suggest that capital controls can be a way for emerging market economies to curb the negative consequences of global financial cycles. However, we also find that firms in the Connect: raised more cash, enjoyed lower financing costs, and earned higher returns on equity (ROE) and assets (ROA). Our results suggest that firms in the Connect are able to hedge the negative consequences concerning increased sensitivity to external shocks.
Before joining the Federal Reserve Board, John Rogers was Associate Professor at the Pennsylvania State University. He received his PhD in Economics at the University of Virginia, in 1989.
His current research topics deal with the Unconventional Monetary Policy and International Pricing, CA and FX Dynamics.