BKK the EZ Way: International Long-Run Growth News and Capital Flows

2018 ◽  
Vol 108 (11) ◽  
pp. 3416-3449 ◽  
Author(s):  
Ric Colacito ◽  
Max Croce ◽  
Steven Ho ◽  
Philip Howard
Keyword(s):  
Empirical Evidence ◽  
Capital Flows ◽  
Risk Sharing ◽  
International Investment ◽  
International Capital Flows ◽  
International Capital ◽  
G7 Countries ◽  
Sharing Scheme ◽  
Long Run ◽  
Short Run

We study the response of international investment flows to shortand long-run growth news. Among developed G7 countries, positive long-run news for domestic productivity induces a net outflow of investments, in contrast to the effects of short-run growth shocks. We document that a standard Backus, Keho, and Kydland (1994) (BKK) model fails to reproduce this novel empirical evidence. We augment this model with Epstein and Zin (1989) preferences (EZ-BKK) and characterize the resulting recursive risk-sharing scheme. The response of international capital flows in the EZ-BKK model is consistent with the data. (JEL F14, F32, F43, G12)

scholarly journals Capital flows and office markets in major global cities

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Olawumi Fadeyi ◽  
Stanley McGreal ◽  
Michael McCord ◽  
Jim Berry
Keyword(s):  
New York ◽  
Real Estate ◽  
Capital Flows ◽  
International Capital Flows ◽  
International Capital ◽  
Content Type ◽  
Cross Border ◽  
Office Markets ◽  
Office Market ◽  
Short Run

PurposeOffice markets and particularly international financial centres over the past decade have experienced rapid financialisation, developments and indeed changes in the post-global financial crisis (GFC) landscape. Importantly, the volume and types of international capital flows have witnessed more foreign actors and vehicles entering into the investment landscape with the concentration of investment intensifying within key financial centres. This paper examines the interaction of international real estate capital flows in the London, New York and Tokyo office markets between 2007 and 2017.Design/methodology/approachUsing Real Capital Analytics (RCA) data comprising over 5,700 office property transactions equating to $563bn between 2007 and 2017, the direct global capital flows into the London, New York and Tokyo office markets are assessed using an autoregressive distributed lag (ARDL) approach. Further, Granger causality tests are examined to analyse the short-run interaction of international real estate capital flows into these three major office markets.FindingsBy assessing the relativity of internal to external investments in these three central business district (CBD) office markets, differences in market dynamics are highlighted. The London office market is shown to be highly dependent on international flows and the USA, the foremost source of cross-border investment on the global stage. The cointegration and causality analysis indicate that cross-border real estate investment flows in these markets (and financial centres) show both long- and short-run relationships and suggest that the London office market remains more distinct and the most reliant on international capital flows with a wider geographical spread of investment activities and investor types. In the case of New York and Tokyo, these markets appear to be driven by more domestic investment activity and capital seemingly due to subtle factors pertaining to investor home bias, risk aversion and diversification strategies between the markets in the aftermath of the GFC.Originality/valueGiven the importance of the CBD offices in London, New York and Tokyo as an asset class for institutional investors, this paper provides some insights as to their level of connection and the interaction of the international capital flows into these three major cities.

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