Benjamin Peeters

This study assesses how medium-term economic cycles in center countries drive patterns of short-term financial flows to semi-periphery economies. A portfolio optimization model demonstrates that financial inflows to semi-periphery countries can evolve countercyclically to center countries’ medium-term cycles as investors shift away from the center during downturns. However, this substitution effect competes with a volume effect resulting from changes in total global investment. Using panel data for 1970-2020, the findings provide evidence that: (1) portfolio investments to semi-periphery countries are countercyclical to center economies’ medium-term cycles; (2) FDI flows are less affected than shorter-term flows; (3) financial flows to periphery countries tend to be procyclical; and (4) financial and trade connections with center economies accentuate the substitution effect.

This study investigates the relative importance of monetary policy responses versus economic integration in explaining international monetary policy spillover effects across economies.

The main objective of this thesis is to assess whether financial interdependencies today are different from those in the past decades and whether such differences can be attributed to economic globalization. The study focuses on the impacts of medium-term cycles in center economies on short-term international financial flows to semi-periphery economies and the evolution of international monetary policy spillovers. The thesis is structured around three core chapters: (1) A portfolio optimization model that documents the conditions and hypotheses under which financial flows to semi-periphery are procyclical or countercyclical to macroeconomic medium-term cycles in center economies, finding that financial flows to semi-periphery countries are countercyclical to these cycles for portfolio investments, suggesting that portfolio investors shift part of their investments from center to semi-periphery economies during periods of lower returns in center economies, and vice versa. (2) An examination of how macroeconomic medium-term cycles in center economies trigger countercyclical financial flows to semi-periphery countries that subsequently induce balance-of-payment crises in these economies, highlighting that the last three waves of crises that affected semi-periphery economies are each linked with the medium-term cycles in center economies and disruptive international financial flows. (3) An analysis showing that international monetary policy spillovers are sizable and have increased considerably since the 1980s, with globalization shown to be an important driver of these spillovers.

The concept of energy return (EROEI ratio) is widely used in energy science to describe the interactions between energy and the economic system but it is largely ignored in macroeconomics. In order to contribute to bridging a gap between these fields of research, the authors incorporate these metrics into an endogenous growth model with two sectors (energy and final goods). An approach in terms of net energy allows them (1) to explicitly link the EROEI to macroeconomic variables, (2) to show how it is related to the growth rate of GDP and (3) to obtain a closed-form solution for its long-run value at a general equilibrium level. A transition to lower EROEI resources intensifies the rival use of capital in the energy and non-energy sectors and leads to major economic changes, both in the inter-sectoral capital allocation and in the allocation of final output between consumption and investment. The authors show that a protracted economic contraction may occur before the completion of the transition to renewable energy. They analyze how (1) the magnitude of this contraction and (2) the possibility of an ulterior recovery depend on the initial stock of non-renewables, the potentials of technical progress.