Author(s):Barry Eichengreen, Ricardo Hausmann, and Ugo Panizza Date:November 2022 Abstract: Notwithstanding announcements of progress, “international original sin” (the denomination ofexternal debt in foreign currency) remains a persistent phenomenon in emerging markets.Although some middle-income countries have succeeded in developing markets in local-currencysovereign debt and attracting foreign investors, they continue to hedge their currency exposuresthrough transactions with[…]

Author(s):Josefine Quast Date:July 2022 Abstract: Basel III credit-to-GDP gaps are used to assess whether aggregate credit is excessive or not and inform macroprudential policymaking. Yet, estimates from Basel III’s prescribed detrending procedure are prone to continuous reevaluations that do not reflect changes in the data and exceed commonly discussed end-of-sample biases from converging one- and[…]

Author(s):Barry Eichengreen and Orkun Saka Date:December 2022 Abstract: Using hand-collected data spanning more than a decade on European banks’ sovereign debt portfolios, we show that the trust of residents of a bank’s countries of operation in the residents of a potential target country of investment has a positive, statistically significant, and economically important association with[…]

Author(s):Claudio Borio, Ilhyock Shim, and Hyun Song Shin Date:December 2022 Abstract: Since the 2008–9 Great Financial Crisis, major advanced economies (AEs) have used monetary and macroprudential policies to achieve macroeconomic and financial stability. Emerging market economies (EMEs) have, in addition, combined interest rate tools with FX intervention, macroprudential policy and, sometimes, capital flow management measures[…]

Author(s): Thomas Drechsel and Seho Kim Date: October 2022 Abstract: A large literature has studied optimal regulatory policy in macroeconomic models with collateral constraints. A common conclusion is that agents `over-borrow’ and optimal policy reduces debt positions through taxes. The reason is that agents do not internalize the effects of their choices on asset prices.[…]

Author(s): Ṣebnem Kalemli-Özcan and Liliana Varela Date: May 2022 Abstract: We document five novel facts about Uncovered Interest Parity (UIP) deviations vis-à-vis the U.S. dollar for 34 currencies, during 1996-2018. 1) The UIP premium co-moves with global risk perception (VIX) for all currencies, whereas only for emerging market currencies there is a negative comovement between[…]

Author(s): Jean Imbs, Laurent Pauwels Date: April 2022 Abstract: We introduce a measure of exposure to foreign shocks -openness- that computes the fraction of output subjected to foreign shocks at any order. The measure is easy to obtain for any sector with input-output data; It implies that openness is much more prevalent than often thought,[…]

Author(s): Ricardo Correa , Julian di Giovanni, Linda S. Goldberg, and Camelia Minoiu Date: September 2022 Abstract: When trade uncertainty directly affects credit supply it can amplify other contractionary impulses from a deterioration in the international trade environment. Exploiting heterogeneity in banks’ ex-ante exposure to trade uncertainty and loan-level data for U.S. banks, we show[…]

Author(s): Zhengyang Jiang, Robert J. Richmond and Tony Zhang Date: July 2022 Abstract: We use a portfolio-based framework to understand what drives the decline of the U.S. net foreign asset (NFA) position and the reversal in returns earned on the US NFA (exorbitant privilege). We show that global savings gluts and monetary policies widened the[…]

Author(s): Ozge Akinci, Sebnem Kalemli-Özcan, Albert Queralto Date: July 2022 Abstract: Foreign investors’ changing appetite for risk-taking have been shown to be a key determinant of the global financial cycle. Such fluctuations in risk sentiment also correlate with the dynamics of UIP premia, capital flows, and exchange rates. To understand how these risk sentiment changes transmit[…]