Author(s):Tomás E. Caravello, Pedro Martinez-Bruera, Iván Werning Date:June 2023 Abstract: This study explores the consequences of dollarizing an economy with an initial dollar shortage. We show that the resulting transitional dynamics are tantamount to that of a “sudden stop”: consumption of tradable goods fall, the real exchange rate depreciates abruptly by a discrete drop in[…]
Author(s):Michael Ehrmann, Phillipp Gnan, Kilian Rieder Date:May 2023 Abstract: Leaks of confidential information emanating from public institutions have been the focus of a longstanding line of research. Yet, their determinants as well as their potential impact on public views and on policy effectiveness remain elusive. We construct a database of anonymous monetary policy leaks in[…]
Author(s):Sergi Basco, Giulia Felice, Bruno Merlevede, Martí Mestieri Date:May 2023 Abstract: This paper empirically examines the effects of financial crises on the organization of production of multinational enterprises. We construct a panel of European multinational networks from 2003 through 2015. We use as a financial shock the increase in risk premia between August 2007 and[…]
Author(s):Kristin Forbes, Christian Friedrich, Dennis Reinhardt Date:May 2023 Abstract: This paper explores the relationship between different funding structures—including the source, instrument, currency, and counterparty location of funding—and the extent of financial stress experienced in different countries and sectors during the sharp risk-off shock in early 2020 when Covid-19 spread globally. We measure financial stress using[…]
Author(s):Matthew S. Jaremski, David C. Wheelock Date:May 2023 Abstract: This paper provides quantitative evidence on interbank transmission of financial distress in the Panic of 1907 and ensuing recession. Originating in New York City, the panic led to payment suspensions and emergency currency issuance in many cities. Data on the universe of interbank connections show that[…]
Author(s):Katharina Bergant, Prachi Mishra, Raghuram Rajan Date:May 2023 Abstract: We find that financial conditions in the core have significant spillover effects on cross-border mergers and acquisitions (M&As). On average, a 1 percentage point easing of the IMF US Financial Conditions Index is associated with approximately a 10% higher volume of cross-border M&As. The spillovers are[…]
Author(s):Katharina Bergant, Francesco Grigoli, Niels-Jakob Hansen and Damiano Sandri Date:May 2023 Abstract: We show that macroprudential regulation significantly dampens the impact of global financial shocks on emerging markets. Specifically, a tighter level of regulation reduces the sensitivity of GDP growth to capital flow shocks and movements in the VIX. A broad set of macroprudential tools[…]
Author(s):Bryan Hardy and Felipe Saffie Date:April 2023 Abstract: We use unique firm-level data from Mexico to document that non-financial corporations engage in carry trades by borrowing in foreign currency (FX) and lending in domestic currency, largely in the form of trade credit, accumulating currency risk in the process. We show at a quarterly frequency that[…]
Author(s):Lihong McPhail, Philipp Schnabl & Bruce Tuckman Date:April 2023 Abstract: We ask whether banks use interest rate swaps to hedge the interest rate risk of their assets, primarily loans and securities. To this end, we use regulatory data on individual swap positions for the largest 250 U.S. banks. We find that the average bank has[…]
Author(s):Michael B. Devereux, Charles Engel & Steve Pak Yeung Wu Date:April 2023 Abstract: We construct a two-country New Keynesian model in which US government debt has an advantage as a superior collateral asset in the balance sheets of banks. The model can account for the observed response of the US dollar and US bond returns[…]