Essays In The Us Dollar Dominated International Financial Market
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Essays In The Us Dollar Dominated International Financial Market
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Author : Zefeng Chen
language : en
Publisher:
Release Date : 2021
Essays In The Us Dollar Dominated International Financial Market written by Zefeng Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021 with categories.
This dissertation studies a special feature about the international financial market. Classical theories often assume that countries are symmetric, but realistically the international financial market is heavily US dollar dominated, which stimulates my interest to study whether this role of the US dollar can resolve numerous puzzles that classical theories are unable to reconcile with empirical facts, as well as to study policy implications. The role of the US in the international market is mainly unique in two aspects. First, the US dollar is the dominant currency used in international trade. Second, the US treasuries are considered as the most widely accepted safe assets. In this dissertation, the first two chapters study the safe asset role, and the third chapter explores the invoicing currency role. The first chapters analyzes the phenomenon called the US 'Exorbitant Privilege', which describes the fact that the US is the only large net borrower country in the world earning a positive net investment income. To rationalize this phenomenon, I propose a different theory about the role of US in the international financial system being a service provider, in contrast to the conventional view of an insurance provider, which predicts the US exorbitant privilege would vanish during the financial crisis, not supported by data. I build a two-country model with financial friction to explain the dynamics of the US external balance sheet and the dollar exchange rate. In the model, world financial intermediaries demand US safe assets for their convenience value, but US intermediaries do not demand foreign safe assets. Under an aggregate symmetric financial shock, the rest of the world buys more safe assets from the US despite a rise in convenience yield, the dollar appreciates, and the US takes advantage by buying more equities from the rest of the world at a low price. I show my mechanism can quantitatively explain the data, while a real shock triggering risk-sharing dynamic cannot. The second chapter is a paper completed with coauthors Shanaka J. Peiris and Sanaa Nadeem from the IMF. We take a perspective from Asian small open economies against external shocks driven by the US dollar. We focus on the banking sectors in those economics because in emerging Asia banks constitute the dominant source of financing consumption and investment, and bank balance sheets comprise large gross FX assets and liabilities. This paper extends the DSGE model of Gertler and Karadi (2011) to incorporate these key features and estimates a panel vector autoregression on ten Asian economies to understand the role of the banking sector in transmitting spillovers from the global financial cycle to small open economies. It also evaluates the effectiveness of foreign exchange intervention (FXI) and other macroeconomic policies in responding to external financing shocks. External financial shocks affect net external liabilities of banks and the exchange rate, leading to changes in credit supply by banks and investment. For example, a capital outflow shock leads to a deprecation that reduces the net worth and intermediation capacity of banks exposed to foreign currency liabilities. In such cases, the exchange rate acts as shock amplifier and sterilized FXI, often deployed by Asian economies, can help cushion the economy.
The International Monetary System
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Author : Peter B Kenen
language : en
Publisher: Westview Press
Release Date : 1993-03-16
The International Monetary System written by Peter B Kenen and has been published by Westview Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993-03-16 with Business & Economics categories.
For 50 years, the International Finance Section at Princeton University has encouraged and published work in international finance. This volume, a semicentennial celebration of the Section's essays in international finance, is comprised of 12 essays.
Essays In International Finance
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Author :
language : en
Publisher:
Release Date : 1974
Essays In International Finance written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1974 with International finance categories.
Private And Official International Money The Case For The Dollar
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Author : Ronald I. McKinnon
language : en
Publisher: Princeton, N.J. : International Finance Section, Department of Economics, Princeton University
Release Date : 1969
Private And Official International Money The Case For The Dollar written by Ronald I. McKinnon and has been published by Princeton, N.J. : International Finance Section, Department of Economics, Princeton University this book supported file pdf, txt, epub, kindle and other format this book has been release on 1969 with Business & Economics categories.
Essays On International Finance And Currency Economics
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Author : Yida Li
language : en
Publisher:
Release Date : 2022
Essays On International Finance And Currency Economics written by Yida Li and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with categories.
My dissertation consists of three chapters which address questions in international finance and currency economics. Chapter 1 studies the persistence of covered interest rate parity (CIP) deviations. Since global financial crisis (GFC), the CIP deviations have implied a persistent dollar financing premium for banks versus other major currencies. In this paper, I decompose the CIP deviation into three parts: credit spread differential between U.S. and non- U.S. economies, bank’s default premium, and the liquidity needs of global banks. Then I empirically examine whether the data accords with the model predictions, and find that the relative significance of each component in CIP deviation has changed over time, as default premium was the dominant driver around GFC, credit spread differential has been catching up significantly in recent years. In chapter 2, we use a joint model of macroeconomic and term structure dynamics to estimate the term premia and inflation risk premia embedded in the euro area and U.S. sovereign bonds yields. We find that the fall in real risk premia has been the primary driver of declining yields, given ECB assets purchases and forward guidance which lowered the uncertainty over the projected path of short-term rates. In addition, contrary to the Federal Reserve, the ECB’s new strategy review has yet to lift inflation expectations in our sample period with financial markets expecting inflation to remain below 2 percent. We subsequently build a model of the term premia to forecast the euro area 10-year yield curve and find that yields will likely remain depressed over the medium-term under various scenarios. In chapter 3, we examine the economic determinants of the foreign exchange uncertainty with a focus on options prices. FX option prices theoretically contain information over and above that is included in the spot exchange rate markets, as they reflect the market’s perception of the uncertainty surrounding future exchange rate developments. However, little research efforts have been devoted to examine the economic determinants of the FX uncertainty with a focus on options prices. This paper addresses this issue using the option data by characterizing the economic determinants of FX market un- certainty. In a data-rich environment containing a large number of macroeconomic variables, we find that shocks of output and income variables, as well as monetary and credit variables generate significant and consistent impacts on the general risk sentiment and tail risk in the FX market. Shrinkage method of group LASSO also selects macroeconomic fundamentals and financial variables to have consistent impacts on FX market uncertainties. Besides the standard linear analyses, we adopt the neural network method to examine the non-linear association between economic determinants and FX option volatility. The results connect the time-varying FX market risks at both short and long term with macroeconomic fundamentals, and may in addition suggest that financial uncertainty co-movements also exist in currency markets.
Bank Balance Sheets And External Shocks In Asia The Role Of Fxi Mpms And Cfms
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Author : Zefeng Chen
language : en
Publisher: International Monetary Fund
Release Date : 2021-01-15
Bank Balance Sheets And External Shocks In Asia The Role Of Fxi Mpms And Cfms written by Zefeng Chen and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-01-15 with Business & Economics categories.
In emerging Asia, banks constitute the dominant source of financing consumption and investment, and bank balance sheets comprise large gross FX assets and liabilities. This paper extends the DSGE model of Gertler and Karadi (2011) to incorporate these key features and estimates a panel vector autoregression on ten Asian economies to understand the role of the banking sector in transmitting spillovers from the global financial cycle to small open economies. It also evaluates the effectiveness of foreign exchange intervention (FXI) and other macroeconomic policies in responding to external financing shocks. External financial shocks affect net external liabilities of banks and the exchange rate, leading to changes in credit supply by banks and investment. For example, a capital outflow shock leads to a deprecation that reduces the net worth and intermediation capacity of banks exposed to foreign currency liabilities. In such cases, the exchange rate acts as shock amplifier and sterilized FXI, often deployed by Asian economies, can help cushion the economy. By contrast, with real shocks, the exchange rate serves as a shock absorber, and any FXI that weakens that function can be costly. We also explore the effectiveness of the monetary policy interest rate, macroprudential policies (MPMs) and capital flow management measures (CFMs).
Gaining Currency
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Author : Eswar Prasad
language : en
Publisher: Oxford University Press
Release Date : 2017
Gaining Currency written by Eswar Prasad and has been published by Oxford University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with Business & Economics categories.
China's currency, the renminbi, has taken the world by storm. This book documents the renminbi's impressive rise to global prominence in a short period but also shows how much further it has to go before becoming a major international currency. The hype about its inevitable ascendance to global dominance is overblown.
The Bretton Woods Debates
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Author : Raymond Frech Mikesell
language : en
Publisher: Internat Niversit
Release Date : 1994
The Bretton Woods Debates written by Raymond Frech Mikesell and has been published by Internat Niversit this book supported file pdf, txt, epub, kindle and other format this book has been release on 1994 with United Nations Monetary and Financial Conference categories.
The Euro Dollar Market An Interpretation
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Author : Alexander K. Swoboda
language : en
Publisher: Princeton, N.J. : International Finance Section, Department of Economics, Princeton University
Release Date : 1968
The Euro Dollar Market An Interpretation written by Alexander K. Swoboda and has been published by Princeton, N.J. : International Finance Section, Department of Economics, Princeton University this book supported file pdf, txt, epub, kindle and other format this book has been release on 1968 with Business & Economics categories.
Exchange Rate Theory And Practice
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Author : John F. Bilson
language : en
Publisher: University of Chicago Press
Release Date : 2007-12-01
Exchange Rate Theory And Practice written by John F. Bilson and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-12-01 with Business & Economics categories.
This volume grew out of a National Bureau of Economic Research conference on exchange rates held in Bellagio, Italy, in 1982. In it, the world's most respected international monetary economists discuss three significant new views on the economics of exchange rates - Rudiger Dornbusch's overshooting model, Jacob Frenkel's and Michael Mussa's asset market variants, and Pentti Kouri's current account/portfolio approach. Their papers test these views with evidence from empirical studies and analyze a number of exchange rate policies in use today, including those of the European Monetary System.