nep-ifn New Economics Papers
on International Finance
Issue of 2021‒02‒01
three papers chosen by
Vimal Balasubramaniam
University of Oxford

  1. Cross-Border Currency Exposures By Agustin Benetrix; Deepali Gautam; Luciana Juvenal; Martin Schmitz
  2. Bilateral International Investments: the Big Sur? By Fernando Broner; Tatiana Didier; Sergio L Schmukler; Goetz von Peter
  3. Pricing Currency Risks By Mikhail Chernov; Magnus Dahlquist; Lars A. Lochstoer

  1. By: Agustin Benetrix; Deepali Gautam; Luciana Juvenal; Martin Schmitz
    Abstract: This paper provides a dataset on the currency composition of the international investment position for a group of 50 countries for the period 1990-2017. It improves available data based on estimates by incorporating actual data reported by statistical authorities and refining estimation methods. The paper illustrates current and new uses of these data, with particular focus on the evolution of currency exposures of cross-border positions.
    Keywords: Currencies;Foreign currency exposure;Foreign exchange;Exchange rates;International investment position;WP,foreign currency,exchange rate,reserve asset,financial crisis
    Date: 2019–12–27
  2. By: Fernando Broner; Tatiana Didier; Sergio L Schmukler; Goetz von Peter
    Abstract: Using country-to-country data, this paper documents a set of novel stylized facts about the rise of the South in global finance. The paper assembles comprehensive bilateral data on cross-border bank loans and deposits, portfolio investment in debt and equity, foreign direct investment, and international reserves. The main finding is that global financial integration with and especially within the South (countries outside the G7 and Western Europe) has grown faster than within the North. By 2018, the South accounted for 24 to 40 percent of international loans and deposits, portfolio investment, and foreign direct investment, an increase of roughly 10 percentage points since 2001. The growing importance of the South is reflected in the intensive and extensive margins, with fast growth in the number of bilateral links. Although China weighs heavily in these trends, international investment in the rest of the South has increased to a similar extent.
    Keywords: international capital flows; emerging economies; international financial integration; foreign direct investment; portfolio investment
    JEL: F21 F36 G15
    Date: 2020–12
  3. By: Mikhail Chernov; Magnus Dahlquist; Lars A. Lochstoer
    Abstract: The currency market features a relatively small cross-section and conditional expected returns can be characterized by only a few signals – interest differentials, trend, and mean-reversion. We exploit these properties to construct a conditional projection of the stochastic discount factor onto excess returns of individual currencies. Our approach is implementable in real time and prices all currencies and prominent strategies conditionally as well as unconditionally. We document that the fraction of unpriced risk in these assets is at least 85%. Extant explanations of carry strategies based on intermediary capital or global volatility are related to these unpriced components, while consumption growth is related to the priced component of returns.
    JEL: F31 G12 G15
    Date: 2020–12

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