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on International Finance |
| By: | Stefan Avdjiev; Leonardo Gambacorta; Linda S. Goldberg; Stefano Schiaffi |
| Abstract: | The period after the Global Financial Crisis (GFC) was characterized by a considerable risk migration within global liquidity flows, away from cross-border bank lending towards international bond issuance. We show that the post-GFC shifts in the risk sensitivities of global liquidity flows are related to the tightness of the balance sheet (capital and leverage) constraints faced by international (bank and non-bank) lenders and to the migration of borrowers across funding sources. We document that the risk sensitivity of global liquidity flows is higher when funding is provided by financial intermediaries that are facing greater balance sheet constraints. We also provide evidence that the post-GFC migration of borrowers from cross-border loans to international debt securities was associated with a decline in the risk sensitivity of global liquidity flows to EME borrowers. |
| JEL: | F30 F34 F42 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33674 |
| By: | Jiang, Zhengyang (Northwestern U); Krishnamurthy, Arvind (Stanford U); Lustig, Hanno (Stanford U); Richmond, Robert (New York U); Xu, Chenzi (U of California, Berkeley) |
| Abstract: | What can we learn from the high-frequency responses in bond and currency markets to the recent tariff announcement about the status of the U.S. dollar as the global reserve currency? The dollar depreciated by 3.4% after April 4 in spite of rising U.S. interest rates and market volatility, which is highly unusual. The willingness of foreign investors to pay extra for the safety of dollar safe assets, including but not limited to U.S. Treasury, has declined. These asset market responses suggest that investors started to question the role of the dollar as the reserve currency. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:ecl:stabus:4241 |
| By: | Michael B. Devereux; Rui Lu; Kang Shi; Juanyi (Jenny) Xu |
| Abstract: | This paper proposes a concept of a global currency and introduces a “global currency pricing” specification into a standard N-country open economy macroeconomic model. A global currency is defined as a virtual unit of account that is exclusively used for international trade invoicing and is formed as a basket of individual currencies, similar to the existing SDR. We show there is a unique optimal composition of a global currency that weights currencies according to their importance in international trade. A striking implication is that under this global currency design, the monetary policy of each country should be concerned solely with domestic shocks. No country should have more than a 50 percent weight in an optimal global currency, and a situation where a large country has the sole weighting in the global currency is likely to be worst outcome from a perspective of global welfare. We derive the conditions under which global currency pricing (GCP) dominates all other outcomes, and is an optimal choice of invoicing currency for individual firms. |
| JEL: | F30 F40 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33540 |
| By: | Bryan Gutierrez Cortez; Victoria Ivashina; Juliana Salomao |
| Abstract: | Are defined contribution (DC) pension funds' capital flows sensitive to performance? We examine pressures from individual account holders who can switch their pension managers. Using novel data on retirement accounts for nearly 10 million individuals, we analyze switching behavior based on the plan’s risk profile. Switching across managers within the same pension product is not uncommon, and the tendency to change managers rises over time. Capital flows are sensitive to and increase with fund performance. This sensitivity creates pressure on managers, shaping their incentives and portfolio decisions. A quasi-exogenous increase in outflows leads managers to shift toward higher-yielding bond holdings. |
| JEL: | G11 G23 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33693 |
| By: | Karsten Müller; Chenzi Xu; Mohamed Lehbib; Ziliang Chen |
| Abstract: | The Global Macro Database is an open-source, continuously updated dataset of macroeconomic statistics that unifies and extends existing resources. By harmonizing and integrating data from 32 major contemporary sources—including the IMF, World Bank, and OECD—with historical records from 78 additional datasets, we construct comprehensive annual time series for 46 variables across 243 countries. This database covers global macroeconomic trends from the origins of modern data collection to projected estimates for 2030. Using this extensive database, we study the long-run output losses of financial crises and global temperature shocks, two applications in which historical time series are a crucial input. Our findings show that financial crises are associated with statistically detectable contractions in real GDP for five decades into the future, which are considerably larger than previously estimated. Temperature shocks also predict real GDP contractions up to 30 years ahead, especially in emerging economies. |
| JEL: | E01 F01 N01 N10 O10 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33714 |
| By: | Lin William Cong; Eswar S. Prasad; Daniel Rabetti |
| Abstract: | Oracles are software components that enable data exchange between siloed blockchains and external environments, enhancing smart contract capabilities and platform interoperability. Oracles play key roles in decentralized finance and blockchain applications in centralized finance. We find that integration into decentralized oracle networks is positively associated with key measures of economic activity such as Total Value Locked, triggered by positive network effects in adoption and usage. Our study reveals symbiotic gains from enhanced interoperability and network effects across protocols on a given chain and among integrated chains. Oracle integration appears to improve risk-sharing and mitigates contagion, increasing resilience during turbulent periods in crypto markets. Overall, oracles emerge as a crucial component to enable informational and economic integration in decentralized finance ecosystems. |
| JEL: | F15 F36 G15 G29 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33639 |
| By: | Zhang, Shaojun (Ohio State U); Shi, Zhan (Tsinghua U) |
| Abstract: | An influential view attributes the “greenium†—the cost-of-capital gap between carbon-intensive and greener firms—to climate risks and investor preferences. We challenge this by showing that oil shocks are pivotal: rising prices, driven by foreign supply or sector-specific demand shocks, reduce energy firms’ cost of capital by enhancing their growth opportunities, creating a divergence from other brown firms. This energy specific component explains 20% of greenium fluctuations, peaking at 50%. Reassessing events like the Paris Agreement suggests the impact of investor discipline weakens when oil’s role is considered. Overall, markets price climate risks less effectively than a |
| JEL: | G10 G12 G15 Q51 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecl:ohidic:2024-24 |