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on International Finance |
| By: | Zhengyang Jiang |
| Abstract: | China’s rising presence in international finance, which has long lagged behind its prominence in international trade, is now reshaping global financial dynamics. Using a large sample of developing countries, this paper documents that countries more reliant on China’s lending are less exposed to the global financial cycle in exchange rates, equity prices, bond yields, and capital flows. These countries were not less exposed before China became a major lender, and trade linkages to China do not explain these results. Since China lends primarily in dollar, the exposure reduction is not through the traditional channel of mitigating currency mismatch. These findings suggest that international lending plays a unique role in insulating developing countries from global shocks, and through this channel U.S. and Chinese policies interact to shape global financial outcomes. |
| JEL: | F34 F42 G15 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33519 |
| By: | Raphael Auer; Ulf Lewrick; Jan Paulick |
| Abstract: | We investigate trends and drivers of cross-border flows of the two major native cryptoassets (Bitcoin and Ether) and the two major asset-backed stablecoins (Tether and USD Coin) between 184 countries from 2017 to 2024. These flows are substantial, peaking at around USD 2.6 trillion in 2021, with stablecoins accounting for close to half the volume. The unique bilateral data allow us to estimate the drivers of these flows in a gravity framework, and how they differ across different types of crypto assets. Our findings highlight speculative motives and global funding conditions as key drivers of native crypto asset flows. Transactional motives play a significant role in cross-border flows for stablecoins and low-value Bitcoin transactions, where we further find a strong association with higher costs of traditional remittances. Geographic barriers play a diminished role compared to traditional financial flows, and capital flow management measures appear ineffective. |
| Keywords: | cryptocurrency, payments, cross-border flows, blockchain, decentralised finance, capital flow management, Bitcoin, Ether, USD Coin, Tether, stablecoins, remittances |
| JEL: | F24 F32 F38 G15 G23 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1265 |
| By: | Nuwat Nookhwun; Jettawat Pattararangrong; Phurichai Rungcharoenkitkul |
| Abstract: | Under dominant currency pricing, exchange rate swings affect firms’ profits in domestic currency rather than price competitiveness. We quantify these valuation effects by constructing firm-specific exchange rates that reflect invoicing currencies and capture cashflow exposures. These net-invoice-currency-weighted exchange rates (NICER) outperform trade-weighted exchange rates in explaining firm profitability, particularly for smaller exporters. Higher trade dependency amplifies NICER sensitivities, while financial hedging only partially mitigates them. NICER fluctuations also impact firm liquidity and credit conditions, with large exporters offsetting liquidity shocks through external financing. These cash-flow effects, in turn, drive exporters’ investment and employment decisions. |
| Keywords: | Exchange rates; Valuation effects; Dominant currency paradigm; Firm-level data; Firm profitability; Invoicing currency; Exports; Financial hedging |
| JEL: | E44 F31 F41 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:233 |
| By: | Horioka, Charles Yuji |
| Abstract: | The finding of Feldstein and Horioka (1980) that domestic saving and domestic investment are highly correlated across countries despite the rapid globalization and liberalization of financial markets in recent decades has been regarded as a Puzzle or Paradox. However, in this paper, we show that countries as a whole may not be able to transfer their capital abroad and that the Feldstein-Horioka Finding of domestic saving and domestic investment being highly correlated across countries may arise even if there are no frictions in financial markets and even if individual investors can freely transfer their capital abroad if there are frictions in goods markets such as transport costs, tariffs, nontariff barriers, the cost of regulatory compliance, etc. In fact, there is evidence that frictions in goods markets are a more serious impediment to countries as a whole being able to transfer their capital abroad than frictions in financial markets, especially in the short run. |
| Keywords: | Capital controls, fallacy of composition, Feldstein-Horioka Finding, Feldstein-Horioka Puzzle or Paradox, frictions in financial markets, frictions in goods markets, global interest rate, globalization and liberalization of financial markets, interest parity, interest rate equalization, international capital flows, international capital mobility, saving-investment correlations, saving retention coefficient, trade costs, trade frictions |
| JEL: | F15 F21 F32 F36 F41 G15 |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:agi:wpaper:02000074 |
| By: | Hiroshi Oishi (Bank of Japan); Eisuke Kobayashi (Bank of Japan); Yoshihiko Sugihara (Bank of Japan) |
| Abstract: | Non-Bank Financial Intermediation (NBFI) accounts for about half of global financial assets and plays a pivotal role in financial intermediation activities. Recent observations have indicated a marked shift in the composition of NBFI, with a notable increase in the presence of investment funds, contrasting with the traditional composition of NBFI, which comprises insurance corporations and pension funds. The interconnectedness between banks and NBFI is also viewed to be increasing, mainly through increases in their cross-border transactions. Consequently, there has been a rise in cases where responses of NBFI, particularly investment funds, have been considered as contributing to the amplification of financial stresses, leading to heightened financial market volatility. In view of the potential for such stresses to propagate throughout the global financial system, including the banking sector, a series of policy recommendations have been issued by the Financial Stability Board (FSB) to contain vulnerabilities of NBFI. This article presents an overview of NBFI's financial intermediation, summarizes policy initiatives designed to enhance its resilience, and provides perspectives on issues surrounding NBFI through a review of the FSB's regular issue of the "Global Monitoring Report on Non-Bank Financial Intermediation" and its policy recommendations. |
| Keywords: | non-bank financial institutions; financial intermediation; financial risk and risk management; government policy and regulation |
| JEL: | G23 G15 G32 G28 |
| Date: | 2025–05–15 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojrev:rev25e06 |
| By: | Brignone, Davide (Bank of England); Gambetti, Luca (Universitat Autònoma de Barcelona, BSE, Università di Torino and CCA); Ricci, Martino (European Central Bank) |
| Abstract: | In this paper, we investigate the economic effects of geopolitical risk (GPR) shocks, with a focus on non‑linear transmission mechanisms. Using a VARX framework, we show that larger positive shocks have a disproportionately greater impact, pointing to the existence of an amplification channel driven by rising uncertainty. Large GPR shocks trigger precautionary behaviours, leading to sharp declines in consumption and equity prices. In contrast, prices react positively but the responses are overall muted due to offsetting forces from reduced demand and heightened uncertainty. We further show that GPR shocks linked to anticipated geopolitical threats exhibit pronounced non‑linearities, significantly increasing oil prices and inflation expectations, thereby exerting upward pressure on domestic prices. |
| Keywords: | Geopolitical risk; non-linearities; inflation; vector autoregressions; uncertainty |
| JEL: | C30 D80 E32 F44 H56 |
| Date: | 2025–02–21 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:1118 |
| By: | Kohei Maehashi (Bank of Japan); Daisuke Miyakawa (Waseda University); Takatoshi Sasaki (Bank of Japan); Taihei Sone (Bank of Japan) |
| Abstract: | Using trade repository data on transaction records of Japanese yen-denominated overnight index swap, we estimate individual market participants' expectations on future interest rates and document their time-variant distribution with its higher order moments. By leveraging this novel information, we implement quantitative exercises to verify the state-dependent effects of the Bank of Japan (BoJ)'s outright purchase of Japanese Government Bonds (JGBs) on the JGB yields conditional on the moments of this expectation distribution. We find that the BoJ's fixed-rate purchase operation resulted in a larger reduction of the JGB yields when the expectation distribution on future interest rates was skewed more positively. This empirical result implies the usefulness of the estimated expectation distribution for central banks to conduct market operations effectively. |
| Keywords: | Interest rate expectations; Skewness; Granular data; Trade repository; Overnight index swap; Market operations |
| JEL: | E43 E58 G15 G20 |
| Date: | 2025–05–16 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojwps:wp25e07 |
| By: | Craig Doidge; G. Andrew Karolyi; Kris Shen; René M. Stulz |
| Abstract: | Doidge, Karolyi, and Stulz (2017) show that from 1999 to 2012 the US develops a listing gap relative to other countries, meaning that it has abnormally few publicly listed firms. In this paper, we update their evidence to 2023 and find that the listing gap increases, but at a low rate. By 2023, the US has about half as many listed firms per capita as other developed countries. We discuss some of the important questions raised by the existence and increase of the listing gap to which we hope researchers will find answers. |
| JEL: | G10 G15 G34 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33556 |