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on International Finance |
| By: | Swapan-Kumar Pradhan; Eswar S. Prasad; Előd Takáts; Judit Temesvary |
| Abstract: | We investigate how the U.S. dollar’s prominence in the denomination of international debt securities has evolved in recent decades, using a comprehensive global dataset with far more extensive coverage than datasets used in prior literature. We find no monotonic dollarization or de-dollarization trend; instead, the dollar’s share exhibits a wavelike pattern. We document three dollarization waves since the 1960s. The last wave, following the global financial crisis, lifted the dollar’s share nearly back to its level at the euro’s launch in 2000. We show that closer alignment of a country’s domestic currency to a reserve currency (e.g., the U.S. dollar) correlates with higher shares of issuance in that currency. Our findings are robust to composition and currency valuation effects as well as alternative data definitions. |
| JEL: | F3 F41 G15 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34942 |
| By: | R. Benkraiem (Audencia Business School); N. Dimic; V. Piljak; L. Swinkels |
| Abstract: | We examine the impact of the media-based climate risks, grouped into physical and transition risk categories, on the international corporate bond market in the period from 2012 to 2022. We analyze the following aspects: (i) market development (developed versus emerging markets); (ii) credit quality (investment grade versus high yield bonds), (iii) industry (climate-sensitive versus non-sensitive industries), and (iv) maturity (short versus long term bonds). We find that transition risk is reflected in the global corporate bond market, but not in the emerging corporate bond market segment. Furthermore, transition risk has a material impact only on the investment grade bonds in the global corporate bond market. The industry analysis reveals that there are no consistent significant differences between climate-sensitive and climate-insensitive industries. Maturity analysis indicates that transition risk is reflected in global corporate bond market returns for both short and long terms, but this effect is less pronounced in emerging markets. Physical risk is not systematically reflected in international corporate bond returns. The subsample analysis shows higher importance of transition climate risk following the Paris Agreement in December 2015. |
| Keywords: | Climate risk, Corporate bonds, Debt, Emerging markets, Physical risk, Transition risk |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05535568 |
| By: | Marina Emiris (National Bank of Belgium, Research Department); Joanna Harris (Chicago Booth School of Business.); François Koulischer (University of Luxembourg.) |
| Abstract: | We study how sustainability disclosure regulation affects mutual fund flows and portfolio choices, accounting for investor heterogeneity. Guided by a model of ESG investing under uncertainty, we exploit the introduction of the European Sustainable Finance Disclosure Regulation (SFDR) as a natural experiment, using granular fund–investor holdings data. We show that funds subject to higher disclosure requirements attract significantly larger inflows, particularly for funds with higher pre-regulation uncertainty. Institutional investors respond more strongly than retail investors, and investor trust in environmental labels amplifies these effects. We also find evidence that disclosure induces fund managers to increase portfolio greenness. |
| Keywords: | Mutual funds; Disclosure Regulation; Trust; ESG ratings. |
| JEL: | G23 G11 G14 Q56 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202603-490 |
| By: | Borel Ahonon; Guillaume Roussellet |
| Abstract: | We propose a macro-finance model in which inflation, growth, and the policy rate are driven by unobservable long-run trends and transitory cycles that investors must infer from aggregate data. Their subjective estimates of these trends, and the uncertainty surrounding them, are priced into the Treasury yield curve in a tractable way through both interest rate expectations and bond risk premia. Empirical estimates reveal an upward smooth trend in the long-run real interest rate (r-star) until the 1980s, and large investor uncertainty with confidence bands on as wide as 3.4 percentage points, contrasting with the volatile rate implied by perfect information models. |
| Keywords: | Incomplete information; interest rate stars; Bayesian learning; treasury yields; investors; uncertainty |
| JEL: | C58 E43 E52 G12 |
| Date: | 2026–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:102914 |
| By: | Adam Copeland; Owen Engbretson |
| Abstract: | Securities dealers play a central role intermediating funds in the U.S. short-term money markets. This intermediation involves risk, which can be mitigated by holding buffers of liquid securities. The cost of holding these buffers—the liquidity risk premium—is driven by the opportunity cost of holding money and so is influenced by monetary policy. We use detailed data on the pricing of repurchase agreements (repo), the main contract used to provide secured funding in the money markets, to measure by how much changes in monetary policy affect the liquidity risk premium embedded in repo pricing. The results imply that both changes in administrative rates and in aggregate reserves have effects on this risk premium and that this relationship is nonlinear. Using the average values of rates and reserves in 2024, the estimated coefficients predict that a 100-basis-point increase in the interest rate on reserve balances results in a 0.9 basis point increase in the liquidity risk premium—a 10 percent increase in the spread charged by securities dealers to their clients. The same effect on this risk premium can be achieved by a $429 billion decrease in the aggregate reserves. |
| Keywords: | repo; liquidity risk premium; rate pass-through; short-term funding |
| JEL: | G23 E58 |
| Date: | 2026–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:102916 |
| By: | Michael J. Fleming; Weiling Liu; Giang Nguyen |
| Abstract: | Using thirty-three years of intraday Treasury data, we provide the first high-frequency evidence on auction-day price pressure: yields rise in the hours before auction and reverse afterward. This pressure strengthens when dealers face tighter risk-bearing constraints and weakens when investor demand is stronger or more elastic. More importantly, net order flow dominates in explaining the pressure, providing the first direct evidence that trading transmits dealer constraints into prices. Despite concerns about dealer capacity amid rapid federal debt growth, price pressure has not increased in recent years, partly because non-dealer participants now absorb more auction supply and ease dealers’ intermediation burden. |
| Keywords: | Treasury auctions; dealer intermediation; order flow; Price pressure; Supply effects; risk bearing capacity; returns; demand elasticity; liquidity; frictions |
| JEL: | G12 G14 E43 H63 |
| Date: | 2026–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:102915 |
| By: | Mahbuba Aktar (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan); Makram El-Shagi (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan); Florian Gerth (Asian Institute of Management, Philippines) |
| Abstract: | Financial frictions are a key determinant of monetary policy transmission. Using provincial Chinese data for 2011–2019, we examine this question through the lens of regional variation in traditional and digital financial inclusion. We combine high-frequency monetary policy shocks with state-dependent local projections, in- terpreting traditional inclusion as a proxy for liquidity constraints and digital inclusion as a proxy for search frictions. Regions with stronger liquidity constraints exhibit weaker output and price responses, in line with the predictions of New Keynesian models with heterogeneous agents. Lower search frictions instead tend to amplify transmission over medium horizons, though short-run effects are mixed. |
| Keywords: | monetary policy transmission; regional differences; financial frictions; financial inclusion; high-frequency identification |
| JEL: | E5 E4 C2 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:fds:dpaper:202604 |
| By: | Priit Jeenas; Alberto Martin; Vladimir Asriyan |
| Abstract: | Financial crises are characterized by depressed asset prices, tight financial constraints, and misallocation of resources. Standard policy responses—such as asset purchases and low interest rates—are generally intended to alleviate these symptoms. This paper distinguishes between two types of crises that appear similar but differ fundamentally in their underlying mechanisms: fire-sale crises, where productive firms are forced to sell assets; and demand-freeze crises, where productive firms are unable to purchase assets. While both lead to similar observable outcomes, they have contrasting general equilibrium effects and may call for different policy interventions. Notably, conventional policies can be counterproductive in demand-freeze crises, as they may exacerbate financial constraints and further distort resource allocation. Empirical evidence on the pattern of capital reallocation among U.S. firms suggests that demand-freeze crises are, in fact, more common. |
| Keywords: | asset purchases, capital reallocation, cleansing effects, credit easing, demand freezes, financial crises, financial frictions, fire sales, monetary loosening |
| JEL: | E22 E44 E60 D53 G01 G18 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1567 |
| By: | Thomas Dulak; Guntram Wolff |
| Abstract: | Since the first green bond was issued in 2007, the market has expanded significantly and now accounts for around 3% of the global bond universe. Westudy the liquidity of green bonds. In particular, we are the first to investigategreen bonds’ daily trading volumes and frequency with a unique dataset fromEuroclear. Studying these dimensions of liquidity is particularly important in relatively small markets. Our dataset, covering the period 2020 to 2025, allows us todirectly compare green bonds with conventional bonds. We find that green bondsdo not suffer from a systematic liquidity disadvantage relative to conventionalbonds. On the contrary, they are traded in higher aggregate volumes, drivenby more frequent trading rather than by larger transaction sizes. These differences persist during periods of heightened market-wide stress. Within the greenbond universe, third-party certification is associated with higher trading volumesthrough more intensive trading when bonds are active, while green bonds funding more common project types are traded more regularly than bonds financingmore niche projects |
| Keywords: | Green bonds; Bond liquidity; Trading activity; Market stress; Certification |
| JEL: | G11 G23 Q56 |
| Date: | 2026–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/404323 |
| By: | Makram El-Shagi (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan); Florian Gerth (Asian Institute of Management, Philippines); Paul Lukuliko Philemon (Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan) |
| Abstract: | We construct a new measure of monetary policy discretion by treating the predictable component of interest-rate changes as rule based and unexpected changes as discretionary. Using newly released high-frequency monetary policy shocks for 20 countries from 2000 to 2024, we document systematic cross-country variation in discretion. Two-way fixed-effects estimates show that greater central-bank independence is associated with higher discretion in developed economies. Event studies around irregular governor turnovers yield little evidence of politically driven discretionary shocks once transitional dynamics are accounted for. |
| Keywords: | Taylor rule; Monetary policy shocks; High frequency identification; discretion; Central bank independence |
| JEL: | E40 E43 E44 E58 E61 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:fds:dpaper:202602 |