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on International Finance |
| By: | Zhiguo He; Yuehan Wang; Xiaoquan Zhu |
| Abstract: | Using cross-border holding data from all custodians in China’s Stock Connect, we provide evidence that Chinese mainland insiders evade see-through surveillance by round-tripping via the program. Following the 2018 Northbound Investor Identification reform, the return predictability of northbound flows decays, as does their correlation with insider trading. This reduction is especially pronounced among less prestigious foreign custodians and cross-operating mainland custodians, where insiders are more likely to hide. Furthermore, the reform erodes price informativeness, particularly in stocks with high exposure to homemade foreign investors. Our analysis highlights the role of regulatory cooperation in capital market integration. |
| JEL: | F3 G14 G15 G28 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35095 |
| By: | Julia Schmidt; Maéva Silvestrini; Urszula Szczerbowicz |
| Abstract: | This paper challenges the conventional wisdom that US monetary policy tightening attracts foreign capital through purchases of US Treasuries. Using bilateral data on US foreign assets and liabilities, we show that much of the observed capital inflows into the US is actually due to US investors repatriating funds from foreign equities. This highlights important heterogeneity between domestic and foreign investors. Extending the analysis to Central Bank Information shocks—monetary surprises conveying additional economic information—we document a distinct global portfolio rebalancing characterized by risk-on behavior, with US investors increasing foreign equity holdings and foreign investors shifting into US equities. |
| Keywords: | Monetary Policy, Spillovers, Capital Flows |
| JEL: | F44 E52 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1040 |
| By: | Joseph Abadi; Jesús Fernández-Villaverde; Daniel R. Sanches |
| Abstract: | We present a micro-founded monetary model of the world economy to study international currency competition. Our model features both “unipolar” equilibria, with a single dominant international currency, and “multipolar” equilibria, in which multiple currencies circulate internationally. Long-run equilibria are highly history-dependent and tend towards the emergence of a dominant currency. Governments can compete to internationalize their currencies by offering attractive interest rates on their sovereign debt, but large economies have a natural advantage in ensuring the dominance of their currencies. We calibrate the model to assess the quantitative importance of these mechanisms and study the dynamics of the international monetary system under counterfactual scenarios. |
| Keywords: | dominant currency; international monetary system; strategic complementarities; history dependence |
| JEL: | E42 E58 G21 |
| Date: | 2026–04–15 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:103040 |
| By: | Huixin Bi; Maxime Phillot; Sarah Zubairy |
| Abstract: | Historically high debt-to-GDP levels in the U.S. have raised concerns about future financial market stability and fiscal sustainability. We use high-frequency data and consider Treasury futures price changes within narrow windows around auction announcements in order to identify two distinct Treasury supply shocks: debt volume shocks that capture changes in the level of public debt, and maturity adjustment shocks that reflect changes in the maturity structure. We find that debt expansion shocks raise yields across the curve by increasing term premia, leading to tighter financial conditions. These shocks crowd out private sector activity by reducing investment and production, particularly during periods of rapid debt growth. In contrast, maturity extension shocks steepen the yield curve while lowering credit risk premia and fiscal uncertainty. By reducing risk premia, these shocks stimulate near-term investment and production, even as higher long-term borrowing costs weigh on longer-horizon investment. We also show that the Treasury debt management policy can meaningfully interact with the Federal Reserve's asset purchase programs. |
| JEL: | E44 E63 H63 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35098 |
| By: | Quoc-Trieu Le; Mathieu El Dahaby |
| Abstract: | The US trade tariffs announced in April 2025 initially triggered declines in US equities, Treasury bonds and the US dollar. Equities and bonds have since recovered rapidly, but the dollar’s depreciation is proving more persistent and is pushing international investors to hedge their dollar currency risk. <p> Depuis mi-2023, Les droits de douane américains annoncés en avril 2025 ont provoqué initialement un recul des actions et des obligations souveraines américaines ainsi qu’une dépréciation du dollar. Si les actions et obligations ont depuis rapidement rebondi, la dépréciation du dollar semble plus persistante et incite les investisseurs internationaux à se couvrir contre le risque de change face au dollar. |
| Date: | 2026–04–13 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:econot:444 |
| By: | Sneha Agrawal |
| Abstract: | Uncertainty in the foreign value of the US dollar affects the US banking sector and therefore, the US real economy. In this paper, I propose a novel ‘Exchange Rate (ER) Uncertainty Channel’ and show the effects of increased volatility in the trade-weighted US dollar index on the US banking sector. Higher volatility in the exchange rate leads to retrenchment by foreign banks from the US syndicated loans market (SLM). This entails a loanable funds supply bottleneck for US banks trying to finance their loans through syndicates. US banks respond with tighter credit standards in an attempt to re-allocate scarce funds. In response to a 1 standard deviation increase in ER volatility, US banks’ net interest margin increase by 10 bps annualized, whereas balance sheet contract by 2-3 pp annualized. This is consistent with banks exerting market power in the loan market while simultaneously shrinking their balance sheet. Both the price and volume effects are stronger for US banks with greater exposure to the SLM as measured by their loans-to-interest-earning-assets ratio. Thus, volatility in the US dollar is a ‘global risk indicator’ that significantly affects US banking lending activity. |
| Keywords: | Exchange Rate Uncertainty; US Dollar; Syndicated Loans Market; Foreign Banks; Loanable Funds Supply Bottleneck; US Bank Lending Margin; Global Risk Indicator; Market Power |
| Date: | 2026–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/081 |
| By: | Keita Takemura (Bank of Japan); Yuko Iwamura (Bank of Japan); Makoto Kutsunugi (Bank of Japan) |
| Abstract: | Private equity (PE) funds and private debt (PD) funds have expanded their assets under management since the global financial crisis, especially in the United States. Recent developments have indicated subdued performance of PE funds, reflecting factors such as a decline in valuations of portfolio companies following the rise in foreign interest rates. Exit timelines for portfolio companies have also been extended. PD funds have demonstrated robust performance, supported by wide lending spreads; however, spreads are showing a tightening trend amid intensifying competition. Furthermore, while the portfolio companies of both PE and PD funds have maintained robust business performance, they are facing increasing interest payment burdens, warranting close attention to their creditworthiness. It is important to closely monitor future developments in this area, as Japanese banks and domestic institutional investors have increased their interconnectedness with PE and PD funds through investments and lending, which may have an impact on Japan's financial system. |
| Date: | 2026–04–21 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojrev:rev26e03 |
| By: | Inês Lindoso, Andreas Schrimpf, Vladyslav Sushko and Toma Tomov; Andreas Schrimpf; Vladyslav Sushko; Toma Tomov |
| Abstract: | The sensitivity of fund returns to exchange rates, once underlying asset returns are accounted for, provides a measure of funds' exposure to currency risk, ie their de facto hedge ratio. Bond funds have high and stable hedge ratios, though with some sensitivity to hedging costs. Equity funds' hedging is volatile and consistent with opportunistic currency speculation. In the run-up to April 2025, equity funds with low hedge ratios attracted most inflows and outperformed those with high hedge ratios, but this relation flipped following "Liberation Day". |
| Date: | 2026–04–22 |
| URL: | https://d.repec.org/n?u=RePEc:bis:bisblt:123 |
| By: | Tamar den Besten; Regis Barnichon; Diego R. Känzig; Aayush Singh |
| Abstract: | We study the macroeconomic effects of tariff policy using U.S. historical data from 1840–2024. We construct a narrative series of plausibly exogenous tariff changes – based on major legislative actions, multilateral negotiations, and temporary surcharges – and use it as an instrument to identify a structural tariff shock. Tariff increases are contractionary: imports fall sharply, exports decline with a lag, and output and manufacturing activity drop persistently. The shock transmits through both supply and demand channels. Prices rise in the full sample but fall post-World War II, a pattern consistent with changes in the monetary policy response and with stronger international retaliation and reciprocity in the modern trade regime. |
| JEL: | E30 F13 F14 F41 H20 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35102 |
| By: | Naoto JINJI; Shigenobu KAWAGUCHI |
| Abstract: | Using a comprehensive database of global sanctions, we examine how sanctions affect cross-border mergers and acquisitions (M&A) over 2006-2023. Aggregating deal-level M&A data to the investor-host-year level, we estimate sanction effects using an extended two-way fixed effects estimator in a staggered difference-in-differences framework. Baseline results show that sanctions are associated with an approximately 50% reduction in bilateral cross-border M&A deals from sanctioning to target countries. Event-time estimates further suggest that this negative effect persists and deepens over time. Cohort-specific estimates indicate substantial heterogeneity across sanction episodes, likely driven by variations in participating countries, sanction types, and other contextual features. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26032 |