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on International Finance |
| By: | Giancarlo Corsetti; Keith Kuester; Gernot J. Müller; Sebastian Schmidt; Ben Schumann |
| Abstract: | We confront the notion that flexible exchange rates insulate countries from external disturbances with new evidence for the euro area (EA) and 20 of its neighbors. Using high-frequency data, we first establish that countries with flexible exchange rates (“floats”) let their currencies depreciate in response to EA monetary policy shocks, while“pegs” raise interest rates. Yet at business cycle frequency, these depreciations do not translate into insulation: floats contract just as much as pegs—not only in response to monetary policy shocks but also to other shocks originating in the EA. This result appears puzzling in light of received wisdom, but we show that it can be rationalized within a state-of-the-art HANK model and flesh out the underlying transmission channels. |
| Keywords: | Exchange-rate regime, Insulation, External shock, Exchange-rate disconnect, Monetary Policy |
| JEL: | F41 F42 E31 |
| Date: | 2026–05–05 |
| URL: | https://d.repec.org/n?u=RePEc:bdp:dpaper:0096 |
| By: | J. Scott Davis |
| Abstract: | The U.S. net foreign asset position—the value of foreign assets held by U.S. residents minus the value of U.S. assets held by foreign residents—has fallen sharply since the 2008 Global Financial Crisis. |
| Keywords: | equity prices; international economics; United States |
| Date: | 2024–11–12 |
| URL: | https://d.repec.org/n?u=RePEc:fip:d00001:99107 |
| By: | Enrique Martínez García; Mark A. Wynne |
| Abstract: | During a presentation and discussion hosted by the Global Institute last month, Steve Kamin discussed how tariffs, volatility and evolving payment technologies are challenging—but not yet dislodging—the dollar’s position as a reserve currency at the center of the global financial system. |
| Keywords: | dollar; payment technology; international economics |
| Date: | 2025–12–31 |
| URL: | https://d.repec.org/n?u=RePEc:fip:d00001:102538 |
| By: | Bax, Karoline; Ćehajić, Aida |
| Abstract: | We examine whether banks incorporate firm-level biodiversity risk into their lending decisions. Using a large sample of syndicated loans matched to firm-level biodiversity risk measures, we document that borrowers with higher biodiversity risk face significantly higher loan spreads. Evidence on loan volumes is weaker, suggesting that banks primarily adjust along the pricing margin rather than restricting credit supply. To capture biodiversity risk exposure, we develop a novel text-based indicator derived from corporate disclosures that incorporates the contextual content of environmental risk. To strengthen identification, we exploit firm-level environmental violations as shocks to environmental credibility. In a stacked difference-in-differences framework, we show that such violations increase the sensitivity of loan pricing to biodiversity risk. Overall, our findings provide evidence that biodiversity risk is a financially material dimension of environmental risk in credit markets. JEL Classification: G21, Q51, Q57 |
| Keywords: | bank-firm relationship, biodiversity risk, financial stability, syndicated loans, textual analysis |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263232 |
| By: | Philippe Bacchetta; J. Scott Davis; Eric Van Wincoop |
| Abstract: | Starting in late 2007, the Federal Reserve, in partnership with a few major foreign central banks, began offering central bank dollar liquidity swap lines as an important liquidity backstop. |
| Keywords: | central banks; dollar; swap lines |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:fip:d00001:101899 |
| By: | Lutz Kilian; Michael D. Plante; Alexander W. Richter |
| Abstract: | Notwithstanding the attention geopolitical events in oil markets have attracted, we find that geopolitical oil price risk is unlikely to generate sizable recessionary effects. |
| Keywords: | energy; oil prices; international economics |
| Date: | 2025–02–18 |
| URL: | https://d.repec.org/n?u=RePEc:fip:d00001:99566 |
| By: | J. Scott Davis; Pon Sagnanert |
| Abstract: | The purchasing power parity theory of exchange rates is easily understood: A basket of goods should have the same price in different markets when that price is expressed in a common currency. However, the relationship between market-determined exchange rates and inflation shocks is not always straightforward. In the short run, central bank transparency can become an important determinant. |
| Keywords: | exchange rates; international economics; inflation; monetary policy |
| Date: | 2024–09–03 |
| URL: | https://d.repec.org/n?u=RePEc:fip:d00001:98757 |
| By: | Domenech Palacios, Mar; Ehrmann, Michael; Ferrari Minesso, Massimo; Mehl, Arnaud; Comazzi, Fabio |
| Abstract: | We revisit the debate on the effectiveness of central bank communication on exchange rates, contrasting a skeptical view, which holds that communication neither moves exchange rates nor influences them in the desired direction, with an optimistic view that it does. Using nearly 100 official ECB statements on exchange rates made during its monetary policy press conferences since 2002, we show that the ECB tends to mention the exchange rate when the real effective exchange rate deviates from its equilibrium value, whereas journalists’ questions are mainly responsive to the nominal exchange rate. Studying the effects of these mentions, our findings by and large support the skeptical view: after controlling for monetary policy shocks, exchange rate communication has limited immediate effects on the euro exchange rate, which fade quickly. Effectiveness is particularly limited when interest rates are at their effective lower bound. JEL Classification: E52, E58, F31, O24 |
| Keywords: | central bank communication, exchange rates, high frequency identification, natural language processing |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263229 |
| By: | Laurent Ferrara (SKEMA Business School, UniCA - Université Côte d'Azur); Aikaterini Karadimitropoulou (Department of Economics, University of Piraeus); Athanasios Triantafyllou (Audencia Business School) |
| Abstract: | We investigate the macroeconomic effects of commodity price uncertainty by explicitly accounting for comovement across commodity markets. Using quarterly realized volatilities of major agricultural, metals, and energy commodity prices, we estimate a hierarchical dynamic factor model that decomposes uncertainty into a global component, common to all commodities, and group-specific components capturing sectoral uncertainty. The estimated uncertainty factors are then embedded into country-specific Structural VAR models to assess the dynamic macroeconomic responses to uncertainty shocks through impulse response functions. We focus in particular on business investment and exports across a panel of advanced and emerging economies. Our results show that a global commodity price uncertainty shock generates sizable and persistent recessionary effects on investment and trade worldwide. Benchmark comparisons indicate that this global commodity uncertainty shock produces larger and more persistent macroeconomic contractions than standard uncertainty measures. Importantly, we show that, once global uncertainty is accounted for, commodity-specific uncertainty shocks exhibit differentiated effects. Increases in agricultural and metals price uncertainty lead to contractionary outcomes, whereas energy-specific uncertainty shocks generate positive short-run responses in investment and exports. These findings provide new empirical evidence that oil price uncertainty can be expansionary when it reflects sector-specific dynamics rather than global demand uncertainty. Overall, our framework offers a novel way to disentangle "bad" and "good" commodity price uncertainty. |
| Keywords: | Commodity prices, uncertainty shocks, comovement, recessionary effects, positive macroeconomic impact |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05607366 |
| By: | Meri Papavangjeli (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Joint Vienna Institute); Lorena Skufi (Bank of Albania & Metropolitan University of Tirana); Adam Gersl (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | This study investigates the relationship between lending standards and credit dynamics in Albania. Using a unique bank-level dataset from the Bank Lending Standards Survey, we differentiate between newly issued domestic-currency and foreign-currency loans to non-financial corporations. We construct a quantitative index of lending standards using detailed bank-level and macro-financial data. The analysis reveals that tightening internal credit criteria, driven by macroeconomic uncertainty, regulatory constraints, or risk aversion, significantly reduces new business lending, weakening bank–firm relationships. In addition, we assess the role of monetary and macroprudential policies, finding that policy changes affect domestic-currency and foreign-currency credit differently, amplifying the impact of supply-side tightening. Firms face limited ability to offset these constraints through alternative lenders, reflecting low substitutability in the Albanian credit market. The effects of tightening are persistent and intensify during economic stress, yielding important implications for monetary transmission, macroprudential policy effectiveness, financial stability, and crisis resilience in small, bank-based economies. |
| Keywords: | Corporate credit growth; lending standards; credit supply shocks; bank lending behavior; firm financing |
| JEL: | E44 G21 G32 C33 E51 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2026_05 |