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on International Finance |
| By: | Nina Boyarchenko; Leonardo Elias |
| Abstract: | The global corporate nonfinancial bond market is both a large investment asset class and a vital source of funding for nonfinancial firms. With $19 trillion outstanding at the end of 2024, a broad portfolio of corporate bonds would be expected to be well diversified. Yet, in 37 percent of months between 1998 and 2024, more than 80 percent of bonds in the ICE Global Bond Indices—a portfolio with over 10, 000 constituents spanning diverse industries, credit ratings, and regions—moved in the same direction, suggesting a large degree of synchronization. In this post, we introduce the global credit factor, which proxies for the global price of risk in international corporate bond markets. The global credit factor creates a global credit cycle in bond risk premia and generates predictable comovement in bond prices. |
| Keywords: | global financial cycle; credit cycles; corporate bond returns |
| JEL: | F30 G15 G12 |
| Date: | 2026–05–19 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:103269 |
| By: | Kenjiro Kataoka (Bank of Japan); Mashu Namiki (Bank of Japan); Masabumi Shimada (Bank of Japan); Yoshihiro Takada (Bank of Japan) |
| Abstract: | In response to the announcement of U.S. reciprocal tariffs in April 2025, the foreign exchange (FX) market experienced rapid fluctuations. This paper aims to analyze the structural characteristics of transactions in Japan's FX market, based on the results of the Triennial Central Bank Survey conducted by the Bank for International Settlements (BIS) in April 2025. The analysis considers various perspectives such as instrument, currency, and counterparty. Additionally, this paper examines the factors driving FX turnover in Japan, comparing it to other FX markets in Asia. |
| Keywords: | Foreign exchange; Turnover; Market structure |
| JEL: | F31 G12 G15 |
| Date: | 2026–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojrev:rev26e08 |
| By: | Laura DeMane; Angela Garcia; Josie Gillette; Tanya Grover; Henry Haw; Hudson Hinshaw; Nyssa Kim; Andrew Loucky; Andrew H. McCallum |
| Abstract: | The Treasury International Capital (TIC) system offers comprehensive data on U.S. cross-border securities holdings and transactions, facilitating a detailed understanding of U.S. capital flows. For users new to TIC data, a key fact shapes how to use these statistics: holdings data have been collected for a longer historical period and are measured with greater precision than transactions data. |
| Date: | 2026–05–21 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:103332 |
| By: | Mintrapan Chaeng-lum; Nuwat Nookhwun; Jettawat Pattararangrong |
| Abstract: | This paper examines factors behind the persistence of dominant currency pricing and the effectiveness of de-dollarization policies in the context of emerging market economies. Using a transaction-level customs dataset of Thailand spanning 2007–2024, we document the dominance of dollar invoicing in Thai export transactions, despite a gradual rise in baht invoicing. Such dollar dominance is largely explained by firm and industry characteristics, including imported input exposure, strategic complementarities and inertia in invoicing currency choice. Meanwhile, the introduction of the Local Currency Settlement Framework (LCSF) between Thailand and partner countries including Malaysia and Indonesia moderately reduces dollar reliance, with effects being heterogeneous across firms and industries. Notably, we find that dollar-denominated liabilities do not influence invoicing choice, suggesting some disconnection between operational and financial hedging. |
| Keywords: | Invoicing currency choice; Dollar dominance; Dollar-denominated debt; Local currency settlement framework; Firm-level trade; Thai exports |
| JEL: | F14 F3 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:250 |
| By: | Daniel Marcel Kaat (University of Groningen); Alexander Raabe (Asian Development Bank) |
| Abstract: | How do international investors adjust portfolios in response to biodiversity risk? Using monthly data on investment fund portfolios, we show that the 2021 Kunming Declaration led fund managers to reallocate portfolios from high-biodiversity risk countries to less risky ones, while ultimate fund investors remained unresponsive. Fund managers reduced exposures to extremely high biodiversity risk without seizing low biodiversity risk as an opportunity for profit, characterizing biodiversity as downside risk factor. Investment funds drive cross-country spillovers as the reallocation triggers significant capital flows benefiting countries in the same geographic region, but outside of a fund’s hitherto established portfolio. Using a novel measure of legal action to protect nature, we demonstrate that countries adopting more legal acts are partially shielded from funds reducing their exposure to high-biodiversity risk countries. |
| Keywords: | biodiversity;risk;portfolio reallocation;cross-border capital flows;spillovers;investment fund;Kunming Declaration |
| JEL: | F30 G10 G20 Q50 |
| Date: | 2026–05–27 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:022593 |
| By: | Iñaki Aldasoro; Sebastian Doerr; Haonan Zhou |
| Abstract: | We establish a causal link between liquidity regulation and a lower cost of bank wholesale funding. For identification, we use pre-determined variation in banks' liquidity coverage ratio (LCR) in a difference-in-differences setup. Granular instrument-level data allow us to carefully control for any observable and unobservable time-varying factors at the creditor, instrument type, and macroeconomic levels. We find that banks with greater LCR exposure see a steeper decline in their wholesale funding costs. Consistent with seminal theoretical papers on bank liquidity risk, we provide novel evidence that wholesale funding costs decline by more for longer-maturity instruments and that banks shift from short to longer maturity liabilities. Our results support the argument that bank regulation can– at least partly– offset its costs to intermediaries through cheaper wholesale funding. |
| Keywords: | liquidity coverage ratio, liquidity risk, Basel III, money market funds, market discipline |
| JEL: | G21 G23 G28 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1352 |
| By: | Johanna Tiedemann; Olivier Bizimana; Kiswendsida Tougouma |
| Abstract: | This paper empirically reassesses monetary policy transmission in emerging and frontier market economies in Sub-Saharan Africa (SSA EFMs). Using the identification approach of Romer and Romer (2004), we construct measures of monetary policy shocks and provide evidence on transmission mechanisms in the region. We show that monetary policy shocks pass through quickly to short-term market interest rates and lead to persistent increases in bank deposit and lending rates in most economies, indicating an operative bank-based interest rate channel. By contrast, exchange rates generally do not appreciate and, in many cases, depreciate following monetary tightening, consistent with the exchange rate puzzle—suggesting that interest rate hikes alone may be insufficient to systematically influence exchange rate movements. We also find that contractionary monetary policy reduces both output and inflation, with effects that are modest and notably weaker than in more developed economies. In addition, we find that transmission is stronger in economies that have adopted, or are transitioning toward, inflation-targeting regimes. Finally, we show that cross-country heterogeneity in transmission largely reflects differences in monetary policy transparency, financial development, and, to a lesser extent, fiscal dominance. |
| Keywords: | Monetary policy transmission; inflation; Financial markets; Sub-Saharan Africa |
| Date: | 2026–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/102 |
| By: | Kakuho Furukawa (Bank of Japan); Komei Suzuki (Bank of Japan) |
| Abstract: | This paper investigates the impact of flood disasters on banks' financial conditions. Using granular, municipality-level data from Japan, we exploit exogenous variation in the timing and location of floods to identify how the effects of these flood events are transmitted to banks' balance sheets. We find that flood exposure impairs asset quality and profitability, evidenced by elevated non-performing loan ratios and credit cost ratios alongside reduced returns on assets. However, the estimated magnitudes of the impairments are economically small relative to their average level, suggesting that the impact of floods on banks' financial conditions has been quantitatively limited thus far. Simultaneously, banks expand credit supply in affected regions following floods, possibly reflecting heightened credit demand of firms and households, driven by reconstruction and liquidity needs. In addition, we observe that the responses of variables are heterogeneous: banks exposed to regions where land prices decline sharply following floods experience larger declines in financial performance and a more muted expansion of credit. These observations are further pronounced for banks with a high proportion of their total lending secured by real estate. Our findings suggest that the depreciation of collateral value can also be an important transmission channel of climate-related physical risks to the banking sector. |
| Keywords: | natural disasters; climate change; bank stability; credit supply; collateral channel |
| JEL: | G21 Q54 R33 |
| Date: | 2026–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojwps:wp26e08 |
| By: | De Jonghe, Olivier; Lewis, Daniel |
| Abstract: | We propose a new model in which relationship-specific effects or shocks are identified in a bipartite network under mild covariance restrictions, generalizing the influential Abowd et al. (1999) framework. For example, separate demand shocks are identified for each bank from which a firm borrows. We show how previous approaches break down when confronted with such heterogeneity, while our novel identification strategy yields a simple estimator that is consistent and asymptotically normal, under weaker network density assumptions than previous approaches. The methodology performs well in empirically-calibrated simulations. We apply our approach to identify relationship-level credit demand and supply shocks for thousands of firms and banks across nine Euro-area countries and three distinct economic episodes. We formally reject the Abowd et al. (1999) assumptions in nearly every country-period and show that within-firm/bank shock variation is of comparable scale to between firm/bank variation. We document considerable bias in Abowd et al. (1999) style estimates and associated regressions, while finding significant deleterious effects of the post-2022 monetary contraction on exposed firms. We highlight novel heterogeneity in the transmission of monetary policy. JEL Classification: C33, C58, E44, G21, G30 |
| Keywords: | corporate credit, demand shock, higher moments, identification, networks, networks, supply shock, two-way fixed effects |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263238 |
| By: | Katharina Bergant; Andres Fernandez; Mr. Ken Teoh; Martin Uribe |
| Abstract: | Employing large language models to analyze official documents, we construct a comprehensive record of daily changes in de jure restrictions on cross-border flows worldwide since the 1950s. Our analysis uncovers the wide array of instruments used to regulate cross-border financial flows over the past seven decades, leveraging the fine granularity of the new measures to characterize cross-country and time-series variation across eight categories of restrictions —- distinguishing by flow, direction, instrument type, intensity, and overall policy stance. We exploit the high frequency nature of the new data to document novel patterns in the use of these restrictions, as well as their relationship to crises and political economy determinants. |
| Keywords: | Cross-border flows; Controls; Large language models |
| Date: | 2026–05–15 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/098 |