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on International Finance |
| By: | Rey, Hélène; Stavrakeva, Vania |
| Abstract: | We study the anatomy of the international portfolio finance network. As global financial linkages have become denser over time, cross-border portfolio equity positions have grown in importance relative to debt for Emerging markets and Advanced economies. Using the framework developed by Stavrakeva and Rey (2024), we construct a novel proxy of daily foreign investor holdings in both equity and long-term sovereign debt markets across 32 currency areas. Leveraging an instrumental variable strategy, we identify an effect of foreign equity ETF inflows on exchange rates and local stock market prices. Our high-frequency proxy enables us to interpret episodes of turbulence in international finance. It should prove useful to assess how persistent the current shocks to the international financial system are likely to be. |
| JEL: | F30 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20799 |
| By: | Allen, Cian; Bems, Rudolfs; Boer, Lukas; Moussa, Racha |
| Abstract: | US dollar appreciations can inflict sizable negative cross-border spillovers. We investigate such spillovers from flight-to-safety shocks and the accompanying “global dollar cycle†. Our results show that negative real sector spillovers from US dollar appreciations fall disproportionately on emerging markets. In contrast, effects on advanced economies are small and short-lived. Emerging market commodity exporters historically experienced larger negative spillovers than commodity importers, reflecting a strong negative link between the US dollar and commodity prices. In terms of policies, more anchored inflation expectations can mitigate the initial negative spillovers, while more flexible exchange rates can speed up the subsequent economic recovery. |
| JEL: | E50 F30 F41 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20371 |
| By: | Manger, Mark; Mihalyi, David; Panizza, Ugo; Rescia, Niccolò; Trebesch, Christoph; Wong, Ka Lok |
| Abstract: | This paper introduces the African Debt Database (ADD) - a new, comprehensive dataset that traces both domestic and external debt instruments at a granular level. The main innovation is a detailed mapping of Africa’s domestic debt markets, drawing on rich, new data extracted from government auction reports and bond prospectuses. The database covers over 50, 000 individual government loans and securities issued by 54 African countries between 2000 and 2024, amounting to a total of USD 6.3 trillion in debt. For each instrument, it provides harmonized micro-level information on currency, maturity, interest rates, instrument type, and creditor. The data reveal the growing dominance of domestic debt in Africa — albeit with substantial cross-country variation. Four stylized facts stand out: (i) the rapid expansion of domestic debt markets, especially in middle-income countries; (ii) the wide dispersion in borrowing costs and real interest rates; (iii) large cross-country differences in maturity structures and associated rollover risks; and (iv) a rising debt-service burden, particularly due to international bonds. Generally, this project shows that debt transparency is both feasible and valuable, even in data-scarce environments. |
| Keywords: | Africa |
| JEL: | F34 H63 O55 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20747 |
| By: | Bacchetta, Philippe; Davis, J. Scott; van Wincoop, Eric |
| Abstract: | Global non-US banks have significant dollar exposure both on and off their balance sheet. We develop a model to analyze their adjustment to dollar funding shocks, whether from reduced direct lending or external dollar shortages. The model provides insight into banks’ responses through borrowing, lending, and FX swap positions, as well as the impact on their net worth, their probability of default and CIP deviations. Implications of the model are confronted with data on the response of non-US global banks to major dollar funding shocks. We examine the benefits from buffering these shocks through central bank dollar swap lines or local currency lending by the central bank. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20497 |
| By: | Arteaga-Garavito, María José; Colacito, Ric; Croce, Mariano; Yang, Biao |
| Abstract: | We develop novel high-frequency indices that measure climate attention across a wide range of developed and emerging economies. By analyzing the text of over 23 million Tweets published by leading national newspapers, we find that a country experiencing more severe climate news shocks tends to see both an inflow of capital and an appreciation of its currency. In addition, brown stocks experience large and persistent negative returns after a global climate news shock if located in highly exposed countries. A risk-sharing model in which investors price climate news shocks and trade consumption and investment goods in global markets rationalizes these findings. |
| Keywords: | Trade; Currencies |
| JEL: | F3 F4 G1 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20607 |
| By: | Javier Bianchi; Sebastian Horn; Giovanni Rosso; César Sosa-Padilla |
| Abstract: | This paper studies how geopolitical risk shapes financial fragmentation and international risk-sharing, using bilateral official lending data from 1910 to 2024. We document that when geopolitical risk is high, bilateral lending increasingly follows geopolitical alignment. Because geopolitically aligned countries experience more synchronized shocks, this fragmentation limits the effectiveness of international risk-sharing. To rationalize these patterns, we introduce geopolitical considerations into a limited-commitment model of sovereign borrowing. The model shows that, even with non-discriminatory default, higher geopolitical tensions redirect international lending toward allied countries and weaken risk-sharing. |
| JEL: | F34 G01 H63 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35389 |
| By: | Zhou, Sili; Ma, Chang; Rebucci, Alessandro |
| Abstract: | Chinese private portfolio equity outflows, though small compared to other Chinese outflows, are growing rapidly because of capital account liberalization and capital flight. Using granular stock-holding data on Qualified Domestic Institutional Investor (QDII) mutual funds, we identify a nascent financial channel of international transmission of Chinese monetary policy to world stocks. Event study analysis around monetary policy announcement days reveals that monetary policy tightening depresses returns of country equity indexes and individual U.S. stocks with QDII fund exposure relative to non-exposed stocks. The results are robust to controlling for the real transmission channel of Chinese monetary policy and other confounders. The effect is driven by smaller and less liquid firms, but not by China-concept stocks or those highly exposed to China's macroeconomic shocks. We also find that the results are driven by household portfolio rebalancing from more to less risky assets following the announcement. |
| JEL: | F30 G10 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20672 |
| By: | Ostry, Daniel; Lloyd, Simon; Corsetti, Giancarlo |
| Abstract: | TThis paper provides econometric evidence on how exchange rates respond to tariffs. We construct a new tariff-shock database, which captures tariff-related announcements, threats and implementations by the U.S., China, the Euro Area and Canada between 2018 and 2020, and in 2025. Our shock measure accounts for both the size of tariff rates and their economic relevance. Over the 2018-2020 period, we show that exchange rates reacted to U.S. tariff shocks in systematically different ways depending on retaliation: the U.S. dollar (USD) appreciated if the tariff was imposed unilaterally, but depreciated if other countries threatened to retaliate. In 2025, when nearly all U.S. tariff actions were met with retaliatory threats, the USD again depreciated. In contrast to 2018-2020, however, long-maturity U.S. Treasury yields rose in 2025, instead of fell—consistent with an interpretation of ‘Liberation Day’ as a reserve-currency shock. This may reflect that U.S. tariff actions in 2025 were significantly larger, more frequent and targeted a broader set of countries. |
| JEL: | F13 F31 F51 G15 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20452 |
| By: | Sai Ma; Viktors Stebunovs; Judit Temesvary |
| Abstract: | We develop a Transmission Growth-at-Risk (TGaR) framework that incorporates foreign financial vulnerabilities as predictors of U.S. downside growth risk. We distinguish financial conditions, which measure current tightness in credit markets, from financial vulnerabilities, which measure structural fragilities that can amplify shocks. Elevated foreign financial vulnerabilities are associated with lower U.S. growth-at-risk, with transmission through both trade linkages and dollar integration channels. Asset valuation pressures and financial sector leverage abroad have the largest estimated amplification effects. Financial conditions primarily affect near-term tail risk, while foreign vulnerabilities weigh on U.S. GDP at a medium-term horizon. Out of sample, adding foreign vulnerabilities raises the predictive score by 53 percent at the 8-quarter horizon. Crisis-episode evidence points to the same interpretation. These findings show that monitoring foreign financial vulnerabilities is important for gauging U.S. growth prospects. |
| Keywords: | growth-at-risk; financial vulnerabilities; international transmission; risk assessment |
| Date: | 2026–07–17 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgif:103562 |
| By: | Broner, Fernando; Martín, Alberto; Meyer, Josefin; Trebesch, Christoph |
| Abstract: | How do shifts in the global balance of power shape the world economy? We propose a theory of alignment-based “hegemonic globalization, †built on two central premises: countries differ in their preferences over policies (such as the rule of law or regulatory frameworks) and trade between any two countries increases with the degree of alignment in these policies. Hegemons promote policy alignment and thereby facilitate deeper trade integration. A unipolar world, dominated by a single hegemon, tends to support globalization. However, the transition to a multipolar world can trigger fragmentation, which is particularly costly for the declining hegemon and its closest allies. To test the theory, we use international treaties as a proxy for alignment and compile a novel “Global Treaty Database, †covering 77, 000 agreements signed between 1800 and 2020. Consistent with the theory, we find that hegemons account for a disproportionate share of global treaty activity and that treaty-signing is a leading indicator of increasing bilateral trade. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20339 |