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on International Finance |
| By: | David Beers; Obiageri Ndukwe; Joe Berry |
| Abstract: | The BoC–BoE database of sovereign debt defaults, published and updated annually by the Bank of Canada and the Bank of England, provides comprehensive estimates of stocks of government obligations in default. |
| Keywords: | Financial markets and funds management; Funds management; International markets and currencies; Financial system; Financial stability and systemic risk |
| JEL: | F F3 F34 G G1 G10 G14 G15 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocsap:26-48 |
| By: | Rafael Guerra; Gabriel Zelpo |
| Abstract: | This paper analyses the state-dependent effects of geopolitical risks on gold prices (i.e. the safe-haven role of gold), conditional on financial conditions. Geopolitical risks are often associated with tighter financial conditions. However, recent data reveal a decoupling be tween such shocks and more restrictive financial conditions, raising the question of how gold returns are affected by geopolitical shocks, conditional on the macro-financial environment. Using monthly data from 1990 to 2026, we find that increases in geopolitical risks– both geopolitical threats and realised events– increase gold returns, with stronger effects ob served during periods of loose financial conditions. We decompose this relationship into two mechanisms: (i) the credit and liquidity risk channel and (ii) the opportunity cost channel. Our findings indicate that the relationship operates most clearly through the first channel, suggesting that the key factor is investors’ capacity to rebalance, while the evidence for the second channel is less conclusive. Finally, we also find that the largest impact occurs when periods of loose financial conditions are compounded with periods of geopolitical escala tions, as seen in 2024–26. These insights highlight the relevance of understanding gold as a safe-haven asset amid complex macro-financial conditions. |
| Keywords: | gold prices, geopolitical risk, financial conditions |
| JEL: | G15 E44 F51 G12 Q02 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1380 |
| By: | Romain Meuwissen; Martin Rohár |
| Keywords: | Stablecoins, flow of funds, financial intermediation, financial stability, financial regulation, monetary architecture, dollarisation, international role of the euro, bank funding, digital money |
| JEL: | E42 E44 G28 O33 |
| Date: | 2026–10–05 |
| URL: | https://d.repec.org/n?u=RePEc:stm:wpaper:79 |
| By: | Cole, Shawn; Meh, Cesaire Assah; Mashwama, Fanele; Moelders, Florian |
| Abstract: | Private debt is an important form of corporate financing in emerging markets, but its investor returns are not well understood. This paper uses loan-level cash flow data from the International Finance Corporation to provide the first systematic evidence on realized returns across 4, 109 loans over more than 20 years, totaling about US$115 billion in 127 countries. Post–global financial crisis loans outperform both the JPMorgan Corporate Emerging Market Bond Index and U.S. Treasuries, with public market equivalents of 1.02 and 1.10, respectively, rising to 1.05 and 1.14 over the latest five years. Over 2002–24, the corresponding public market equivalents are 0.98 and 1.07, respectively, with global financial crisis–era vintages posting weaker performance relative to the JPMorgan Corporate Emerging Market Bond Index. Overall, returns are competitive with public markets. The paper also assesses financial performance more specifically within the most challenging markets: very low-income countries and fragile and conflict-affected states. Although default rates are higher in these markets, returns relative to public-market alternatives are statistically indistinguishable from those of the overall portfolio, suggesting that the International Finance Corporation priced default risk appropriately even in these markets. |
| Date: | 2026–10–05 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11479 |
| By: | Dennis Bonam; Dorinth van Dijk; Gavin Goy; Bing Zhu |
| Abstract: | We provide new evidence on the international spillover effects of US monetary policy through global commercial real estate (CRE) markets. Using a global VAR-X model that exploits both city- and country-level data, we account for spatial dependencies arising from cross-border investor ownership of CRE. A US quantitative easing shock leads to a persistent rise in CRE prices, both within and outside the US, and an expansion of credit, but mostly in the US. To interpret these findings, we develop an open economy New Keynesian model with CRE markets, which highlights the role of increased domestic demand for foreign CRE as a key transmission channel. Moreover, the model reveals that spillover effects can spill back to the US via trade linkages, amplifying the initial effects of US monetary policy. |
| Keywords: | monetary policy; commercial real estate; international spillovers; quantitative easing; global VAR-X model; New Keynesian model; |
| JEL: | C32 E32 E52 F42 R33 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:872 |
| By: | Banu, Elena; Vinci, Francesca; Best, Lea |
| Abstract: | This paper develops novel firm-level measures of shareholder geographical concentration and examines how elevated home bias in equity holdings affects investment resilience in the euro area. We combine security-level holdings data from the ECB’s Securities Holdings Statistics (SHS-S) with firm-level financial-statement data from Compustat, and document that equity ownership remains strongly concentrated domestically, with limited cross-border diversification within the monetary union. Using a difference-in-differences design around the COVID-19 shock, combined with a propensity score matching approach, we then analyse whether equity home bias shapes firms’ responses to macroeconomic disruptions. Against an average 16% decline in exports among the firms in the sectors most affected by the pandemic, those with more concentrated, home-biased shareholder bases reduced investment by 20% more than their more diversified peers after the shock. The effect operates mainly through weaker equity resilience, with equity declining by 13%, while sales and bank financing remain comparable. Our findings highlight the benefits of deeper cross-border equity integration for corporate resilience. JEL Classification: F36, G32, G15, D22, E44 |
| Keywords: | COVID-19 shock, cross-border equity integration, difference-in-differences, firm resilience, macroeconomic shocks, shareholder geographical concentration |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263296 |
| By: | Santiago Camara; Lawrence J. Christiano; Husnu Dalgic |
| Abstract: | We investigate the global transmission of US monetary policy shocks. The existing literature finds that a US monetary contraction causes a contraction in economic activity not only in the US but also abroad. This sharply contradicts the traditional Mundell-Fleming view. Much of the existing literature refers to frictions in international financial markets as reasons for the failure of the traditional view. Instead, we argue that trade is key for understanding the transmission of US monetary policy shocks. |
| Keywords: | Monetary policy spillovers, Trade channel, Small open economy DSGE models, Exchange rates. |
| JEL: | E44 E52 F31 F32 F41 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_782 |
| By: | Bahaj, Saleem; Reis, Ricardo |
| Abstract: | By controlling the scarcity of an offshore parallel currency, policymakers can manage capital flows and steer the exchange rate. This is an alternative policy to setting the rate of a Tobin tax. However, its fiscal implications are distinct, and this paper lays them out. Having a parallel currency creates both seigniorage and liquidity revenues. The two revenues have different sizes and different Laffer curves, both of which vary with the regime for the exchange rate, with liquidity policies, and with the size of the offshore market. Quantitatively, the fiscal footprint of offshore money management is small and the Laffer curve is flat, boosting the chances that it can be used independently of fiscal pressures. |
| Keywords: | integrated policy framework;CNH;financial transaction taxes;fiscal-monetary interactions |
| JEL: | F31 F33 E51 |
| Date: | 2026–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:141134 |
| By: | Husnu C. Dalgic; Brittany Almquist Lewis; Andrea Modena |
| Abstract: | We show that strengthening creditor rights can exacerbate financial instability, par ticularly under long debt maturities and low collateral volatility. We build a model of financial intermediaries that raise financing by pledging collateral in the sale and repurchase (repo) market. In the short term, increasing collateral pledgeability makes repo creditors safer and reduces debt rollover risk; however, it also expands long-term debt capacity and leverage, ultimately heightening run risk. This instability is a dis tinct feature of environments with long-term liabilities and low-volatility assets, where market discipline fails to constrain post-policy leverage. We test our model’s predic tions by exploiting the 2005 BAPCPA bankruptcy reform, which expanded creditor protections via repo safe harbors. Using hand-collected data on dealer repo collateral, we confirm that while the law enhanced collateral pledgeability, it fueled short-term leverage and precipitated sharper de-leveraging during the downturn |
| Keywords: | repo, collateral, safe harbor, bankruptcy, leverage, dealer banks, bank runs. |
| JEL: | G01 G21 G23 G28 G33 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_783 |
| By: | Haonan Li (Graduate School of Economics, Waseda University); Yasuyuki Todo (Graduate School of Economics, Waseda University, and Research Institute of Economy, Trade and Industry) |
| Abstract: | Existing measures of geopolitical risk are country-level and assume that all investors face the same risk in a given destination. This paper constructs a directional, bilateral geopolitical risk index that captures how the domestic media of each source country report on geopolitical conflicts involving each destination country. Using GDELT news data, the index covers more than 200 source and destination countries at a monthly frequency. We combine the index with project-level data on greenfield FDI and product-level trade data, and exploit variation across source countries for the same destination and period while controlling for destination-specific shocks. Source countries whose media place greater emphasis on a destination's geopolitical risk subsequently announce more greenfield projects there: a one-standard-deviation increase in the index is associated with a 7% increase in new projects. This suggests that firms may read such coverage as a signal of future market-access frictions and localize production in advance. Consistent with this interpretation, the association is concentrated in projects serving the host market and in sectors that depend on local demand, and is absent among politically aligned country pairs. By contrast, higher risk coverage is followed by a short-lived decline in imports, driven by severe conflicts, while exports do not respond. |
| Keywords: | geopolitical risk, media, foreign direct investment, trade, GDELT |
| JEL: | F14 F21 F23 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2615 |