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on International Finance |
| By: | Ambrocio, Gene; Bui, Dien Giau; Hasan, Iftekhar; Lin, Chih-Yung |
| Abstract: | We demonstrate that foreign institutional ownership (FIO) is associated with stronger stock return sensitivity to the Global Financial Cycle (GFC), indicating greater global co-movement among stocks selected by FIOs compared to those not selected. We conjecture that this may be because (i) FIOs tend to pick ex-ante very similar firms when investing abroad, or (ii) FIO investments itself makes firms ex-post more similar and more sensitive to the GFC. We find evidence in support of both hypotheses: that the increased co-movement may be due to FIO's selecting more homogeneous firms and that the sensitivity to the GFC increases after FIO investment. However, we find no significant difference between firms that have longer exposure to FIO investors and those that have only recently obtained FIO investment. Our results indicate that diversification gains are left on the table when FIOs select firms to invest in. |
| Keywords: | Foreign institutional ownership, Global Financial Cycle, co-movement, diversification gains |
| JEL: | E44 F21 F30 G15 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofrdp:335890 |
| By: | Ṣebnem Kalemli-Özcan; Can Soylu; Muhammed A. Yildirim |
| Abstract: | We analyze how tariff uncertainty affects exchange rates, motivated by the U.S. dollar’s depreciation after the 2025 tariff announcements. Standard macro-trade models predict that unilateral tariffs appreciate the implementing country’s currency, but we show this result can be overturned by policy uncertainty. We build a two-country general equilibrium model with risk-averse agents and segmented financial markets, where tariff volatility enters uncovered interest parity through a risk-premium wedge. Higher tariff uncertainty increases precautionary savings and risk premia, leading to immediate currency depreciation even as tariffs rise. Quantitatively, the model replicates the size and timing of the observed dollar depreciation episode dynamics. |
| JEL: | E0 F3 F40 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34728 |
| By: | Joseph Abadi (Federal Reserve Bank of Philadelphia); Jesús Fernández-Villaverde (University of Pennsylvania, NBER, and CEPR); Daniel Sanches (Federal Reserve Bank of Philadelphia) |
| Abstract: | We present a micro-founded monetary model of the world economy to study international currency competition. Our model features “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 international monetary system’s dynamics under several counterfactual scenarios. |
| Keywords: | Dominant currency, international monetary system, strategic complementarities, history dependence |
| JEL: | E42 E58 G21 |
| Date: | 2026–01–28 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:26-003 |
| By: | Caroline Flammer; Thomas Giroux; Geoffrey Heal |
| Abstract: | Mobilizing private capital at scale is critical for financing sustainable development, particularly in emerging and developing economies (EMDEs), where capital is most needed. We conduct a global survey of senior investment decision-makers across a broad spectrum of capital providers, including asset managers, pension and sovereign wealth funds, development finance institutions, philanthropic investors, and others. The survey provides novel evidence on investors’ risk-return expectations, risk perceptions, and investment practices in EMDEs and in blended finance structures. We document four main findings. First, conditional on investor type, return expectations in EMDEs are comparable to those in developed markets, suggesting that categorical exclusions of EMDE assets might be inefficient. Second, investors’ dominant risk perceptions—particularly currency and political risks—are poorly aligned with the de-risking tools commonly employed in blended finance. Third, prevailing approaches to evaluating blended finance rely on both input- and outcome-based metrics, yet with limited measurement of financial and impact additionality. Fourth, our results highlight organizational and informational frictions, rather than unattractive financial fundamentals, as key barriers to scaling sustainable investing in EMDEs. |
| JEL: | F3 G1 G2 H4 O1 Q01 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34746 |
| By: | Piotr Lewandowski (Institute for Structural Research); Karol Madoń (Institute for Structural Research); Albert Park (Asian Development Bank) |
| Abstract: | This paper develops a task-adjusted, country-specific measure of workers’ exposure to artificial intelligence (AI) across 108 countries. Building on Felten et al. (2021), we adapt the artificial intelligence occupational exposure (AIOE) index to worker-level data from the Programme for the International Assessment of Adult Competencies (PIAAC) and extend it globally using comparable surveys and regression-based predictions, covering about 89% of global employment. Accounting for country-specific task structures reveals substantial cross-country heterogeneity: workers in low-income countries exhibit AI exposure levels roughly 0.8 United States (US) standard deviations below those in high-income countries, largely due to differences in within-occupation task content. Regression decompositions attribute most cross-country variation to information and communications technology intensity and human capital. High-income countries employ the majority of workers in highly AI-exposed occupations, while low-income countries concentrate in less exposed ones. Using two PIAAC cycles, we document rising AI exposure in high-income countries, driven by shifts in within-occupation tasks rather than employment structure. |
| Keywords: | job tasks;occupations;AI;technology;skills |
| JEL: | J21 J23 J24 |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:022156 |
| By: | KANO, Kazuko; KANO, Takashi |
| Abstract: | This paper studies how currency conversion can disrupt relative prices by impairing the unit-ofaccount function of money. We examine Okinawa’s 1972 conversion from the U.S. dollar to the Japanese yen, following the collapse of a previously shared unit-of-account triggered by the Nixon shock. Using wholesale price data for perishable goods, we showthat relative prices exhibited sharp changes despite flexible prices. By contrast, Okinawa’s 1958 currency conversion used a single, clearly announced rate and left relative prices stable. The comparison highlights the importance of institutional clarity for a shared unit of account and stable relative prices. |
| Keywords: | Unit of Account, Monetary Singleness, Relative Price Distortion, Currency Conversion, Okinawa Reversion |
| JEL: | E42 E31 D40 N15 |
| Date: | 2026–01–24 |
| URL: | https://d.repec.org/n?u=RePEc:hit:hiasdp:hias-e-155 |
| By: | Alex Haag |
| Abstract: | Global competition in artificial intelligence (AI) has intensified in recent years. Some assessments emphasize US exceptionalism, while others argue that China is eroding US dominance. By contrast, the progress of other advanced foreign economies (AFEs) receives far less attention. |
| Date: | 2025–10–06 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:102359 |
| By: | Mucai Lin (Huaqiao University); Zhiwu Hong; Linlin Niu |
| Abstract: | China's monetary policy employs a dual-target framework, where announcements explicitly adjust one target while silently signaling the other. Existing single-shock models ignore this embedded dual-shock structure. We propose identification via ordered heteroskedasticity: loud-news shocks exhibit higher variance than silent-news shocks. Applied to Chinese Treasury yields, our model outperforms single-shock specifications. Silent news---particularly price signals within quantity announcements---provides potent forward guidance that predicts future policy adjustments. Both news types trigger significant and persistent responses in yields and money-market rates. These findings highlight the role of silent news in central bank communication and deepen understanding of China's dual-target policy transmission. |
| Keywords: | Monetary Policy Announcements; Silent News; Heteroskedasticity; Dual-Shock Identification |
| JEL: | E43 E52 E58 |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:wyi:wpaper:002615 |
| By: | Christopher Clayton; Matteo Maggiori; Jesse Schreger |
| Abstract: | We discuss the conditions under which global imbalances, such as China being a large foreign creditor and the United States being a large foreign debtor, might also generate power imbalances. We highlight possible theoretical channels and empirical measures that the future literature could investigate in a full treatment of this topic. |
| JEL: | F0 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34717 |
| By: | Yuriy Gorodnichenko; Maurice Obstfeld |
| Abstract: | The monumental task of rebuilding postwar Ukraine requires early planning and identification of growth strategies. The earlier accession of Eastern European countries to the European Union and NATO offers a template that relies on massive foreign direct investment and public structural funds. This approach helps to raise incomes directly and can create a virtuous circle where capital deepening facilitates technological upgrades and repatriation of war refugees, which in turn stimulate more investment. We show theoretically that the government can refine this strategy by internalizing positive externalities from having a higher capital stock: Investment in physical capital relaxes borrowing constraints (thus allowing more capital inflows) and raises wages (thus encouraging more Ukrainian refugees to return home). |
| JEL: | E2 F2 F5 P2 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34715 |