nep-mst New Economics Papers
on Market Microstructure
Issue of 2026–05–04
two papers chosen by
Thanos Verousis, Vlerick Business School
  1. This paper explores factors driving the internationalization of Renminbi (RMB) trading, using data from the 2025 BIS Triennial Survey of global foreign exchange turnover. We analyze both short-term (three-year) trading growth and long-term RMB turnover levels across jurisdictions. Unlike recent studies that struggled to identify sizable effects of real or financial links with China, we find that financial factors, especially banking links with China, play a key role, even over short horizons. These financial links reinforce market-driven "convergence" patterns, whereby RMB trading adjusts based on its under- or over-representation in total currency trading in a given location. However, this convergence is slower than previously reported, while financial drivers have grown in importance. For the long-term geographical distribution of RMB trading, financial links with China, including policy-driven variables such as qualified investor licenses, dominate, though trade links also contribute significantly. We also find that bilateral trade effects are stronger for cross-border RMB trading, and we report new insights on the dynamics in Asian financial centers and trading in spot versus derivatives. By Juliana Robbert; Vladyslav Sushko; Frank Westermann
  2. Liquidity Stress Tests for Fixed-Income Mutual Fund: an application for Chile By Tamara Gallardo; Fernando Martínez; Matías Muñoz; Félix Villatoro
  1. By: Juliana Robbert; Vladyslav Sushko; Frank Westermann
    Keywords: geography of currency trading, foreign exchange, renminbi internationalization, cross-border banking
    JEL: F31 F33 G15 G18
    Date: 2026–04
    URL: https://d.repec.org/n?u=RePEc:bis:biswps:1345
  2. By: Tamara Gallardo; Fernando Martínez; Matías Muñoz; Félix Villatoro
    Abstract: We implement a stress testing methodology for fixed-income Chilean mutual funds, while also documenting the evolution of these funds’ liquidity and providing evidence regarding managers’ liquidation strategy. Our main results are as follows. First, we find that mutual funds satisfy the resilience condition following a liquidity stress test. However, the selling needs by funds may cause significant pressure in certain sectors of financial fixed income markets, especially for bank and corporate bonds. Second, we observe a generalized decline in liquidity measures across the fixed-income fund industry, which has been driven by a sharp fall in exposure to money market instruments. Third, while our evidence is not conclusive regarding the liquidation strategy favored by Chilean mutual funds at all times, our results tend to suggest that managers have met redemption requests by selling liquid assets (money-market instruments and sovereign bonds), which is consistent with a partial waterfall liquidation strategy.
    Date: 2026–03
    URL: https://d.repec.org/n?u=RePEc:chb:bcchwp:1071
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