Government forecasts of GDP growth and budget balances are generally more over-optimistic than private sector forecasts. When official forecasts are especially optimistic relative to private forecasts ex ante, they are more likely also to be over-optimistic relative to realizations ex post. For...

Geoeconomic pressure--the use of existing economic relationships by governments to achieve geopolitical or economic goals--is a prominent feature of global power dynamics. This paper introduces a methodology using large language models (LLMs) to systematically identify the application of and...

Geoeconomics is the use of a country's economic strength to exert influence on foreign entities to achieve geopolitical or economic goals. We discuss how concepts of power in the political science and economics literature can be used to guide research on geoeconomics. Economic threats as a form...

We estimate the causal effect of sovereign default on the equity returns of Argentine firms. We identify this effect by exploiting changes in the probability of Argentine sovereign default induced by legal rulings in the case of Republic of Argentina v. NML Capital. We find that a 10% increase...

It is surprisingly difficult to find economic variables that strongly co-move with exchange rates, a phenomenon codified in a large literature on "exchange rate disconnect." We demonstrate that a variety of common proxies for global risk appetite, which did not co-move with exchange rates prior...

The modern notion of an international currency involves use in areas of international finance and trade that extend well beyond central banks' coffers. In addition to their important roles as foreign exchange reserves, international currencies are most frequently used to denominate corporate and...

The covered interest rate parity (CIP) condition is a fundamental arbitrage relationship in international finance. In this chapter, we review its breakdown during the Global Financial Crisis and its continued failure in the subsequent decade. We review how to measure CIP deviations, discuss the...

We establish that global portfolios are driven by an often neglected aspect: the currency of denomination of assets. Using a dataset of $27 trillion in security-level investment positions, we demonstrate that investor holdings are biased toward their own currencies to such an extent that each...

We quantify the difference in the convenience yield of U.S. Treasuries and the bonds of near default-free sovereigns by measuring the gap between the FX swap-implied dollar yield paid by foreign governments and the U.S. Treasury dollar yield. We call this wedge the "U.S. Treasury Premium." We...

Nominal debt provides consumption-smoothing benefits if it can be inflated away during recessions. However, we document empirically that countries with more countercyclical inflation, where nominal debt provides better consumption-smoothing, issue more foreign-currency debt. We propose that...