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 provide a comprehensive account of the evolution of the currency composition of sovereign and corporate external borrowing by emerging markets over the past fifteen years. We show that a higher reliance on foreign currency debt by the corporate sector is associated with higher sovereign...

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