Long before the introduction of the euro there was an active debate among researchers, policy-makers and financial market participants over how the new European money would change the relative roles of currencies in the international monetary and financial system. A widely held view was that the...

In the past few years there has been a large increase in portfolio capital flows into emerging markets, mostly fueled by mutual funds and other institutional investors. Based on a simple variance ratio test, this paper finds that emerging stock markets as a group experienced a sharp increase in...

Global open-ended mutual funds are an increasingly important source of capital for emerging market economies (EMEs). Mutual funds, however, have a greater propensity than other overseas investors to change their holdings of EME bonds following changes in macroeconomic conditions. This paper...

This paper compares the behaviour of banks with that of non-bank financial institutions (NBFIs) in the intermediation of portfolio flows to emerging market economies (EMEs). Our analysis shows that investment funds, a key component of NBFIs, tend to reduce their exposure to EMEs more than banks...

In this paper we investigate the price, volatility and micro-level effects of central bank swap lines during the 2020 pandemic. These policies lowered the ceiling on covered interest rate parity violations and reduced volatility following settlement of swap line auctions. We then combine...

We study the impact of global volatility on equity portfolio flows of institutional investors worldwide. We find that their equity allocations decrease in times of high volatility; retail investors are net buyers. The effect is present in developed and emerging markets, is economically stronger...

We empirically characterize how China is internationalizing the Renminbi by selectively opening up its domestic bond market and propose a dynamic reputation model to understand China's internationalization strategy. While previously closed to foreign investors, China has recently allowed major...

We isolate a U.S. dollar currency premium by comparing corporate bonds issued in the dollar and the euro by firms o utside t he U .S. a nd e uro a rea. We make s everal empirical observations that dissect the perceived advantage of borrowing in the dollar. First, while the dollar dominates...

Over the last decade foreign bond portfolio positions in US dollar assets have risen above the reciprocal US investor positions in foreign currencies. In periods of increased economic uncertainty, institutional investors hedge their international bond positions, which creates a net hedging...

We document the exchange rate hedging channel that connects country-level measures of net external financial imbalances with exchange rates. In times of market distress, countries with large positive external imbalances (e.g. Japan) experience domestic currency appreciation, and crucially,...