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on International Finance |
| By: | Menzie D. Chinn; Hiro Ito; Robert N. McCauley |
| Abstract: | Do central banks rebalance their currency shares? The answer matters because the dollar’s predominant role in large official reserve holdings means that widespread rebalancing requires central banks to buy (sell) a depreciating (appreciating) dollar, stabilising its value against other major currencies. We hypothesise that larger reserve holdings have led central banks to approach their investment more systematically and to make rebalancing in the face of exchange rate changes the norm. We illustrate the choice with two polar case studies: the US clearly does not rebalance its small FX reserves; Switzerland does rebalance its very large reserves, so that changes in exchange rates do not move its currency allocation. Our hypothesis finds partial support in global aggregated data. They reject both no rebalancing and full rebalancing and point to emerging market economies as the source of the aggregate result. We also test for rebalancing with panel data and find that our sample economies on average again behave in intermediate fashion, partially but not fully rebalancing. However, when observations are weighted by the size of reserves, the panel analysis finds full rebalancing. A variety of control variables and splits of the panel sample do not alter the thrust of these findings. Central banks rebalance their FX reserves extensively but not uniformly. |
| JEL: | F31 F42 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29190&r= |
| By: | Judit Temesvary; Andrew Wei |
| Abstract: | We study how U.S. banks' exposure to the economic fallout due to governments' response to Covid-19 in foreign countries has affected their credit provision to borrowers in the United States. We combine a rarely accessed dataset on U.S. banks' cross-border exposure to borrowers in foreign countries with the most detailed regulatory ("credit registry") data that is available on their U.S.-based lending. We compare the change in the U.S. lending of banks that are more vs. less exposed to the pandemic abroad, during and after the onset of Covid-19 in 2020. We document strong spillover effects: U.S. banks with higher foreign exposures in badly "Covid-19-hit" regions cut their lending in the United States substantially more. This effect is particularly strong for longer-maturity loans and term loans and is robust to controlling for firms’ pandemic exposure. |
| Keywords: | Cross-border exposure; Bank lending; Bank capital; Bank balance sheet liquidity |
| JEL: | F34 F65 G15 G21 |
| Date: | 2021–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-56&r= |
| By: | Luigi Bonatti; Andrea Fracasso; Roberto Tamborini |
| Abstract: | We present a review of the channels through which the US fiscal and monetary post-pandemic policies may affect the euro area. US spillovers will likely be relevant and worth considering while setting the policy stance in the euro area, at a crossroad between economic global recovery and global overheating. A key role is going to be played by global financial markets, their appetite for open-ended stimulative policies and fears of hard disinflation scenarios affecting central banks' ability to keep the economies on the recovery path and inflation expectations anchored. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwprg:2021/09&r= |