Annual Conference

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International Macroeconomics, Money & Banking

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May 2019

Working Paper AC19P1078

International Bank Lending Channel of Monetary Policy

Davide FURCERI, Silvia ALBRIZIO, Sangyup CHOI, Chansik YOON
How does domestic monetary policy in systemic countries spillover to the rest of the world? This paper examines the transmission channel of domestic monetary policy in the cross-border context. We use exogenous shocks to monetary policy in systemically important economies, including the U.S., and lo...
Keywords: Monetary policy spillovers;International bank lending channel, Cross-border banking flows, Global financial cycles, Local projections
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Annual Conference

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International Macroeconomics, Money & Banking

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May 2019

Working Paper AC19P1018

Global Currency Hedging with Common Risk Factors

Steven J. RIDDIOUGH, Wei OPIE
We develop a novel method to dynamically hedge foreign exchange exposure in international equity and bond portfolios. The method exploits the time-series predictability of currency returns, which we show emerges from exploiting a forecastable component in global factor returns. The hedging strategy ...
Keywords: global currency hedging, currency risk factors, currency returns, international portfolio diversification, mean-variance optimization
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Annual Conference

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International Macroeconomics, Money & Banking

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May 2019

Working Paper AC19P1046

Currency Mispricing and Dealer Balance Sheets

Pasquale Della CORTE, Gino CENEDESE, Tianyu WANG
We relate currency mispricing originating from the breakdown of covered interest rate parity to the dealer balance-sheet constraints resulting from the post-crisis financial regulation. Using a unique data set on contract-level foreign exchange derivatives with disclosed counterparty identities, we ...
Keywords: exchange rates, dollar basis covered interest parity condition, arbitrage opportunities
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Annual Conference

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International Macroeconomics, Money & Banking

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May 2019

Working Paper AC19P1015

Bond Risk Premia and the Exchange Rate

Ilhyock SHIM, Boris HOFMANN, Hyun Song SHIN
In emerging market economies, currency appreciation goes hand in hand with compressed sovereign bond spreads, even for local currency sovereign bonds. This yield compression comes from a reduction in the credit risk premium. Crucially, the relevant exchange rate involved in yield compression is the ...
Keywords: Bond Spread, Capital Flow, Credit Risk, Emerging Market, exchange rate
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Senior Fellows/Fellows

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Senior Fellows/Fellows

Working Paper MWP19032

Policy News and Stock Market Volatility

Steven J. DAVIS, Scott R. BAKER, Nicholas A. BLOOM, Kyle KOST
We create a newspaper-based Equity Market Volatility (EMV) tracker that moves with the VIX and with the realized volatility of returns on the S&P 500. Parsing the underlying text, we find that 72 percent of EMV articles discuss the Macroeconomic Outlook, and 44 percent discuss Commodity Markets....
Keywords: stock market, equity returns, volatility, uncertainty, government policy
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