Annual Conference

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International Macroeconomics, Money & Banking

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May 2022

Currency Volatility and Global Technological Innovation

Po-Hsuan HSU, Mark P. TAYLOR, Zigan WANG, Qi XU
We investigate the real effects of foreign exchange (FX) volatility on technological innovation. Using a 32-market, three-decade sample, we show that heightened FX volatility associates with significantly lower firm-level R&D expenditures, patents granted, and forward citations. The negative FX ...
Keywords: Foreign Exchange Volatility, Technological Innovation, Patents, R&D
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Annual Conference

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International Macroeconomics, Money & Banking

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May 2023

Currency Risk Under Capital Controls

Xiang FANG, Sining LIU, Yang LIU
Currencies of emerging markets with stricter capital controls have lower average returns. These return spreads cannot be explained by traditional currency risk factors. The effect of capital controls is concentrated in debtor countries and is not present in currencies of advanced economies. The high...
Keywords: Capital control, Currency risk, Risk premia, Sudden stop, Emerging markets
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Annual Conference

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International Macroeconomics, Money & Banking, Senior Fellows/Fellows

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May 2022

Currency Risk in the Long Run

Pasquale Della CORTE, Giorgio VALENTE, Can GAO, Daniel P.A. PREVE
We study the long-horizon risk profile of a currency strategy, whereby a US investor earns excess returns by entering in an unhedged long position in a foreign long-term bond funded at the domestic risk-free rate. After showing the drivers of the strategy returns, we derive and estimate their long-h...
Keywords: Currency risk, Long-term bonds, Predictability, Long-term investments
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Annual Conference

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International Macroeconomics, Money & Banking

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May 2019

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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Investment Finance, Senior Fellows/Fellows

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May 2022

Currency Management by International Fixed Income Mutual Funds

Clemens SIALM, Qifei ZHU
Investments in international fixed income securities are exposed to significant currency risks. We collect novel data on mutual fund currency derivatives and document that around 90% of U.S. international fixed income funds use currency forwards to manage their foreign exchange exposure. Funds’ cu...
Keywords: currency risk, forward contracts, mutual funds, fixed-income securities, performance
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