Annual Conference

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International Macroeconomics, Money & Banking

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May 2021

Parallel Digital Currencies and Sticky Prices

Harald UHLIG, Taojun XIE
The rise of digital currencies may result in domestic parallel currencies. Their exchange rate shocks will present a new challenge for monetary policy. We analyze these issues in a New Keynesian framework, where  rms can set prices in one of the available currencies. Price rigidity translates a on...
Keywords: private money, cryptocurrency, digital currency, currency choice, mon- etary policy
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Annual Conference

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International Macroeconomics, Money & Banking, Senior Fellows/Fellows

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May 2021

Local Currency Bond Returns, Foreign Investors and Portfolio Flows in Emerging Markets

Giorgio VALENTE, Jason WU, Inhwan SO
Foreign investors play a key role in EME sovereign bond markets, in part because their portfolio flows are sensitive to bond returns and are therefore pro-cyclical in nature. This note discusses the implications of the framework proposed by So et al. (2019) which incorporates the risk that arises fr...
Keywords: Bond excess returns, Portfolio flows, institutional investors, Conditional asset pricing
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Annual Conference

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International Macroeconomics, Money & Banking, Senior Fellows/Fellows

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May 2021

International Equity and Debt Flows to Emerging Market Economies: Composition, Crises, and Controls

Shang-Jin WEI, Chang MA
Standard models of capital flows to emerging market economies focus on debt flows and a pecuniary externality. However, by offering better risk sharing, international equity flows can render such externality unimportant, yet many economies fail to attract equity investment in a large quantity. We pr...
Keywords: capital controls, Institutional Quality
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Annual Conference

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International Macroeconomics, Money & Banking

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May 2021

Capital Controls and Income Inequality

Mark M. SPIEGEL, Zheng LIU, Jingyi ZHANG
We examine the implications of capital flows and capital account policy for income distribution in a small open economy with heterogeneous agents and financial frictions. Banks engage in costly intermediation between household savings and entrepreneur investment. Our model predicts that inflow surge...
Keywords: capital flows, income distribution, Heterogeneous agents, Financial Frictions, small open economy.
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Annual Conference

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International Macroeconomics, Money & Banking

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May 2021

Scrambling for Dollars: International Liquidity, Banks and Exchange Rates

Charles ENGEL, Javier BIANCHI, Saki BIGIO
We develop a theory of exchange rate fluctuations arising from financial institutions’ demand for dollar liquid assets. Financial flows are unpredictable and may leave banks “scrambling for dollars.” Because of settlement frictions in interbank markets, a precautionary demand for dollar reserv...
Keywords: exchange rates, liquidity premia, monetary policy
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