Dollar Safety and the Global Financial Cycle

By Zhengyang Jiang, Arvind Krishnamurthy, Hanno Lustig. Social Science Research Network, 2020

116 citations recorded by the source corpus.

We develop a model of the global financial cycle with one key ingredient: the international demand for safe dollar assets. The model matches patterns of dollar borrowing and currency mismatch, the U.S. external balance sheet, exorbitant privilege, spillovers of the U.S. monetary policy to the rest of the world, and the dollar as a global risk factor. In doing so, we lay out a novel transmission mechanism through which the U.S. monetary policy affects the currency market and the global economy. The global financial cycle is a dollar cycle.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/29e6c2f52161a4746e88452fe411911e546d4025

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Sebnem Kalemli‐ozcan
2. F. Murtin
3. Luis Angeles
4. Laura Alfaro
5. Amparo Castello Climent
6. Rafael Doménech
7. Nico Voigtländer
8. H. Voth

In Finance

1. Sebnem Kalemli‐ozcan
2. Laura Alfaro

Citations in the corpus

• U.S. Monetary Policy and International Risk Spillovers (2019, background): “Bruno and Shin (2015), Gabaix and Maggiori (2015), Miranda-Agrippino and Rey (2019), and Jiang et al. (2019) develop models that center on balance sheet currency currency mismatches, there can be real effects such as a persistent decline in investment and output during large depreciation events…”