International Currencies and Capital Allocation

By Matteo Maggiori, Brent Neiman, Jesse Schreger. Journal of Political Economy, 2020

255 citations recorded by the source corpus.

We establish currency as an important factor shaping global portfolios. Using a new security-level data set, we demonstrate that investor holdings are biased toward their own currencies to such an extent that countries typically hold most of the foreign-debt securities denominated in their currency. While large firms issue in foreign currency and borrow from foreigners, most firms issue only in local currency and do not directly access foreign capital. These patterns hold broadly across countries except for the United States, as foreign investors hold significant shares of US dollar bonds. The share of dollar-denominated cross-border holdings surged after 2008.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/ecddb550b96b35c5bd4e7278160cb257a523394f

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Citations in the corpus

Exchange Arrangements Entering the Twenty-First Century: Which Anchor will Hold?* (2019, background): “…developed here suggests the possibility that many central banks may be accumulating outsized quantities of “safe” advanced country bonds, partly as a substitute for the declining effective levels of exchange controls (see Farhi, Gourinchas, and Rey 2011; Obstfeld 2013; Farhi and Maggiori 2018).”