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Asset Prices, Leverage and Portfolio Rebalancing Drive Global Capital Flows Cycle


Abstract: The amount of leverage—borrowed funds relative to the value of underlying assets—increases for risky holdings during downturns, motivating their ultimate sale to achieve a more secure financial position. The opposite occurs during upswings, as risky assets gain favor.

Keywords: Capital Flows; Currency;

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File(s): File format is text/html https://www.dallasfed.org/research/economics/2021/1130
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Provider: Federal Reserve Bank of Dallas

Source: Dallas Fed Economics

Publication Date: 2021-11-30