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Working Paper
New Evidence on the US Excess Return on Foreign Portfolios
Bertaut, Carol C.; Curcuru, Stephanie E.; Faia, Ester; Gourinchas, Pierre-Olivier (2024-11-13)
We provide new estimates of the return on US external claims and liabilities using confidential, high-quality, security-level data. The excess return is positive on average, since claims are tilted toward higher-return equities. The excess return is large and positive in normal times but large and negative during global crises, reflecting the global insurance role of the US external balance sheet. Controlling for issuer's nationality, we find that US investors have a larger exposure to equity issued by Asia-headquartered corporations than reported in the aggregate statistics. Finally, equity ...
International Finance Discussion Papers , Paper 1398

Working Paper
Natural Resources and Global Misallocation
Santaeulalia-Llopis, Raul; Monge-Naranjo, Alexander; Sanchez, Juan M. (2015-07-07)
We explore the efficiency in the allocation of physical capital and human capital across countries. The observed marginal products can differ across countries because of differences in technology (i.e. production functions) and in distortions (i.e. differences in use of factors) across countries. To identify differences in technology, we use new data and propose a simple method to estimate output shares of natural resources, and thus adjust the estimated marginal products of physical and human capital. With a sample of 79 countries from 1970 to 2005, we find that the world has decidedly moved ...
Working Papers , Paper 2015-13

Working Paper
International Dollar Flows
Banegas, Ayelen; Judson, Ruth; Sims, Charles; Stebunovs, Viktors (2015-09-09)
Using confidential Federal Reserve data, we study the factors driving U.S. banknote flows between the United States and other countries. These flows are a significant component of capital flows in emerging market economies, where physical U.S. currency functions as a safe asset and precautionary demand for U.S. banknotes is a form of flight to quality. Prior to the global financial crisis, country-specific factors, including local economic uncertainty, largely explain the volume and heterogeneity of the flows. Since the crisis, global factors, particularly, global economic uncertainty, ...
International Finance Discussion Papers , Paper 1144

Commodity Financing Markets Shaken by Russian Invasion; Monitoring for U.S. Financial Stress
Cetina, Jill; McCormick, Matthew; Sagnanert, Pon (2022-04-14)
While volatility in commodity markets is not unusual, rapid and correlated price increases across many different types of commodities at once is much rarer.
Dallas Fed Economics

Working Paper
The Impact of Bretton Woods International Capital Controls on the Global Economy and the Value of Geopolitical Stability: A General Equilibrium Analysis
Restrepo-Echavarria, Paulina; Wright, Mark L. J.; Ohanian, Lee E.; Van Patten, Diana (2024-09-19)
This paper quantifies the positive and normative impacts of Bretton Woods capital controls on global economic activity. It applies a three-region DSGE model consisting of the U.S., Western Europe, and the Rest of the World (ROW) to measure de facto capital controls and analyze their effects. Counterfactual analyses show Bretton Woods controls significantly prevented ROW capital from flowing to the U.S., had large negative welfare effects on the U.S., raised welfare in the ROW, and increased global output. Why did the U.S. support controls, given lower welfare? By keeping capital in the ROW, ...
Working Papers , Paper 2020-042

Working Paper
Optimal Foreign Reserve Intervention and Financial Development
Davis, J. Scott; Huang, Kevin X. D.; Liu, Zheng; Spiegel, Mark M. (2025-11-13)
We document evidence of a U-shaped relationship between financial development and the adjustments of foreign exchange (FX) reserve holdings in response to a U.S. interest rate increase. Countries with intermediate levels of financial development sell reserves aggressively, while those with low or high development adjust little. Domestic interest rate responses are not systematically related to financial development. A model with borrowing constraints and foreign-currency debt rationalizes these findings: the associated pecuniary externality is maximized at intermediate levels of financial ...
Working Paper Series , Paper 2025-27

Working Paper
A Theory of the Global Financial Cycle
Davis, J. Scott; Van Wincoop, Eric (2021-09-09)
We develop a theory to account for changes in prices of risky and safe assets and gross and net capital flows over the global financial cycle (GFC). The multi-country model features global risk-aversion shocks and heterogeneity of investors both within and across countries. Within-country heterogeneity is needed to account for the drop in gross capital flows during a negative GFC shock (higher global risk-aversion). Cross-country heterogeneity is needed to account for the differential vulnerability of countries to a negative GFC shock. The key vulnerability is associated with leverage. In ...
Globalization Institute Working Papers , Paper 410

Report
International capital flow pressures
Goldberg, Linda S.; Krogstrup, Signe (2018-02-01)
This paper presents a new measure of capital flow pressures in the form of a recast exchange market pressure index. The measure captures pressures that materialize in actual international capital flows as well as pressures that result in exchange rate adjustments. The formulation is theory-based, relying on balance of payments equilibrium conditions and international asset portfolio considerations. Based on the modified exchange market pressure index, the paper also proposes a global risk response index, which reflects the country-specific sensitivity of capital flow pressures to measures of ...
Staff Reports , Paper 834

Working Paper
The Consequences of Bretton Woods’ International Capital Controls and the High Value of Geopolitical Stability
Restrepo-Echavarria, Paulina; Wright, Mark L. J.; Ohanian, Lee E.; Van Patten, Diana (2022-09-28)
This paper quantifies the positive and normative effects of international capital controls on global and regional economic activity under The Bretton Woods international financial system and thereafter. A three region, open economy, DSGE capital flows accounting framework consisting of the U.S., Western Europe, and the Rest of the World, is developed to identify capital controls and quantify their impact. We find these controls had large positive and normative effects by restricting international capital flows. Counterfactual analyses show world output would have been 0.6% higher had there ...
Working Papers , Paper 2020-042

Working Paper
Liquidity Traps, Prudential Policies, and International Spillovers
Bianchi, Javier; Coulibaly, Louphou (2021-07-27)
We present a simple open economy framework to study the transmission channels of monetary and macroprudential policies and evaluate the implications for international spillovers and global welfare. Using an analytical decomposition, we first identify three transmission channels: intertemporal substitution, expenditure switching, and aggregate income. Quantitatively, expenditure switching plays a prominent role for monetary policy, while macroprudential policy operates almost entirely through intertemporal substitution. Turning to the normative analysis, we show that the risk of a liquidity ...
Working Papers , Paper 780

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