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Working Paper
Home Country Interest Rates and International Investment in U.S. Bonds
We analyze how interest rates affect cross-border portfolio investments. Data on U.S. bond holdings by foreign investors from 31 countries for the period 2003 - 2016 and a large variety in movements in interest rates in these countries provide for a unique way to analyze shifts in investment behavior in response to interest rates. We find that low(er) interest rates, now prevailing in many advanced countries, lead to greater investment in general into the United States, with the effects generally driven by investment in (higher yielding) corporate bonds, rather than in Treasury bonds. In ...
Discussion Paper
"Low-For-Long" Interest Rates and Portfolio Shifts in Advanced Foreign Economies
For the past several years, interest rates in many advanced economies have been at historic lows. Although low interest rates have helped support recovery in these economies, persistently low rates have also raised concerns about increased incentives for risk-taking by investors to achieve higher yields.
Discussion Paper
"Low-For-Long" Interest Rates and Portfolio Shifts in Advanced Foreign Economies
For the past several years, interest rates in many advanced economies have been at historic lows. Although low interest rates have helped support recovery in these economies, persistently low rates have also raised concerns about increased incentives for risk-taking by investors to achieve higher yields.
Discussion Paper
What Happened to Foreign Direct Investment in the United States?
This note demonstrates that the slowdown in FDIUS can be explained by two special factors: 1) a handful of corporate restructurings that are purely tax- and regulation-driven and affect the equity portion of direct investment flows, and 2) a reversal in intercompany debt flows that are often the result of corporate tax planning.
Working Paper
Searching for Yield Abroad : Risk-Taking Through Foreign Investment in U.S. Bonds
The risk-taking effects of low interest rates, now prevailing in many advanced countries, "search-for-yield," can be hard to analyze due to both a paucity of data and challenges in identification. Unique, security-level data on portfolio investment into the United States allow us to overcome both problems. Analyzing holdings of investors from 36 countries in close to 15,000 unique U.S. corporate bonds between 2003 and 2016, we show that declining home-country interest rates lead investors to shift their portfolios toward riskier U.S. corporate bonds, consistent with "search-for-yield". We ...
Working Paper
The Replacement of Safe Assets: Evidence from the U.S. Bond Portfolio
The expansion in financial sector "safe" assets, largely in the form of structured products from the U.S. and the Caribbean, in the lead-up to the global financial crisis has by now been fairly well documented. Using a unique dataset derived from security-level data on U.S. portfolio holdings of foreign securities, we show that since the crisis, it is mostly the foreign financial sector that appears to have met U.S. demand for safe and liquid investment assets by expanding its supply of debt securities. We also find a strong negative correlation between the foreign share of the U.S. ...
Working Paper
Portfolio diversification and the cross-sectional distribution of foreign investment
In this paper I explore the role of portfolio diversification in explaining the distribution of foreign investment across countries. I capture the portfolio diversification motive by a measure of country-specific riskiness, ?covariance risk?, which I construct as how countries' growth rates covary with the stochastic discount factor of a representative international investor. My key new empirical finding is a strong and significant correlation between this new measure of country riskiness and foreign investment allocations. Less risky countries, i.e. countries whose growth rates are more ...
Discussion Paper
U.S. Corporations' Repatriation of Offshore Profits: Evidence from 2018
We investigate how companies with large holdings of cash abroad have used those funds following the Tax Cuts and Jobs Act (TCJA), which eliminated prior tax disincentives on the repatriation of foreign earnings.
Discussion Paper
U.S. Corporations' Repatriation of Offshore Profits
We investigate how companies with large holdings of cash abroad have used those funds following the Tax Cuts and Jobs Act, which eliminated prior tax disincentives on the repatriation of foreign earnings.