Changing patterns of cross-border portfolio holdings
Maggiori and al. use a new dataset of global mutual fund positions starting in early 2000s and covering about 97% of the $16 trillion of US mutual fund assets and more than 70 percent of the additional $16 trillion domiciled in the remaining countries in the data. They find that around 2008 there was a drastic shift in cross-border portfolio holdings away from euro-denominated bonds and toward dollar-denominated bonds.
International Currencies and Capital Allocation
Authors: Matteo Maggiori, Brent Neiman, Jesse Schreger
From: Harvard University – University of Chicago – Columbia University
The US perspective
Global capital flows have become more sensitive to U.S. monetary policy since the break in Q1 of 2009, argue Gambacorta and al. “We estimate that a 25 basis-point (bp) decline in the federal funds rate is associated with a quarterly growth rate of cross-border bank lending that is 80 bp higher before the break versus 202 bp higher afterward.”
U.S. Monetary Policy as a Changing Driver of Global Liquidity
By: Stefan Avdjiev, Leonardo Gambacorta, Linda S. Goldberg, and Stefano Schiaffi – Federal Reserve Bank of NY
The Eurozone perspective
Steiner and al. use a portfolio balance model of the exchange rate to show that that a strict monetary target for the aggregate euro area, combined with a full-allotment policy for National Central Banks’s, eventually creates euro-break-up expectations on the side of investors. The result is a capital flight within the eurozone similar to the one that took place during the winter of 2011/2012.
Exit Strategies, Capital Flight and Speculative Attacks: Europe’s Version of the Trilemma
Authors: Andreas Steiner, Sven Steinkamp, Frank Westermann
From: University of Groningen – Osnabrück University
