Annual Conference

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International Macroeconomics, Money & Banking

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May 2024

The anatomy of a peg: lessons from China's parallel currencies

Saleem BAHAJ, Ricardo REIS
China's current account transactions use an offshore international currency, the CNH, that co-exists as a parallel currency with the mainland domestic currency, the CNY. The CNH is freely used, but by restricting its exchange for CNY, the authorities can enforce capital controls. Sustaining these co...
Keywords: Chinese monetary policy, Gresham’s law, Goodhart’s law, Money markets, RMB
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Annual Conference

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International Macroeconomics, Money & Banking

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May 2024

Exorbitant Privilege Gained and Lost Fiscal Implications

Zefeng CHEN, Zhengyang JIANG, Hanno LUSTIG, Stijn VAN NIEUWERBURGH, Mindy Xiaolan ZHANG
We study three centuries of U.K., U.S. and Dutch fiscal history. When a country is the dominant safe asset supplier, it can issue more debt than what is justified by its future primary surpluses. This pattern holds for the Dutch Republic in the 17th and 18th, the U.K. in the 18th and 19th, and the U...
Keywords: bond pricing, fiscal policy, term structure, convenience yield, exorbitant privilege
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Annual Conference

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International Macroeconomics, Money & Banking

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May 2024

Estimating the Costs of Capital Market Policy Distortions: Evidence from Overseas Listed Chinese Firms

Qu FENG, Shang-Jin WEI, Guiying Laura WU, Mengying YUAN
Both capital controls and domestic capital market regulations impose a cost on firms. By comparing Chinese firms listed at home and abroad, that takes into account the endogenous nature of the IPO locational choices, we estimate that for those overseas listed Chinese firms, entrepreneurs' willingnes...
Keywords: Overseas IPO, capital control, self-selection
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Annual Conference

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International Macroeconomics, Money & Banking

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May 2024

Global Flight to Safety, Business Cycles, and the Dollar

Martin BODENSTEIN, Pablo Cuba BORDA, Nils GORNEMANN, Ignacio PRESNO, Andrea PRESTIPINO, Andrea RAFFO, Albert QUERALTO
We develop a two-country macroeconomic model that we fit to a set of aggregate prices and quantities for the U.S. and the rest of the world. In addition to a standard array of shocks, the model includes time variation in agents’ preference for safe bonds. We allow for a component of this time vari...
Keywords: Econometrics and economic theory, International economics, Macroeconomic activity
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Annual Conference

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International Macroeconomics, Money & Banking

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May 2024

Foreign Discount in International Corporate Bonds

Zhe GENG
In the dollar-denominated corporate bond market, 42% of bonds with an amount outstanding of USD 5.9 Trillion are issued by non-US firms. Despite the increasing importance of cross-border financing, foreign issuers are paying an extra premium of 22 bps, compared with their US counterparts. A similar ...
Keywords: international corporate bonds, foreign discount, foreign squeeze, economic political uncertainty, home bias
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