Citation

Discussion Paper Details

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Title: International Currencies and Capital Allocation

Author(s): Matteo Maggiori, Brent Neiman and Jesse Schreger

Publication Date: June 2018

Keyword(s): Capital Flows, Exorbitant Privilege, Home Bias and reserve currencies

Programme Area(s): Financial Economics, International Macroeconomics and Finance, International Trade and Regional Economics, Macroeconomics and Growth and Monetary Economics and Fluctuations

Abstract: We establish currency as an important factor shaping global portfolios. Using a new security-level dataset, we demonstrate that investor holdings are biased toward their own currencies to such an extent that countries typically hold most of the foreign debt securities denominated in their currency. While large firms issue in foreign currency and borrow from foreigners, most firms issue only in local currency and do not directly access foreign capital. These patterns hold broadly across countries except for the United States, as foreign investors hold significant shares of US dollar bonds. The share of dollar-denominated cross-border holdings surged after 2008.

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Bibliographic Reference

Maggiori, M, Neiman, B and Schreger, J. 2018. 'International Currencies and Capital Allocation'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12973