Cross-Border Currency Exposures

Abstract

This paper provides a dataset on the currency composition of the international investment position for a group of 50 countries for the period 1990-2017. It improves available data based on estimates by incorporating actual data reported by statistical authorities and refining estimation methods. The paper illustrates current and new uses of these data, with particular focus on the evolution of currency exposures of cross-border positions.

Exchange rates and political uncertainty: the Brexit case

“…In this subsection, we consider an alternative set of weights to construct multilateral exchange rates and interest rates. Specifically, we use weights based on the currency composition of the international investment position of the UK, as provided by Benetrix et al (2019) in their dataset on cross-border currency exposures of individual countries over the period 1990-2017. In particular, we consider the shares of the UK's external assets denominated in US dollars, euros and Japanese yen as of 2015, as well as the shares of the UK's external liabilities denominated in these currencies in the same year, and calculate currency weights by taking an average of asset shares and liability shares for each currency (these weights are then rescaled so that they sum to 1).…”

“… In panel B, the dependent variable (labelled as ROW$$$ {}^C $$$) is the log multilateral exchange rate of the BP against the US dollar, the euro and the Japanese yen, calculated as a weighted average using cross‐border currency exposures (Benetrix et al . 2019) as weights. Here, $$$ \pi $$$ is the Leave probability; $$$ q $$$ is the probability of the referendum being held, taking value $$$ {q}_0 $$$ before the Referendum Act and 1 afterwards; $$$ {i}^{\ast }-i $$$ is the difference between the foreign (weighted by currency exposures) and domestic (UK) interest rates.…”

The Simpler the Better: Measuring Financial Conditions for Monetary Policy and Financial Stability

“…We let the exchange rate have a different role for indices constructed for advanced and emerging economies. Since emerging economies own a non-negligible part of their debt in US dollars (Bénétrix et al, 2019), when the local currency weakens against the dollar, the cost of debt expressed in national currency rises and financial conditions tighten. For advanced economies we let the exchange rate work through a traditional trade channel, so that for these countries a weakening of the domestic currency results in an easing of the FCI.…”

Asian Economic Integration Report 2022:

“…Coordinated Portfolio Investment Survey. https://data.imf.org/cpis (accessedSeptember 2021).33This analysis uses the estimatedBénétrix et al (2019) data set on currency composition weights for 2017 and applied those weights to the 2020 values of the International Investment Position, which reports the total external assets and liabilities across all types of instruments, for selected Asia and Pacific economies.…”