The International Role of the U.S. Dollar

Bertaut, Carol C.; Beschwitz, Bastian von; Curcuru, Stephanie E.

doi:10.17016/2380-7172.2998

Cited by 23 publications

(20 citation statements)

References 4 publications

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“…In our sample, the proportion of total holdings held in US-dollar denominated funds as of November 2021 was 65%, compared to 31% of the funds domiciled in the US. It is also higher than other commonly used measures of dollar dominance, such as the proportion of foreign exchange reserves, cross-border banking liabilities, and foreign currency debt, all around 60% (Bertaut et al, 2021b). Moreover, the financial infrastructures and practices underpinning AMC lead to a global segmentation of asset markets, which privileges the dollar as the safe assets (as it does with treasury bonds in the closed economy, e.g.…”

Section: Reduced Threat Of Exit and Financial Stabilitymentioning

confidence: 79%

“…reserves, cross-border banking liabilities, and foreign currency debt, all around 60% (Bertaut et al, 2021b). Moreover, the financial infrastructures and practices underpinning AMC lead to a global segmentation of asset markets, which privileges the dollar as the safe assets (as it does with treasury bonds in the closed economy, e.g.…”

Section: Reduced Threat Of Exit and Financial Stabilitymentioning

confidence: 99%

“…However, they are likely to be exacerbated in the case of EM given their subordinate position in international money and financial markets. As discussed in the literatures on currency hierarchy, dollar dominance, and the global financial cycle (Bertaut et al, 2021b; de Paula et al, 2017; Kaltenbrunner, 2015; Miranda-Agrippino and Rey, 2020), the hierarchical structure of the international monetary system, and the dominant role of the US dollar as the global funding currency, make currencies lower down the hierarchy particularly sensitive to changes in global liquidity conditions. In addition, relative to financial markets in advanced capitalist economies, capital and foreign exchange markets in EM remain thinner and less liquid, which increases their vulnerability to fire sales.…”

Section: Reduced Threat Of Exit and Financial Stabilitymentioning

confidence: 99%

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International financial subordination in the age of asset manager capitalism

Bonizzi,

Kaltenbrunner

2024

Environ Plan A

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The rise of asset managers as key nodes of financial intermediation has been one of the most fundamental changes in the global economy over recent years. An emerging literature on asset manager capitalism (AMC) discusses these changes and its implications, though largely in the context of corporate governance in advanced capitalist economies. This paper expands the remit of the AMC literature to spaces outside the global capitalist core, and assesses its implications, based on quantitative data on asset manager allocations and flows, and qualitative data from semi-structured interviews. We find that despite the growth of asset managers’ investments into emerging markets, their presence remains limited and that the threat of exit remains present but increasingly tied with global conditions and the composition of benchmark indices. We also find that asset managers’ investments are increasingly focussing on bonds, and are heavily concentrated in a few companies and sectors, revealing a marginal rather than broad-based presence. Finally, we find very limited evidence that asset managers use their voice to influence corporate governance and macroeconomic policy. Overall, asset managers do not seem to fundamentally reshape the characteristics of financial subordination of emerging markets, and the characteristics of AMCs remain, for now, specific to advanced economies.

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Section: Reduced Threat Of Exit and Financial Stabilitymentioning

confidence: 79%

Section: Reduced Threat Of Exit and Financial Stabilitymentioning

confidence: 99%

Section: Reduced Threat Of Exit and Financial Stabilitymentioning

confidence: 99%

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International financial subordination in the age of asset manager capitalism

Bonizzi,

Kaltenbrunner

2024

Environ Plan A

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“…Exchange rate movements between two trading partners i and j can create a mirror trade discrepancy if there is a calendar year time‐lag in the reported data between countries i and j . However, trade data are expected to be little affected by exchange rate fluctuations since most of the international trade contracts between exporters and imports are denominated in USD (Bertaut et al, 2021). If re‐exports are coded as exports, re‐exports create a wedge between the reported trade for the involved trading partners even if the data are correctly reported by both partners.…”

Section: Datamentioning

confidence: 99%

The mystery of misreported trade: A novel method to identify distorted trade figures

et al. 2023

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This research shows that misreporting of trade is rampant, which markedly reduces the quality of reported bilateral trade data. We devise a novel methodology to correct for misreported bilateral trade while accounting for the composition of product types and for trading partners. Based on bilateral data for 196 countries in the world at the product level over the period 1996–2017, we find that (i) our corrected trade data are significantly more reliable than reported data; (ii) our corrected data are significantly more reliable than data based on conventional misreporting correction methods; (iii) corrected trade balances are often quite distinct from their reported counterparts; (iv) capital flight is the most important source of misreporting and (v) the misreporting propensity tends to cluster geographically, with the main offenders often deviating from common perceptions in the literature. Based on estimates of the gravity model, we show that geographical characteristics are more influential than institutional variables in explaining misreporting.

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“…Source: SIFMA, https://www.sifma.org/resources/research/research-quarterly-equities/, accessed July 6, 2022.19 Source: Bank for International Settlements, https://www.bis.org/statistics/secstats.htm, accessed July 3, 2022.20 An alternative source for recent data on the dollar's dominance isBertaut, von Beschwitz and Curcuru (2021). They analyze newer invoicing data assembled byBoz and others (2022) and find that the dollar's share in export invoicing is 96.3 percent in the Americas, 74.0 percent in the Asia-Pacific region, 23.1 percent in Europe, and 79.1 percent in the rest of the world.…”

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confidence: 99%

The Global Dollar Cycle

Obstfeld¹,

Zhou²

2023

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The U.S. dollar's nominal effective exchange rate closely tracks global financial conditions, which themselves show a cyclical pattern. Over that cycle, world asset prices, leverage, and capital flows move in concert with global growth, especially influencing the fortunes of emerging and developing economies (EMDEs). This paper documents that dollar appreciation shocks predict economic downturns in EMDEs and highlights policies countries could implement to dampen the effects of dollar fluctuations. Dollar appreciation shocks themselves are highly correlated not just with tighter U.S. monetary policies, but also with measures of U.S. domestic and international dollar funding stress that themselves reflect global investors' risk appetite. After the initial market panic and upward dollar spike at the start of the COVID-19 pandemic, the dollar fell as global financial conditions eased; but the higher inflation that followed has induced central banks everywhere to tighten monetary policies more recently. The dollar has strengthened considerably since mid-2021 and a contractionary phase of the global financial cycle is now under way. Owing to increases in public-and business-sector debts during the pandemic, a strong dollar, higher interest rates, and slower economic growth will be challenging for EMDEs.

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The International Role of the U.S. Dollar

Cited by 23 publications

References 4 publications

International financial subordination in the age of asset manager capitalism

International financial subordination in the age of asset manager capitalism

The mystery of misreported trade: A novel method to identify distorted trade figures

The Global Dollar Cycle

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