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Essays in the Us Dollar Dominated International Financial Market.

紀錄類型:	書目-電子資源 : Monograph/item
正題名/作者:	Essays in the Us Dollar Dominated International Financial Market./
作者:	Chen, Zefeng.
出版者:	Ann Arbor : ProQuest Dissertations & Theses, : 2021,
面頁冊數:	117 p.
附註:	Source: Dissertations Abstracts International, Volume: 83-05, Section: A.
Contained By:	Dissertations Abstracts International83-05A.
標題:	Sensitivity analysis. -
電子資源:	http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=28671233
ISBN:	9798544200109

Essays in the Us Dollar Dominated International Financial Market.
Chen, Zefeng.

Essays in the Us Dollar Dominated International Financial Market. - Ann Arbor : ProQuest Dissertations & Theses, 2021 - 117 p.

Source: Dissertations Abstracts International, Volume: 83-05, Section: A.

Thesis (Ph.D.)--Stanford University, 2021.

This item must not be sold to any third party vendors.

This dissertation studies a special feature about the international financial market. Classical theories often assume that countries are symmetric, but realistically the international financial market is heavily US dollar dominated, which stimulates my interest to study whether this role of the US dollar can resolve numerous puzzles that classical theories are unable to reconcile with empirical facts, as well as to study policy implications. The role of the US in the international market is mainly unique in two aspects. First, the US dollar is the dominant currency used in international trade. Second, the US treasuries are considered as the most widely accepted safe assets. In this dissertation, the first two chapters study the safe asset role, and the third chapter explores the invoicing currency role. The first chapters analyzes the phenomenon called the US 'Exorbitant Privilege', which describes the fact that the US is the only large net borrower country in the world earning a positive net investment income. To rationalize this phenomenon, I propose a different theory about the role of US in the international financial system being a service provider, in contrast to the conventional view of an insurance provider, which predicts the US exorbitant privilege would vanish during the financial crisis, not supported by data. I build a two-country model with financial friction to explain the dynamics of the US external balance sheet and the dollar exchange rate. In the model, world financial intermediaries demand US safe assets for their convenience value, but US intermediaries do not demand foreign safe assets. Under an aggregate symmetric financial shock, the rest of the world buys more safe assets from the US despite a rise in convenience yield, the dollar appreciates, and the US takes advantage by buying more equities from the rest of the world at a low price. I show my mechanism can quantitatively explain the data, while a real shock triggering risk-sharing dynamic cannot. The second chapter is a paper completed with coauthors Shanaka J. Peiris and Sanaa Nadeem from the IMF. We take a perspective from Asian small open economies against external shocks driven by the US dollar. We focus on the banking sectors in those economics because in emerging Asia banks constitute the dominant source of financing consumption and investment, and bank balance sheets comprise large gross FX assets and liabilities. This paper extends the DSGE model of Gertler and Karadi (2011) to incorporate these key features and estimates a panel vector autoregression on ten Asian economies to understand the role of the banking sector in transmitting spillovers from the global financial cycle to small open economies. It also evaluates the effectiveness of foreign exchange intervention (FXI) and other macroeconomic policies in responding to external financing shocks. External financial shocks affect net external liabilities of banks and the exchange rate, leading to changes in credit supply by banks and investment. For example, a capital outflow shock leads to a deprecation that reduces the net worth and intermediation capacity of banks exposed to foreign currency liabilities. In such cases, the exchange rate acts as shock amplifier and sterilized FXI, often deployed by Asian economies, can help cushion the economy.

ISBN: 9798544200109Subjects--Topical Terms:

3560752
Sensitivity analysis.

Essays in the Us Dollar Dominated International Financial Market.
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520 $a This dissertation studies a special feature about the international financial market. Classical theories often assume that countries are symmetric, but realistically the international financial market is heavily US dollar dominated, which stimulates my interest to study whether this role of the US dollar can resolve numerous puzzles that classical theories are unable to reconcile with empirical facts, as well as to study policy implications. The role of the US in the international market is mainly unique in two aspects. First, the US dollar is the dominant currency used in international trade. Second, the US treasuries are considered as the most widely accepted safe assets. In this dissertation, the first two chapters study the safe asset role, and the third chapter explores the invoicing currency role. The first chapters analyzes the phenomenon called the US 'Exorbitant Privilege', which describes the fact that the US is the only large net borrower country in the world earning a positive net investment income. To rationalize this phenomenon, I propose a different theory about the role of US in the international financial system being a service provider, in contrast to the conventional view of an insurance provider, which predicts the US exorbitant privilege would vanish during the financial crisis, not supported by data. I build a two-country model with financial friction to explain the dynamics of the US external balance sheet and the dollar exchange rate. In the model, world financial intermediaries demand US safe assets for their convenience value, but US intermediaries do not demand foreign safe assets. Under an aggregate symmetric financial shock, the rest of the world buys more safe assets from the US despite a rise in convenience yield, the dollar appreciates, and the US takes advantage by buying more equities from the rest of the world at a low price. I show my mechanism can quantitatively explain the data, while a real shock triggering risk-sharing dynamic cannot. The second chapter is a paper completed with coauthors Shanaka J. Peiris and Sanaa Nadeem from the IMF. We take a perspective from Asian small open economies against external shocks driven by the US dollar. We focus on the banking sectors in those economics because in emerging Asia banks constitute the dominant source of financing consumption and investment, and bank balance sheets comprise large gross FX assets and liabilities. This paper extends the DSGE model of Gertler and Karadi (2011) to incorporate these key features and estimates a panel vector autoregression on ten Asian economies to understand the role of the banking sector in transmitting spillovers from the global financial cycle to small open economies. It also evaluates the effectiveness of foreign exchange intervention (FXI) and other macroeconomic policies in responding to external financing shocks. External financial shocks affect net external liabilities of banks and the exchange rate, leading to changes in credit supply by banks and investment. For example, a capital outflow shock leads to a deprecation that reduces the net worth and intermediation capacity of banks exposed to foreign currency liabilities. In such cases, the exchange rate acts as shock amplifier and sterilized FXI, often deployed by Asian economies, can help cushion the economy.
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