International Currencies and Capital Allocation

99 Pages Posted: 11 Jun 2018 Last revised: 7 May 2019

See all articles by Matteo Maggiori

Matteo Maggiori

Harvard University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Brent Neiman

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Jesse Schreger

Columbia University - Columbia Business School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: June 2018

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.

Keywords: Capital Flows, Exorbitant Privilege, Home Bias, reserve currencies

JEL Classification: E42, E44, F3, F55, G11, G15, G23, G28

Suggested Citation

Maggiori, Matteo and Neiman, Brent and Schreger, Jesse, International Currencies and Capital Allocation (June 2018). CEPR Discussion Paper No. DP12973. Available at SSRN: https://ssrn.com/abstract=3193935

Matteo Maggiori (Contact Author)

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Brent Neiman

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://faculty.chicagobooth.edu/brent.neiman/index.html

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jesse Schreger

Columbia University - Columbia Business School

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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