The Non-U.S. Bank Demand for U.S. Dollar Assets

45 Pages Posted: 3 Mar 2020

See all articles by Tobias Adrian

Tobias Adrian

International Monetary Fund

Peichu Xie

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2020


The USD asset share of non-U.S. banks captures the demand for dollars by these investors. An instrumental variable strategy identifies a causal link from the USD asset share to the USD exchange rate. Cross-sectional asset pricing tests show that the USD asset share is a highly significant pricing factor for carry trade strategies. The USD asset share forecasts the dollar with economically large magnitude, high statistical significance, and large explanatory power, both in sample and out of sample, pointing towards time varying risk premia. It takes 2-5 years for exchange rate risk premia to normalize in response to demand shocks.

Keywords: Exchange Rate Disconnect, intermediary asset pricing, Safe Asset Demand

JEL Classification: F3, G1

Suggested Citation

Adrian, Tobias and Xie, Peichu, The Non-U.S. Bank Demand for U.S. Dollar Assets (February 2020). CEPR Discussion Paper No. DP14437, Available at SSRN:

Tobias Adrian (Contact Author)

International Monetary Fund ( email )


Peichu Xie

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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