Masazumi Hattori (Deputy Head of Economics Section, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: masazumi.hattori@boj.or.jp)) Hyun Song Shin (Professor of Economics, Princeton University (E-mail: hsshin@princeton.edu))
Abstract
Yen carry trades have traditionally been viewed in narrow terms purely as a foreign exchange transaction. However, evidence from the waxing and waning of balance sheets of foreign banks operating in Japan points to a broader notion of the carry trade. Yen liabilities fund not only pure currency carry trades, but also fund the general increase in balance sheets of hedge funds and financial intermediaries. The difference in overnight rates across countries is a crucial determinant of balance sheet changes. Domestic monetary policy thus has a global dimension.
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Publisher Info
Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number
07-E-19.
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