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International Currencies and Capital Allocation

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Listed:
  • Matteo Maggiori
  • Brent Neiman
  • Jesse Schreger

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.

Suggested Citation

  • Matteo Maggiori & Brent Neiman & Jesse Schreger, 2018. "International Currencies and Capital Allocation," NBER Working Papers 24673, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24673
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • F3 - International Economics - - International Finance
    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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