Fickle emerging market flows, stable euros, and the dollar risk factor

• 成果类型: Article
• 署名作者: Boermans, Martijn A.; Burger, John D.
• 署名单位: European Central Bank; De Nederlandsche Bank NV; Loyola University Maryland
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2023.103730
• 发表日期: 2023
• 关键词: Global risk; capital flows; Global financial cycle; US dollar; Exchange rates; Currency mismatch; portfolio choice; spillovers; Emerging market bonds; Securities holdings statistics; Home currency bias

摘要

Policymakers fear the destabilizing impact of fickle global investors on emerging markets. Euro area investors are significant participants in emerging bond markets and exhibit volatile flows, but their fickleness does not result in indiscriminate periods of surge and flight. Employing granular data, we discern important investor differentiation by currency denomination and issuer-level risk factors. First, euro area investors exhibit a home currency bias leading to both strong cross-sectional preference and more stable flows to EUR-denominated bonds over time. Second, volatile flows to USD and local-currency-denominated bonds are robustly related to global risk factors including the broad dollar. Investors differentiate among USDdenominated bonds such that flows to currency mismatched (and less creditworthy) sovereigns and corporates are more sensitive to the broad dollar. In contrast, local currency bond investors appear primarily concerned with currency rather than issuer-specific credit risk.(c) 2023 Elsevier B.V. All rights reserved.