Country Size, Currency Unions, and International Asset Returns

• 成果类型: Article
• 署名作者: Hassan, Tarek A.
• 署名单位: University of Chicago; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12081
• 发表日期: 2013
• 页码: 2269-2308
• 关键词: equilibrium-model; exchange-rates; Consumption risk; Nontraded goods; cross-section

摘要

Differences in real interest rates across developed economies are puzzlingly large and persistent. I propose a simple explanation: bonds issued in the currencies of larger economies are expensive because they insure against shocks that affect a larger fraction of the world economy. I show that, indeed, differences in the size of economies explain a large fraction of the cross-sectional variation in currency returns. The data also support additional implications of the model: the introduction of a currency union lowers interest rates in participating countries, and stocks in the nontraded sector of larger economies pay lower expected returns.