Pub Date : 2025-10-24DOI: 10.1016/j.jimonfin.2025.103453
Ronald Doeswijk, Laurens Swinkels
We examine the risks and rewards of investing by constructing a comprehensive market portfolio valued at $150 trillion in global assets and spanning 1970–2022 at a monthly frequency. The monthly frequency allows for a more accurate estimate of investment risks compared to previous studies. Although the Sharpe ratio of the global market portfolio is not much higher than that of equities, it is much more stable over time. In addition, the drawdowns of the global market portfolio are less deep and shorter. When the market portfolio is expressed in currencies other than the U.S. dollar, risks of investing appear larger.
{"title":"The risk and reward of investing","authors":"Ronald Doeswijk, Laurens Swinkels","doi":"10.1016/j.jimonfin.2025.103453","DOIUrl":"10.1016/j.jimonfin.2025.103453","url":null,"abstract":"<div><div>We examine the risks and rewards of investing by constructing a comprehensive market portfolio valued at $150 trillion in global assets and spanning 1970–2022 at a monthly frequency. The monthly frequency allows for a more accurate estimate of investment risks compared to previous studies. Although the Sharpe ratio of the global market portfolio is not much higher than that of equities, it is much more stable over time. In addition, the drawdowns of the global market portfolio are less deep and shorter. When the market portfolio is expressed in currencies other than the U.S. dollar, risks of investing appear larger.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"160 ","pages":"Article 103453"},"PeriodicalIF":3.3,"publicationDate":"2025-10-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145425215","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-24DOI: 10.1016/j.jimonfin.2025.103450
Han Han , Tao Liu , Dong Lu
This paper examines the announcement effect of financial policies that aim to promote the international usage of a previously domestic currency. To this end, we propose an open-economy monetary search model with transaction costs and use it to analyze international currency choices. We examine not only steady state changes, but also the transition path between these states. The announcement effect on transition dynamics depends on various factors such as the degree of risk aversion, searching friction, and information structure. Our empirical estimation between 2010 and 2018 reveals a significant but asymmetric announcement effect of RMB swap lines (RSL). We find that RSL announcements increase the RMB share in a counterparty country’s import from China, but not its export to China. Finally, a calibrated model implies that RSL announcements decrease RMB’s transaction cost by 54.35 %.
{"title":"The announcement effect on international currency choices: Theory and evidence","authors":"Han Han , Tao Liu , Dong Lu","doi":"10.1016/j.jimonfin.2025.103450","DOIUrl":"10.1016/j.jimonfin.2025.103450","url":null,"abstract":"<div><div>This paper examines the announcement effect of financial policies that aim to promote the international usage of a previously domestic currency. To this end, we propose an open-economy monetary search model with transaction costs and use it to analyze international currency choices. We examine not only steady state changes, but also the transition path between these states. The announcement effect on transition dynamics depends on various factors such as the degree of risk aversion, searching friction, and information structure. Our empirical estimation between 2010 and 2018 reveals a significant but asymmetric announcement effect of RMB swap lines (RSL). We find that RSL announcements increase the RMB share in a counterparty country’s import from China, but not its export to China. Finally, a calibrated model implies that RSL announcements decrease RMB’s transaction cost by 54.35 %.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"160 ","pages":"Article 103450"},"PeriodicalIF":3.3,"publicationDate":"2025-10-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145425171","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-22DOI: 10.1016/j.jimonfin.2025.103444
Jonathan Rice , Giulia Maria Guerrini
This paper examines how the ECB’s 2022–2023 interest rate hikes affected euro area banks’ economic net worth and vulnerability to deposit runs. Drawing on granular, confidential data for 139 banks, we estimate each bank’s economic net worth and find that unrealised losses on loans and bonds averaged around 30 % of equity. By September 2023, roughly half of these losses had been offset by gains from the deposit franchise and interest rate swaps. We develop a theoretical framework linking banks’ economic net worth and deposit rate setting to depositor behaviour and run incentives. We demonstrate that banks with larger unrealised losses raised their deposit rates by less–a pattern we interpret as banks leveraging a more valuable deposit franchise to fund longer–duration assets. Although euro area banks as a whole avoided widespread runs, several institutions nonetheless carried substantial mark–to–market losses, suggesting latent fragilities.
{"title":"Riding the rate wave: Interest rate and run risks in euro area banks during the 2022–2023 monetary cycle","authors":"Jonathan Rice , Giulia Maria Guerrini","doi":"10.1016/j.jimonfin.2025.103444","DOIUrl":"10.1016/j.jimonfin.2025.103444","url":null,"abstract":"<div><div>This paper examines how the ECB’s 2022–2023 interest rate hikes affected euro area banks’ economic net worth and vulnerability to deposit runs. Drawing on granular, confidential data for 139 banks, we estimate each bank’s economic net worth and find that unrealised losses on loans and bonds averaged around 30 % of equity. By September 2023, roughly half of these losses had been offset by gains from the deposit franchise and interest rate swaps. We develop a theoretical framework linking banks’ economic net worth and deposit rate setting to depositor behaviour and run incentives. We demonstrate that banks with larger unrealised losses raised their deposit rates by less–a pattern we interpret as banks leveraging a more valuable deposit franchise to fund longer–duration assets. Although euro area banks as a whole avoided widespread runs, several institutions nonetheless carried substantial mark–to–market losses, suggesting latent fragilities.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"160 ","pages":"Article 103444"},"PeriodicalIF":3.3,"publicationDate":"2025-10-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145475006","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-20DOI: 10.1016/j.jimonfin.2025.103442
Julián Caballero, Christian Upper
This paper explores under what circumstances increases in US Treasury yields spill over into declines in emerging market economy (EME) asset prices. We identify episodes of sharp increases in US 10-year Treasury yields and explore under which conditions these are associated with reductions in EME local currency yields, exchange rates and equity prices. We find that rising US yields are more likely to be associated with adverse outcomes in emerging markets when they reflect (i) a rise in the US term premium and (ii) dollar appreciation. The effects of these variables are highly non-linear economically significant and robust to a variety of sensitivity checks. Of EME fundamentals, rising EME inflation expectations, a current account deficit and greater exchange rate flexibility seem to be associated with worse EME outcomes, although these results do not hold in all specifications.
{"title":"What happens to emerging market economies when US yields go up?","authors":"Julián Caballero, Christian Upper","doi":"10.1016/j.jimonfin.2025.103442","DOIUrl":"10.1016/j.jimonfin.2025.103442","url":null,"abstract":"<div><div>This paper explores under what circumstances increases in US Treasury yields spill over into declines in emerging market economy (EME) asset prices. We identify episodes of sharp increases in US 10-year Treasury yields and explore under which conditions these are associated with reductions in EME local currency yields, exchange rates and equity prices. We find that rising US yields are more likely to be associated with adverse outcomes in emerging markets when they reflect (i) a rise in the US term premium and (ii) dollar appreciation. The effects of these variables are highly non-linear economically significant and robust to a variety of sensitivity checks. Of EME fundamentals, rising EME inflation expectations, a current account deficit and greater exchange rate flexibility seem to be associated with worse EME outcomes, although these results do not hold in all specifications.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"160 ","pages":"Article 103442"},"PeriodicalIF":3.3,"publicationDate":"2025-10-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145365670","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-18DOI: 10.1016/j.jimonfin.2025.103447
Rose Ruoxi Huang , Elaine Yongshi Jie , Yue Ma
We document that hedge fund managers exhibit a hump-shaped relationship between their work experience and performance. This observed pattern reflects the dynamic interplay between two contrasting effects of career concerns and incentives channel. In the early years of their careers, fund managers face significant career concerns, which exert high pressure to induce effort in their jobs. Meanwhile, managers also have a strong incentive to build their expertise, leading to better performance. However, as their performance steadily ascends, the rate of improvement decelerates. This is because their career concerns start to ebb away, leading to a cutback on effort that offsets their incentive effects. Consequently, after reaching its peak around the five-year mark, their performance tends to deteriorate afterwards. Additionally, we find that manager’s investment skill contributes positively to fund performance and female managers or master degree holders perform better than their counterparts. Fund size links to performance through diminishing returns to scale. Smaller funds exhibit better performance, whereas larger funds attract better managers. Managers in financial centers outperform their peers in non-financial centers due to both sorting and learning effects. Managers with a prior fund-related background perform better than their peers without it. However, the outperformance of both managers in financial centers and those with fund-related background diminishes in the long run. In a natural experiment setting, we show the stock market crash had a permanent negative impact on the performance of managers. Our findings are robust across varying numbers of manager-fund overlaps, investment strategies, and alternative performance measures.
{"title":"Life cycle performance of hedge fund managers","authors":"Rose Ruoxi Huang , Elaine Yongshi Jie , Yue Ma","doi":"10.1016/j.jimonfin.2025.103447","DOIUrl":"10.1016/j.jimonfin.2025.103447","url":null,"abstract":"<div><div>We document that hedge fund managers exhibit a hump-shaped relationship between their work experience and performance. This observed pattern reflects the dynamic interplay between two contrasting effects of career concerns and incentives channel. In the early years of their careers, fund managers face significant career concerns, which exert high pressure to induce effort in their jobs. Meanwhile, managers also have a strong incentive to build their expertise, leading to better performance. However, as their performance steadily ascends, the rate of improvement decelerates. This is because their career concerns start to ebb away, leading to a cutback on effort that offsets their incentive effects. Consequently, after reaching its peak around the five-year mark, their performance tends to deteriorate afterwards. Additionally, we find that manager’s investment skill contributes positively to fund performance and female managers or master degree holders perform better than their counterparts. Fund size links to performance through diminishing returns to scale. Smaller funds exhibit better performance, whereas larger funds attract better managers. Managers in financial centers outperform their peers in non-financial centers due to both sorting and learning effects. Managers with a prior fund-related background perform better than their peers without it. However, the outperformance of both managers in financial centers and those with fund-related background diminishes in the long run. In a natural experiment setting, we show the stock market crash had a permanent negative impact on the performance of managers. Our findings are robust across varying numbers of manager-fund overlaps, investment strategies, and alternative performance measures.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"160 ","pages":"Article 103447"},"PeriodicalIF":3.3,"publicationDate":"2025-10-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145335224","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-17DOI: 10.1016/j.jimonfin.2025.103445
Taro Esaka , Takao Fujii
This paper uses a synthetic control method (SCM) to estimate the lasting effect of yen-buying and dollar-selling interventions in two cases of Japanese foreign exchange (FX) interventions in 1997–98 and 2022. Our analysis using this method enables us to estimate the causal impact of FX intervention on yen-dollar rate for each intervention event by constructing the counterfactual for change in the yen-dollar rate as the optimal weighted average of changes in several hundred exchange rates that were not directly affected by Japanese intervention through a data-driven approach. In the recent case of Japanese interventions in 2022, we find that while the effect of the yen-buying intervention on September 22 was short-lived, the effect in the event of October 21 and 24 lasted for more than 10 business days after the intervention. In the case of yen-buying interventions during the Japanese financial crisis in 1997–98, while the effects of the single interventions in the events of December 17–19, 1997, and April 9 and 10, 1998, were short-lived, the effect of the coordinated intervention by the monetary authorities of Japan and the US on June 17, 1998, lasted more than 10 business days after the intervention. These findings are robust to employing a Ridge Augmented SCM and a synthetic difference-in-differences.
{"title":"The lasting effect of yen-buying interventions: Two cases of Japanese FX interventions in 1997–98 and 2022","authors":"Taro Esaka , Takao Fujii","doi":"10.1016/j.jimonfin.2025.103445","DOIUrl":"10.1016/j.jimonfin.2025.103445","url":null,"abstract":"<div><div>This paper uses a synthetic control method (SCM) to estimate the lasting effect of yen-buying and dollar-selling interventions in two cases of Japanese foreign exchange (FX) interventions in 1997–98 and 2022. Our analysis using this method enables us to estimate the causal impact of FX intervention on yen-dollar rate for each intervention event by constructing the counterfactual for change in the yen-dollar rate as the optimal weighted average of changes in several hundred exchange rates that were not directly affected by Japanese intervention through a data-driven approach. In the recent case of Japanese interventions in 2022, we find that while the effect of the yen-buying intervention on September 22 was short-lived, the effect in the event of October 21 and 24 lasted for more than 10 business days after the intervention. In the case of yen-buying interventions during the Japanese financial crisis in 1997–98, while the effects of the single interventions in the events of December 17–19, 1997, and April 9 and 10, 1998, were short-lived, the effect of the coordinated intervention by the monetary authorities of Japan and the US on June 17, 1998, lasted more than 10 business days after the intervention. These findings are robust to employing a Ridge Augmented SCM and a synthetic difference-in-differences.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"160 ","pages":"Article 103445"},"PeriodicalIF":3.3,"publicationDate":"2025-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145425170","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-17DOI: 10.1016/j.jimonfin.2025.103446
Yun bai , Chuanmiao Yan , Fuxin Jiang , Yunjie Wei , Shouyang Wang
The foreign exchange market operates as a high-dimensional, dynamic, and complex system influenced by multiple factors and their interrelations. In this paper, we propose a comprehensive ensemble framework for exchange rate forecasting that effectively captures the intricate fluctuation patterns inherent in exchange rate data. Our framework integrates economic theories, technical indicators, and other relevant factors to enhance predictive accuracy. To achieve this, we first decompose the exchange rate time series using ensemble empirical mode decomposition with adaptive noise (CEEMDAN). The resulting components are then segmented into high- and low-frequency groups using the Wilcoxon rank test. Based on macroeconomic fundamentals and technical indicators, we select predictive variables to be included in the model. Next, we conduct comparative experiments to verify the role of export and import (EI) data in exchange rate forecasting. We employ the time convolutional network (TCN) model to predict four important exchange rate time series. The empirical results—validated across forecasting horizons of 1, 3, and 6 months—consistently demonstrate that the proposed method outperforms benchmark models, offering a more accurate and reliable framework for exchange rate predictions. These findings underscore the robustness and predictive power of our approach, confirming its effectiveness in anticipating fluctuations in exchange rates over different time scales. The results highlight the strong correlation between exchange rates, macroeconomic conditions, and investment transactions. Moreover, the comparative experiments reveal that the inclusion of EI data significantly improves the prediction accuracy of the model, emphasizing the importance of this factor in exchange rate forecasting.
{"title":"Exchange rate forecasting with macroeconomic data: Evidence from a novel comprehensive ensemble approach","authors":"Yun bai , Chuanmiao Yan , Fuxin Jiang , Yunjie Wei , Shouyang Wang","doi":"10.1016/j.jimonfin.2025.103446","DOIUrl":"10.1016/j.jimonfin.2025.103446","url":null,"abstract":"<div><div>The foreign exchange market operates as a high-dimensional, dynamic, and complex system influenced by multiple factors and their interrelations. In this paper, we propose a comprehensive ensemble framework for exchange rate forecasting that effectively captures the intricate fluctuation patterns inherent in exchange rate data. Our framework integrates economic theories, technical indicators, and other relevant factors to enhance predictive accuracy. To achieve this, we first decompose the exchange rate time series using ensemble empirical mode decomposition with adaptive noise (CEEMDAN). The resulting components are then segmented into high- and low-frequency groups using the Wilcoxon rank test. Based on macroeconomic fundamentals and technical indicators, we select predictive variables to be included in the model. Next, we conduct comparative experiments to verify the role of export and import (EI) data in exchange rate forecasting. We employ the time convolutional network (TCN) model to predict four important exchange rate time series. The empirical results—validated across forecasting horizons of 1, 3, and 6 months—consistently demonstrate that the proposed method outperforms benchmark models, offering a more accurate and reliable framework for exchange rate predictions. These findings underscore the robustness and predictive power of our approach, confirming its effectiveness in anticipating fluctuations in exchange rates over different time scales. The results highlight the strong correlation between exchange rates, macroeconomic conditions, and investment transactions. Moreover, the comparative experiments reveal that the inclusion of EI data significantly improves the prediction accuracy of the model, emphasizing the importance of this factor in exchange rate forecasting.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"160 ","pages":"Article 103446"},"PeriodicalIF":3.3,"publicationDate":"2025-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145365669","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-11DOI: 10.1016/j.jimonfin.2025.103440
Eugenia Andreasen , Victoria Nuguer
The paper examines the macroeconomic and bank-level effects of raising foreign currency reserve requirements in a partially dollarized economy. Focusing on Peru, we study policy changes implemented by the Central Bank between 2008 and 2017, aimed at containing rapid credit growth fueled by foreign currency deposits. Empirical results show that higher reserve requirements in foreign currency reduced overall credit supply, with heterogeneous effects across banks depending on their reliance on foreign currency funding. Motivated by these findings, we develop a dynamic stochastic general equilibrium model of a small open economy with financial frictions, bank heterogeneity, and financial dollarization. The model replicates the empirical results and provides insights into the mechanism through which this macroprudential tool affects credit and aggregate dynamics, highlighting its effectiveness in managing credit booms in dollarized banking systems.
{"title":"Managing capital inflows in a partially dollarized economy: The role of reserve requirements","authors":"Eugenia Andreasen , Victoria Nuguer","doi":"10.1016/j.jimonfin.2025.103440","DOIUrl":"10.1016/j.jimonfin.2025.103440","url":null,"abstract":"<div><div>The paper examines the macroeconomic and bank-level effects of raising foreign currency reserve requirements in a partially dollarized economy. Focusing on Peru, we study policy changes implemented by the Central Bank between 2008 and 2017, aimed at containing rapid credit growth fueled by foreign currency deposits. Empirical results show that higher reserve requirements in foreign currency reduced overall credit supply, with heterogeneous effects across banks depending on their reliance on foreign currency funding. Motivated by these findings, we develop a dynamic stochastic general equilibrium model of a small open economy with financial frictions, bank heterogeneity, and financial dollarization. The model replicates the empirical results and provides insights into the mechanism through which this macroprudential tool affects credit and aggregate dynamics, highlighting its effectiveness in managing credit booms in dollarized banking systems.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"159 ","pages":"Article 103440"},"PeriodicalIF":3.3,"publicationDate":"2025-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145323909","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-09DOI: 10.1016/j.jimonfin.2025.103443
Raphaelle G. Coulombe , James McNeil
We study the term structure of interest rates in an endowment economy with noisy information and CRRA preferences. Exogenous prices and consumption consist of both temporary and permanent components, but the household observes only their aggregate values. We show that on average the term spread in this environment is positive and on a scale close to what we observe in the data, a fact that many existing macroeconomic models struggle to reproduce without very large coefficients of relative risk aversion. In our partial-information framework, uncertainty about the decomposition of the endowment and prices into their temporary and permanent components combined with a negative correlation in consumption growth explains why the slope of the yield curve is positive on average. We estimate our model using Bayesian methods and US data from 1961–2007 and find that the average interest rate spread is 0.85 %, compared with 0.98 % in the data. Further, we estimate a coefficient of relative risk aversion of only 4.86. Noisy information accounts for 44 % of the scale of the term premium, with the remainder principally explained by real activity and nominal factors playing only a small role.
{"title":"The term structure of interest rates in a noisy information model","authors":"Raphaelle G. Coulombe , James McNeil","doi":"10.1016/j.jimonfin.2025.103443","DOIUrl":"10.1016/j.jimonfin.2025.103443","url":null,"abstract":"<div><div>We study the term structure of interest rates in an endowment economy with noisy information and CRRA preferences. Exogenous prices and consumption consist of both temporary and permanent components, but the household observes only their aggregate values. We show that on average the term spread in this environment is positive and on a scale close to what we observe in the data, a fact that many existing macroeconomic models struggle to reproduce without very large coefficients of relative risk aversion. In our partial-information framework, uncertainty about the decomposition of the endowment and prices into their temporary and permanent components combined with a negative correlation in consumption growth explains why the slope of the yield curve is positive on average. We estimate our model using Bayesian methods and US data from 1961–2007 and find that the average interest rate spread is 0.85 %, compared with 0.98 % in the data. Further, we estimate a coefficient of relative risk aversion of only 4.86. Noisy information accounts for 44 % of the scale of the term premium, with the remainder principally explained by real activity and nominal factors playing only a small role.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"159 ","pages":"Article 103443"},"PeriodicalIF":3.3,"publicationDate":"2025-10-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145323910","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-27DOI: 10.1016/j.jimonfin.2025.103441
José Garcia-Revelo , Grégory Levieuge , Jean-Guillaume Sahuc
The European Central Bank and the Federal Reserve introduced new policy instruments and made changes to their operational frameworks to address the global financial crisis (2008) and the Covid-19 pandemic (2020). We study the macroeconomic effects of these monetary policy evolutions on both sides of the Atlantic Ocean by developing and estimating a tractable two-country dynamic stochastic general equilibrium model. We show that the euro area and the United States faced shocks of different natures, explaining some asynchronous monetary policy measures between 2008 and 2023. However, counterfactual exercises highlight that all conventional and unconventional policies implemented since 2008 have appropriately (i) supported economic growth and (ii) maintained inflation on track in both areas. The exception is the delayed reaction to the inflationary surge during 2021–2022. Furthermore, exchange rate shocks played a significant role in shaping the overall monetary conditions of the two economies.
{"title":"Revisiting 15 years of unusual transatlantic monetary policies","authors":"José Garcia-Revelo , Grégory Levieuge , Jean-Guillaume Sahuc","doi":"10.1016/j.jimonfin.2025.103441","DOIUrl":"10.1016/j.jimonfin.2025.103441","url":null,"abstract":"<div><div>The European Central Bank and the Federal Reserve introduced new policy instruments and made changes to their operational frameworks to address the global financial crisis (2008) and the Covid-19 pandemic (2020). We study the macroeconomic effects of these monetary policy evolutions on both sides of the Atlantic Ocean by developing and estimating a tractable two-country dynamic stochastic general equilibrium model. We show that the euro area and the United States faced shocks of different natures, explaining some asynchronous monetary policy measures between 2008 and 2023. However, counterfactual exercises highlight that all conventional and unconventional policies implemented since 2008 have appropriately <em>(i)</em> supported economic growth and <em>(ii)</em> maintained inflation on track in both areas. The exception is the delayed reaction to the inflationary surge during 2021–2022. Furthermore, exchange rate shocks played a significant role in shaping the overall monetary conditions of the two economies.</div></div>","PeriodicalId":48331,"journal":{"name":"Journal of International Money and Finance","volume":"159 ","pages":"Article 103441"},"PeriodicalIF":3.3,"publicationDate":"2025-09-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145267341","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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