Topic
Currency
About: Currency is a research topic. Over the lifetime, 26697 publications have been published within this topic receiving 485370 citations. The topic is also known as: monetary unit & unit of money.
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TL;DR: In this paper, a dataset of $27 trillion in security-level investment positions is used to demonstrate that investor holdings are biased toward their own currencies to such an extent that each country holds the bulk of all debt securities denominated in their own currency, even those issued by foreign borrowers in developed countries.
Abstract: We establish that global portfolios are driven by an often neglected aspect: the currency of denomination of assets. Using a dataset of $27 trillion in security-level investment positions, we demonstrate that investor holdings are biased toward their own currencies to such an extent that each country holds the bulk of all debt securities denominated in their own currency, even those issued by foreign borrowers in developed countries. Surprisingly, currency is such a strong predictor of the nationality of a security's holder that the nationality of the issuer - to date, the most powerful predictor in a voluminous literature on cross-border portfolios - adds very little explanatory power. While large firms issue bonds in foreign currency and borrow from foreigners, the vast majority of firms issue only in local currency and do not directly access foreign capital. These patterns hold broadly across countries with the exception of countries, like the United States, that issue an international currency. The global willingness to hold the US dollar means that even smaller US firms that borrow exclusively in dollars have little difficulty borrowing from abroad. Global portfolios shifted sharply away from the euro and toward the dollar starting with the 2008 financial crisis, further cementing the dollar's international role and potentially amplifying the benefit that its status brings to the US.
111 citations
TL;DR: It is suggested that as long as BitCoin price will be mainly driven by speculative investments, BitCoin will not be able to compete with standard currencies.
Abstract: This paper identifies and analyzes BitCoin features which may facilitate BitCoin to become a global currency, as well as characteristics which may impede the use of BitCoin as a medium of exchange, a unit of account and a store of value, and compares BitCoin with standard currencies with respect to the main functions of money. Among all analyzed BitCoin features, the extreme price volatility stands out most clearly compared to standard currencies. In order to understand the reasons for such extreme price volatility, we attempt to identify drivers of BitCoin price formation and estimate their importance econometrically. We apply time-series analytical mechanisms to daily data for the 2009---2014 period. Our estimation results suggest that BitCoin attractiveness indicators are the strongest drivers of BitCoin price followed by market forces. In contrast, macro-financial developments do not determine BitCoin price in the long-run. Our findings suggest that as long as BitCoin price will be mainly driven by speculative investments, BitCoin will not be able to compete with standard currencies.
111 citations
TL;DR: The authors found a contemporaneous relation between the foreign exchange rate and the market value of large exporters and found a weak lagged relationship which suggests that the stock market takes time to incorporate all of the implications of foreign currency movements into share prices.
Abstract: Contrary to prior research, this U.K.-based study finds a contemporaneous relation between the foreign exchange rate and the market value of large exporters. We also find a weak lagged relationship which suggests that the stock market takes time to incorporate all of the implications of foreign currency movements into share prices. Evidence that the nature of this relationship changed when sterling was in the ERM is also provided.
111 citations
TL;DR: In this paper, the renminbi (RMB) has increasingly become a reference currency, which is defined as one that exhibits a high degree of co-movement with other currencies.
Abstract: A country’s rise to economic dominance tends to be accompanied by its currency becoming a reference point, with other currencies tracking it implicitly or explicitly. For a sample comprising emerging-market economies, we show that in the last three years, the renminbi (RMB) has increasingly become a reference currency, which we define as one that exhibits a high degree of co-movement with other currencies. In East Asia, there is already a RMB bloc, because the RMB has become the dominant reference currency, eclipsing the US dollar, which is a historic development. In this region, 7 currencies out of 10 co-move more closely with the RMB than with the dollar, with the average value of the co-movement coefficient relative to the RMB being about 60 percent greater than that for the dollar. We find that co-movements with a reference currency, especially for the RMB, are associated with trade integration. We draw some lessons for the prospects for the RMB bloc to move beyond Asia based on a comparison of the RMB’s situation today and that of the Japanese yen in the early 1990s. If trade were the sole driver, a more global RMB bloc could emerge by the mid-2030s, but complementary reforms of the financial and external sectors could considerably expedite the process.
111 citations
TL;DR: In this paper, the impact of currency target zones on short-term interest rates was examined in the European Monetary System using a regime-switching model that allows fbr a differently parameterized mean-reverting square root process in each regime.
111 citations