FRIC/Finance Seminar with Wenxin Du, Federal Reserve Board of Governors
FRIC Center for Financial Frictions and the Department of Finance are proud to announce the upcoming seminar with Wenxin Du, Federal Reserve Board of Governors
Wenxin Du will present:
We document the triangular relationship formed by the strength of the US dollar, cross-border bank lending in dollars and deviations from covered interest parity (CIP). A stronger dollar goes hand-in-hand with bigger deviations from CIP and contractions of cross-border bank lending in dollars. Differential sensitivity of CIP deviations to the strength of the dollar can explain cross-sectional variations in CIP arbitrage profits. We argue that underpinning the triangle is the role of the dollar as proxy for the shadow price of bank leverage.
Solbjerg Plads 3, 2000 Frederiksberg