Dollar reserves and U.S. yields: Identifying the price impact of official flows

Rashad Ahmed and Alessandro Rebucci ()

Journal of International Economics, 2024, vol. 152, issue C

Abstract: By exploiting changes in the volatility of U.S. Treasury yields and foreign official (FO) flows into U.S. Treasuries after the 2008 Global Financial Crisis, we identify a FO flow shock via heteroskedasticity in a structural VAR. We estimate that a $100B FO flow shock moves 5 and 10-year U.S. yields by about 100 basis points within a month. An event study of the intraday U.S. Treasury yield curve response to Japan’s FX intervention in September 2022 validates our VAR estimates. Our findings imply that a 1% reduction in the Dollar share of China’s reserves could raise long-term U.S. yields by about 20 basis points.

Keywords: Bayesian VARs; Foreign official flows; Global savings glut; Identification via heteroskedasticity; Interest rate conundrum; International reserves; Price impact; U.S. dollar; SVARs (search for similar items in EconPapers)
JEL-codes: E43 E44 F21 F30 G10 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199624001016
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Dollar Reserves and U.S. Yields: Identifying the Price Impact of Official Flows (2022)
Working Paper: Dollar Reserves and U.S. Yields: Identifying the Price Impact of Official Flows (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:152:y:2024:i:c:s0022199624001016

DOI: 10.1016/j.jinteco.2024.103974

Access Statistics for this article

Journal of International Economics is currently edited by Martin Uribe and Costas Arkolakis

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().