Dollar Safety and the Global Financial Cycle

Zhengyang Jiang, Arvind Krishnamurthy and Hanno Lustig

No 27682, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a model of the global financial cycle with one key ingredient: the international demand for safe dollar assets. The model matches patterns of dollar borrowing and currency mismatch, the U.S. external balance sheet, exorbitant privilege, spillovers of the U.S. monetary policy to the rest of the world, and the dollar as a global risk factor. In doing so, we lay out a novel transmission mechanism through which the U.S. monetary policy affects the currency market and the global economy. The global financial cycle is a dollar cycle.

JEL-codes: E4 F3 G15 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac, nep-mon and nep-opm
Note: AP CF IFM ME
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Citations: View citations in EconPapers (23)

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Related works:
Working Paper: Dollar Safety and the Global Financial Cycle (2018)
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