Interpreting Turbulent Episodes in International Finance

Helene Rey and Vania Stavrakeva

No 34409, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the anatomy of the international portfolio finance network. As global financial linkages have become denser over time, cross-border portfolio equity positions have grown in importance relative to debt for Emerging markets and Advanced economies. Using the framework developed by Stavrakeva and Rey (2024), we construct a novel proxy of daily foreign investor holdings in both equity and long-term sovereign debt markets across 32 currency areas. Leveraging an instrumental variable strategy, we identify an effect of foreign equity ETF inflows on exchange rates and local stock market prices. Our high-frequency proxy enables us to interpret episodes of turbulence in international finance. It should prove useful to assess how persistent the current shocks to the international financial system are likely to be.

JEL-codes: F3 F32 G15 (search for similar items in EconPapers)
Date: 2025-10
New Economics Papers: this item is included in nep-fdg, nep-ifn, nep-mon and nep-opm
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