Uphill Capital Flows and the International Monetary System
IMF Working Papers, July 26, 2017
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- Uphill Capital Flows and the International Monetary System
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Bibliographic details
- Authors: Balazs Csonto, Camilo E Tovar Mora
- Published: July 26, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484311424.001
Research question and approach
- Examines and quantifies how foreign official purchases of U.S. Treasuries influence the U.S. yield curve at different maturities.
- Uses estimated effects on the term premium to gauge the role of global policies that reduce excess reserve accumulation (for example, a composite global reserve asset or global liquidity facilities).
Key empirical findings
- A percentage point increase in foreign official holdings relative to outstanding marketable securities reduces the term premium by 2.0–2.4 basis points at maturities of 2–3 years.
- A policy that reduces the demand for Treasuries by $100 billion would increase yields by 1.5–1.8 basis points.
Policy scenarios and implications
- Global policy options considered include:
- A composite global reserve asset.
- Global liquidity facilities.
- Quantified channel: reducing reserve accumulation can meaningfully affect Treasury yields via changes in foreign official demand, with the $100 billion demand reduction mapped to a 1.5–1.8 basis point rise in yields.
Subjects and keywords (as stated in the source)
- Subjects: Balance of payments, Capital flows, Central banks, Financial institutions, Financial services, International reserves, Reserves accumulation, Securities, Yield curve.
- Keywords: Capital flows, foreign exchange, foreign holdings, Global, International reserves, premium, reserve accumulation, Reserves accumulation, Securities, term premium, Treasuries, Treasury securities, U.S. Treasuries, Uphill capital flows, WP, yield curve, yield dynamics.
Uphill Capital Flows and the International Monetary System, IMF Working Papers 2017, 174 (2017).
Content in this bundle
- Uphill Capital Flows and the International Monetary System, WP/17/174, July 2017