International Capital Markets and Wealth Transferts-Christian Larsen Hayerdahl (Indiana U)

Département: Finance

Intervenant: Christian Larsen Hayerdahl (Indiana U)

Lieu: salle T022

Abstract

In times of global stress, stock prices fall, the US dollar (USD) appreciates, and the US suffers
losses on its net foreign assets (NFA) position. We argue that this does not create a wealth
transfer from the US to the rest of the world. The USD appreciation benefits US domestic
assets, and the US wealth share actually increases. We generate these patterns within a model
with deep habits in which a richer country is more risk-tolerant. The country’s NFA position
falls in times of stress, yet its wealth share rises. The model matches asset pricing moments
and currency risk premia.