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Market Frictions and Pass-Through in an Interconnected Global Economy
Market Frictions and Pass-Through in an Interconnected Global Economy
상세정보
- 자료유형
- 학위논문 서양
- 최종처리일시
- 20260202104718
- ISBN
- 9798293825905
- DDC
- 658
- 저자명
- Chen, Wentong.
- 서명/저자
- Market Frictions and Pass-Through in an Interconnected Global Economy
- 발행사항
- [Sl] : Cornell University, 2025
- 발행사항
- Ann Arbor : ProQuest Dissertations & Theses, 2025
- 형태사항
- 291 p
- 주기사항
- Source: Dissertations Abstracts International, Volume: 87-03, Section: A.
- 주기사항
- Advisor: Prasad, Eswar.
- 학위논문주기
- Thesis (Ph.D.)--Cornell University, 2025.
- 초록/해제
- 요약My research lies at the intersection of international finance and macroeconomics, focusing on the pass-through of monetary and foreign exchange shocks and policies to different markets and how price and quantity dynamics in these markets interact with (and have feedback effects on) each other. My research aims to formally model the frictions in and spillovers between these markets and to characterize the underlying mechanisms in environments with various forms of market incompleteness and frictions. In the sections that follow, I discuss three chapters of my ongoing projects in this dissertation.In the first chapter, I uncover the substantial foreign exchange risks faced by U.S. firms, despite most international trade being invoiced in U.S. dollars. These risks arise due to spillovers through the production network and fluctuations in foreign demand when exchange rates change. Using new hand-collected data from firms' annual reports, I document that U.S. firms actively hedge foreign exchange risks using financial derivatives. I develop the first model of hedging in a production network and show that hedging by upstream or downstream firms can stabilize a firm's performance due to shared risk exposures. This positive spillover effect operates through firms' financial constraints: hedging stabilizes firms' borrowing costs and the prices they charge connected firms. Exploiting two major USD-Euro exchange rate swings, I find that hedging by connected firms is as effective as a firm's own hedging in stabilizing performance. Additionally, firms at the extremities of the production and trade network are more likely to hedge. Calibrating the model to U.S. data, I show that these spillover effects boost aggregate output and reduce prices.In the second chapter (coauthored with Isha Agarwal and Eswar Prasad), we offer the first empirical evidence on how domestic media-driven narratives about a destination country shape cross-border institutional investment flows. Leveraging natural language processing techniques on over a million articles from 38 newspapers, we construct sentiment and risk indices based on media narratives about China across 15 economies between 2007 and 2022. Our findings reveal significant cross-country variation in these narratives, driven by differences in both topic coverage and within-topic sentiment. Crucially, media narratives significantly influence portfolio flows, even after controlling for macroeconomic and financial fundamentals. The impact of media narratives on flows is smaller for investors with greater familiarity or private information about China and more substantial during periods of heightened uncertainty. Political and environmental narratives influence investment flows as much as, or more than, economic narratives. These findings suggest that media narratives have a greater influence on investment flows when reliable market data is scarce or challenging to interpret. We also find that media narratives have an asymmetric impact on investment, with investors reacting more sharply to negative narratives than positive ones. These results underscore the important role of media-driven narratives in shaping global capital flows, particularly in an era of intensifying geopolitical and economic uncertainty.In the third chapter, I study how reserve tiering-where different tiers of reserves earn different interest rates-affects monetary policy transmission to the loan market. Using data from Japan, I find that reserve tiering leads to an in crease in low-interest loans and a decline in medium-interest loans. These shifts are driven by heterogeneity in banks' exposure to the tiered system: larger and more liquid banks hold more reserves at negative rates, while non-depository institutions effectively face negative rates. This allows small banks to obtain cheaper interbank funding from larger banks and non-depository institutions, enabling them to issue lower-rate loans. Meanwhile, larger banks, holding a greater share of negative-rate reserves, respond by taking on more risk in their lending. I develop a heterogeneous agent model linking interbank and loan markets, which identifies four transmission channels: liquidity, interest rate, bank interest margin, and loan risk. My analysis suggests that, to curb over-heating, central banks should adopt tiering schemes with ascending rates-an approach that is more effective, less distortionary, and more stabilizing than flat-rate alternatives.
- 일반주제명
- Finance
- 키워드
- Exchange rate
- 키워드
- Macroeconomics
- 키워드
- Risk management
- 기타저자
- Cornell University Economics
- 기본자료저록
- Dissertations Abstracts International. 87-03A.
- 전자적 위치 및 접속
- 로그인 후 원문을 볼 수 있습니다.
MARC
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■020 ▼a9798293825905
■035 ▼a(MiAaPQ)AAI32120850
■040 ▼aMiAaPQ▼cMiAaPQ
■0820 ▼a658
■1001 ▼aChen, Wentong.▼0(orcid)0000-0003-1224-3993
■24510▼aMarket Frictions and Pass-Through in an Interconnected Global Economy
■260 ▼a[Sl]▼bCornell University▼c2025
■260 1▼aAnn Arbor▼bProQuest Dissertations & Theses▼c2025
■300 ▼a291 p
■500 ▼aSource: Dissertations Abstracts International, Volume: 87-03, Section: A.
■500 ▼aAdvisor: Prasad, Eswar.
■5021 ▼aThesis (Ph.D.)--Cornell University, 2025.
■520 ▼aMy research lies at the intersection of international finance and macroeconomics, focusing on the pass-through of monetary and foreign exchange shocks and policies to different markets and how price and quantity dynamics in these markets interact with (and have feedback effects on) each other. My research aims to formally model the frictions in and spillovers between these markets and to characterize the underlying mechanisms in environments with various forms of market incompleteness and frictions. In the sections that follow, I discuss three chapters of my ongoing projects in this dissertation.In the first chapter, I uncover the substantial foreign exchange risks faced by U.S. firms, despite most international trade being invoiced in U.S. dollars. These risks arise due to spillovers through the production network and fluctuations in foreign demand when exchange rates change. Using new hand-collected data from firms' annual reports, I document that U.S. firms actively hedge foreign exchange risks using financial derivatives. I develop the first model of hedging in a production network and show that hedging by upstream or downstream firms can stabilize a firm's performance due to shared risk exposures. This positive spillover effect operates through firms' financial constraints: hedging stabilizes firms' borrowing costs and the prices they charge connected firms. Exploiting two major USD-Euro exchange rate swings, I find that hedging by connected firms is as effective as a firm's own hedging in stabilizing performance. Additionally, firms at the extremities of the production and trade network are more likely to hedge. Calibrating the model to U.S. data, I show that these spillover effects boost aggregate output and reduce prices.In the second chapter (coauthored with Isha Agarwal and Eswar Prasad), we offer the first empirical evidence on how domestic media-driven narratives about a destination country shape cross-border institutional investment flows. Leveraging natural language processing techniques on over a million articles from 38 newspapers, we construct sentiment and risk indices based on media narratives about China across 15 economies between 2007 and 2022. Our findings reveal significant cross-country variation in these narratives, driven by differences in both topic coverage and within-topic sentiment. Crucially, media narratives significantly influence portfolio flows, even after controlling for macroeconomic and financial fundamentals. The impact of media narratives on flows is smaller for investors with greater familiarity or private information about China and more substantial during periods of heightened uncertainty. Political and environmental narratives influence investment flows as much as, or more than, economic narratives. These findings suggest that media narratives have a greater influence on investment flows when reliable market data is scarce or challenging to interpret. We also find that media narratives have an asymmetric impact on investment, with investors reacting more sharply to negative narratives than positive ones. These results underscore the important role of media-driven narratives in shaping global capital flows, particularly in an era of intensifying geopolitical and economic uncertainty.In the third chapter, I study how reserve tiering-where different tiers of reserves earn different interest rates-affects monetary policy transmission to the loan market. Using data from Japan, I find that reserve tiering leads to an in crease in low-interest loans and a decline in medium-interest loans. These shifts are driven by heterogeneity in banks' exposure to the tiered system: larger and more liquid banks hold more reserves at negative rates, while non-depository institutions effectively face negative rates. This allows small banks to obtain cheaper interbank funding from larger banks and non-depository institutions, enabling them to issue lower-rate loans. Meanwhile, larger banks, holding a greater share of negative-rate reserves, respond by taking on more risk in their lending. I develop a heterogeneous agent model linking interbank and loan markets, which identifies four transmission channels: liquidity, interest rate, bank interest margin, and loan risk. My analysis suggests that, to curb over-heating, central banks should adopt tiering schemes with ascending rates-an approach that is more effective, less distortionary, and more stabilizing than flat-rate alternatives.
■590 ▼aSchool code: 0058.
■650 4▼aFinance
■653 ▼aExchange rate
■653 ▼aFinancial frictions
■653 ▼aGlobal capital flows
■653 ▼aInternational finance
■653 ▼aMacroeconomics
■653 ▼aRisk management
■690 ▼a0501
■690 ▼a0508
■690 ▼a0601
■71020▼aCornell University▼bEconomics.
■7730 ▼tDissertations Abstracts International▼g87-03A.
■790 ▼a0058
■791 ▼aPh.D.
■792 ▼a2025
■793 ▼aEnglish
■85640▼uhttp://www.riss.kr/pdu/ddodLink.do?id=T17358554▼nKERIS▼z이 자료의 원문은 한국교육학술정보원에서 제공합니다.
