[18/18]
For example, these are my estimated spillovers to investment when combining both the cross-country average and heterogeneous effects for the firms in my sample. [Full quantification through DSGE model in upcoming work]
[17/18]
Policy relevance: emission-dependent monetary spillovers can make greener countries more resilient to global financial tightening, while browner ones, typically emerging economies, are penalised.
[16/18]
Summary: I uncover heterogeneous monetary spillovers across brown and green firms through a risk-taking channel and a green preferences channel.
(Contributing to the literature on US monetary spillovers, climate change and monetary policy, and climate finance.)
[15/18]
Through this strategy, I find empirical support for both channels being at play. [See my paper for all details]
[14/18]
I identify
1) Risk-taking channel by estimating US spillovers within investors' preferences and across firms' carbon intensity.
2) Preferences channel by looking across investors’ preferences and within firm.
[13/18]
As both channels operate along the same directions though, this leads to an identification challenge!
I overcome it by matching granular investor-firm data for US global funds holdings. [See paper for additional analyses with syndicated loans to non-US borrowers]
[12/18]
Both channels imply that tighter US monetary policy widens the return differential between brown and green assets, and thus disproportionally decrease capital and investment for brown firms, in line with my empirical evidence.
[11/18]
2) Investors have non-pecuniary motives to hold green assets as opposed to brown, that is they have green preferences.
[10/18]
1) Investors have different risk-bearing capacity for brown and green firms, because brown assets are more exposed to transition risk, i.e. future cashflow losses from policy and technological innovation linked to the global move to a low-carbon economy.
[9/18]
Second, to rationalize these findings, I develop a model featuring global investors with two financial frictions.
[8/18]
… and investment decrease by more.
[7/18]
… their debt …
[6/18]
… their bond spreads rise by more …
[5/18]
Non-US firms with higher carbon intensity see their equity prices decline by more …
[4/18]
First, combining high-frequency monetary surprises with firm-level data for ~5,000 non-US firms across 38 countries, I show that US monetary tightening disproportionately impacts brown relative to green firms.
[3/18]
This is a timely question because of current time of higher interest rates, which many argue may slow the global green transition down (e.g. larger/higher-risk capital costs for development of renewable energy infrastructure and associated R&D).
3 takeaways:
[2/18]
US monetary policy has an impact beyond national borders. But not all non-US firms are affected in the same way.
Novel source of heterogeneity in spillovers:
*** Do US monetary policy shocks affect brown (i.e. high-carbon intensity) and green firms differently? ***
🚨New Paper🚨
I study how US monetary policy shocks affect non-US firms depending on their carbon emissions: brown firms experience higher bond spreads, lower equity prices and investment.
➡️🟩/🟫 economies more/less resilient
t.co/fWb4VLpha1
🧵[1/18]
#EconSky
Given today’s news on US sanctions, thought to repost this 👇🏻
New improved draft coming soon!
Link to paper w/ my amazing co-authors
Giovanni Rosso and Roger Vicquery
ora.ox.ac.uk/objects/uuid...
Phenomenal #NBUNBPconference25 at National Bank of Ukraine. Presented our work on financial sanctions and USD dominance, focusing on how post-2014 international lending to Russia de-dollarized ($⬇) in favour of a euroization (€⬆️)
events.bank.gov.ua/ARConference...
On increasing the NATO spending norm to 5%: “Spending more is not about pleasing an audience of one, it is about protection a billion people.”
Mark Rutte at @chathamhouse.org
Ukraine’s Operation Spider’s Web will enter the history books as one of the most remarkable and best-executed covert operations of the war, writes @katjabego.bsky.social.
Fascinating new work linking financial sanctions to the dollar's use in Russia.
📣📣📣 New paper out 📣📣📣
With Giovanni Rosso and Roger Vicquery, we study the interplay between financial sanctions and dollar dominance focusing on how post-2014 international lending to Russia de-dollarized ($⬇) in favour of a euroization (€⬆️) ora.ox.ac.uk/objects/uuid...
🧵👇[1/10]
#EconSky
ICYMI: @davidbeckworth.bsky.social @helene-rey.bsky.social @danielmcdowell.bsky.social @apferrero.bsky.social @antoineberthou.bsky.social @edwardfishman.bsky.social @himself.bsky.social @mmaggiori.bsky.social @weisenthal.bsky.social @guntramwolff.bsky.social @rebeccawire.bsky.social
Specifically, our main innovation is to model sanctions as a currency-specific wedge on assets with different denominations. As US sanctions tighten the constraint on USD assets, financial intermediaries reallocate their portfolios towards other currencies.
[10/10]
We plug this insight into a novel 3-country 3-currency framework, where financial sanctions are financial frictions.
[9/10]
In other words: financial sanctions created a new currency-circuit-specific friction.
The risk of counterparts being cut off from the dollar payment system led to a rebalancing of portfolios towards the euro.
[8/10]
Why the euro? We argue that the threat of US extra-territorial sanctions targeting users of the USD international payment system increased “settlement risk” for USD transactions, relative to EUR.
[7/10]