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On the Use of Microdata in International Finance Research

Paper Session

Sunday, Jan. 4, 2026 2:30 PM - 4:30 PM (EST)

Philadelphia Convention Center, 107-AB
Hosted By: American Economic Association
  • Chair: Şebnem Kalemli-Özcan, Brown University

Heterogeneous UIPDs Across Firms: Spillovers from U.S. Monetary Policy Shocks

Miguel Acosta-Henao
,
Central Bank of Chile
Maria Alejandra Amado
,
Central Bank of Spain
Montserrat Marti
,
Central Bank of Chile
David Perez-Reina
,
Los Andes University

Abstract

This paper investigates the granular transmission of U.S. monetary policy shocks to deviations
from the uncovered interest rate parity (UIPDs) in emerging economies. Using a comprehensive
dataset from Chile that accounts for firm-bank relationships and the time-variant characteristics
of both firms and banks, we uncover several key findings: (1) Shocks to the federal funds rate
(FFR) increase banks’ costs of foreign borrowing. (2) These higher credit costs disproportionately
affect small firms, raising their UIPDs more than for large firms. (3) This size-differentiated
impact stems from the relatively higher interest rates on domestic currency loans faced by small
firms. (4) In contrast, interest rates on dollar-denominated loans respond homogeneously across
all firms. (5) We find no differential effect on loan quantities, suggesting a significant role of
credit supply and demand dynamics. We rationalize these findings with a small open economy
model of corporate default that incorporates heterogeneous firms borrowing from domestic
banks in both foreign and domestic currencies. In our model, a higher FFR reduces the marginal
cost of defaulting on domestic-currency debt for small firms more than for large firms.

Capital Controls, Firm Leverage and Profitability: Evidence from Corporate Bond Issuance

Andrea Fabiani
,
Bank of Italy
Andrés Fernández
,
International Monetary Fund
Nimisha Gupta
,
University of Chicago

Abstract

We study how controls on capital inflows affect firms’ financing and real outcomes in emerging markets. Using a novel dataset that combines firm-level bond issuance and balance sheet data with granular measures of capital controls, we uncover a bond channel through which tighter inflow controls reduce the likelihood of subsequent bond issuance by about one-third. Firm responses are heterogeneous and reveal how two channels are at play: leveraged firms delever and cut back investment, whereas more profitable firms sustain investment by substituting away from bond markets, including through lower dividend payouts. These findings are robust across alternative measures of firm profitability, controls for the macroprudential stance, and variation over the financial cycle. We rationalize these findings through a model of capital inflow controls and firm heterogeneity. Optimistic borrowing leads to excessive leverage and default risk, while uniform inflow controls reduce financial fragility but constrain productive firms, highlighting a trade-off between financial stability and productive efficiency.

From Macro Shocks to Firm Responses: Financial and Real Spillovers of the Global Financial Cycle

Miguel Acosta-Henao
,
Central Bank of Chile
Andrés Fernández
,
International Monetary Fund
Patricia Gomez-Gonzalez
,
Fordham University and International Monetary Fund

Abstract

This paper studies the effect of the Global Financial Cycle (GFC) on firms' borrowing conditions and their employment and investment decisions. We use a rich dataset from Chile, merging the universe of firms' international and domestic debt transactions with tax administrative records on their investment and labor decisions. We find that a shock to the GFC tightens external financing conditions of banks and non-financial firms borrowing in international markets. Banks pass through about half of their increased borrowing costs to firms in the domestic credit market. The increase in foreign borrowing costs due to a shock to the GFC has a negligible effect on employment, but it leads non-financial firms to lower their investment. This effect is larger for firms directly borrowing abroad, underscoring the tradeoff faced by firms: borrowing abroad at lower interest rates due to a positive UIP deviation characteristic of emerging markets vs. facing higher vulnerability to foreign shocks.

Asset Elasticities and Currency Risk Transfer

Carol Bertaut
,
Federal Reserve Board
Ester Faia
,
Goethe University Frankfurt and CEPR
Şebnem Kalemli-Özcan
,
Brown University, NBER, and CEPR
Camilo Marchesini
,
Arizona State University
Simon Paetzold
,
German Bundesbank
Martin Schmitz
,
European Central Bank

Abstract

We estimate international demand and supply elasticities for sovereign bonds using security level portfolio holdings of U.S. and Euro Area (EA) investors by exploiting exogenous variation in bond-specific currency wedges. Our identification strategy relies on a Bartik-style shift-share approach that leverages the excess portfolio share of each bond—relative to a benchmark equal-weighted portfolio—as to construct a measure of residual market demand. We document that U.S. investors (banks and nonbanks and others), with the exception of insurance companies, exhibit elastic demand for emerging market (EM) dollar-denominated bonds but an inelastic one for EM bonds denominated in local currency. EA investor types behave similarly, except that they also tend to buy high yield EM assets when US investors sell them. Interestingly, EA non-banks, who display elastic demand for EM-currency denominated bonds, increase their holdings when currency wedges widen, trading-off currency risk with higher returns. Sovereign issuers adjust their supply endogenously in response to heterogeneous changes in investor demand: for the average EM country, an exogenous increase of 8 basis point in currency wedge leads to a 0.26% decline in local currency bond issuance, relative to GDP. These micro-level elasticities, identified conditional on issuer×time fixed effects, are consistent with macro-level negative comovement between capital flows and international arbitrage deviations. We develop a theoretical framework with heterogeneous currency risk tolerance across investor types and endogenous issuance decisions, rationalizing our empirical findings and highlighting the time-varying nature of currency risk transfer between issuers, local and global investors.

Discussant(s)
Pablo D´Erasmo
,
Federal Reserve Bank of Philadelphia
Katharina Bergant
,
International Monetary Fund
Felipe Saffie
,
University of Virginia
Sangeeta Pratap
,
CUNY
JEL Classifications
  • F4 - Macroeconomic Aspects of International Trade and Finance
  • F3 - International Finance