Replication data for: Foreign Safe Asset Demand for US Treasurys and the Dollar

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Project Citation:

Jiang, Zhengyang, Krishnamurthy, Arvind, and Lustig, Hanno. Replication data for: Foreign Safe Asset Demand for US Treasurys and the Dollar. Nashville, TN: American Economic Association [publisher], 2018. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-13. https://doi.org/10.3886/E114463V1

Project Description

Summary: We present theory showing that the spot dollar exchange rate reflects the value of all future convenience yields that foreign investors assign to US Treasuries. The convenience yield also creates wedge, the Treasury-based dollar basis, between the yield on foreign bonds and the currency-hedged yield on US Treasury bonds. We use the Treasury basis to measure the foreign convenience yield and show that an increase in the basis coincides with an appreciation of the dollar, consistent with the theory. The variation in the Treasury basis accounts for 25 percent of the quarterly variation in the dollar between 1988 and 2017.

Scope of Project

JEL Classification:
      E43 Interest Rates: Determination, Term Structure, and Effects
      F31 Foreign Exchange
      G15 International Financial Markets

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V1 [2019-10-13]

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