Firm Default Risks and Exchange Rate Puzzles
主讲人：ChunyaBu, University of Rochester
主持老师：（北大经院）刘蕴霆
参与老师：（北大经院）王一鸣、王法、王熙
（北大国发院）黄卓、张俊妮、孙振庭、
（北大新结构）胡博
时间：2024年6月14日（周五）10:00-11:30
地点（线下）：北京大学经济学院107会议室
报告摘要：
This paper incorporates micro-founded financial frictions from endogenous firm default choice into an open-economy model to address exchange rates puzzles. In a two-country model with productivity shocks, firms finance investment via issuing bonds subject to default risks. Households share risks through a portfolio choice of home and foreign corporate bonds. Exchange rate paths depend on default risk premium as bond returns are risky and households are risk-averse. A positive home productivity shock dampens home default risk premium more than that of foreign. Home currency then appreciates to achieve an interest-rate parity between home and foreign creditors. On the other hand, consumption differentials rise because of the incomplete asset market. Taking together, the model is able to reconcile the Backus-Smith puzzle (Backus & Smith 1993) depending on the degree of financial frictions.
The underlying mechanism lies in the adjustment of household’s foreign asset positions. In response to a positive shock, home default risks drop so that foreign households increase home bond holdings for the hedging motive. The excess foreign demand appreciates the home currency.
Degree of financial frictions in the model is calibrated with bond-level data. Specifically, I derive a measure of financial frictions from the micro-foundation, defined as the relative default risk premium between home and foreign households, and estimate it from the spreads of corporate bonds denominated in different currencies. I use its empirical volatility to discipline the model. The quantitative results reconcile the Backus-Smith puzzle and improve the exchange rate volatility puzzle.
主讲人简介：
ChunyaBu is a PhD candidate in Economics Department of the University of Rochester. Her research interests lie in International Finance, International Macroeconomics and Monetary Policy. Her work has been published in Journal of Monetary Economics, Finance and Economics Discussion Series at the Board of Governors of the Federal Reserve System.
