Currencies of External Balance Sheets

By Cian Allen, Deepali Gautam, Luciana Juvenal

November 17, 2023

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Format: Chicago

Cian Allen, Deepali Gautam, and Luciana Juvenal. Currencies of External Balance Sheets, (USA: International Monetary Fund, 2023) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper assembles a comprehensive dataset of the currency composition of countries’ external balance sheets for 50 economies over the period 1990–2020. We document the following findings: (i) the US dollar and the euro still dominate global external balance sheets; (ii) there were striking changes in the currency composition across countries since the 1990s, with many emerging markets having moved from short to long positions in foreign currency, thus moving away from the so-called “original sin”; (iii) financial and tradeweighted exchange rates are weakly correlated, suggesting the commonly used trade indices do not adequately reflect the wealth effects of currency movements, and (iv) the large wealth transfers across countries during COVID-19 and the global financial crises increased global imbalances in the former, and reduced them in the latter.

Subject: Currencies, Exchange rates, Financial crises, Financial statements, Foreign currency exposure, Foreign exchange, Global financial crisis of 2008-2009, Money, Public financial management (PFM)

Keywords: Currencies, Currency composition, Currency exposure, Currency mismatch risk, Currency movement, Debt liability, Exchange rates, Financial statements, Foreign currency exposure, Global, Global financial crisis of 2008-2009, International investment position, Pound sterling, Wealth effect

Publication Details

Pages:

49
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/237
Stock No:

WPIEA2023237
ISBN:

9798400260100
ISSN:

1018-5941

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