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Elusive Safety: The New Geography of Capital Flows and Risk / Laura Alfaro, Ester Faia, Ruth A. Judson, Tim Schmidt-Eisenlohr.
- Format:
- Book
- Author/Creator:
- Alfaro, Laura.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w27048.
- NBER working paper series no. w27048
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- A confidential dataset with industry-level disaggregation of U.S. cross-border claims and liabilities, shows U.S. securities to be increasingly intermediated by tax-haven-financial-centers (THFC) and less regulated funds. These securities are risky, in intangible-intensive sectors, requiring higher Sharpe ratios; while the foreign-official sector mainly holds Treasuries. Facts on private securities are rationalized through a model where firms with heterogeneous default probabilities, and funded by global intermediaries, endogenously locate affiliates in THFCs. A decline in the cost of funds or in THFC's taxes/regulation, raises profits and firms' incentives to enter THFCs. Firms appear elusively safe, intermediaries reduce monitoring incentives and debt risk increases.
- Notes:
- Print version record
- April 2020.
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