Research

Working Papers

1. [Job Market Paper] Managing Emerging Market Currency Risk, with Haonan Zhou, [SSRN][Job Market Paper Version]

Presentations: CEPR International Macro & Finance Program (2025), IMF (2025), Cambridge SFX (2025), CICF (2025), SED (2025), PKU IMFC9 (2025), HKU-CUHK IFS (2025), JHU SAIS (2025), Columbia Business School (2023, 2024, 2025), Princeton University (2023)

Abstract: Using contract-level data on U.S. bond funds’ currency forward positions from 2010–2023, we document that foreign investors dedicated to emerging markets (EM) bear substantially greater currency risk than their bond holdings suggest. On average, funds amplify their EM currency exposure by 14% through net long position in forwards linked to bond positions, and even more when including forwards without corresponding bond investments. This forward usage pattern is strongly related to the degree of capital control imposed by currency issuers, underpinned by a triangular relationship between capital flow restrictions, funds’ bond portfolio deviations from local currency benchmark weights, and net forward purchases. Meanwhile, for funds that sell local currencies forward overall, bond portfolio weights strongly predict forward sales, indicating an inelastic hedging demand for currency forwards. Informed by the empirical analysis, an equilibrium model featuring investor heterogeneity, capital flow restrictions and forward market segmentation is able to rationalize empirical properties of the forward premia of EM currencies.

2. From Banks to Nonbanks: Macroprudential and Monetary Policy Effects on Corporate Lending, with Bruno Albuquerque, Eugenio Cerutti, and Melih Firat, [IMF WP], R&R at American Economic Journal: Macroeconomics

Presentations:  European Stability Mechanism (2025), Central Bank Research Association Annual Conference (2025), EEA (2025), Fed Board (2025), Midwest Macro (2025), IMF (2024, 2025).

Featured in: 2025 G20 Global Financial Stability Conference

Abstract: The growing role of nonbanks in corporate credit intermediation raises important yet underexplored questions about the transmission of monetary policy (MP) and macroprudential policy (MaPP) to the real economy. Using syndicated loan data, we examine the impact of both MP and MaPP shocks on credit supply to nonfinancial firms. We show that nonbanks act as shock absorbers, cushioning firms - particularly those with preexisting nonbank relationships - from policy tightening. These shocks drive credit away from weaker banks toward nonbanks, raising concerns about credit quality. We also provide evidence that MaPPs on banks can lead them, especially weaker ones, to shift lending to nonbanks and away from nonfinancial corporations. This allows nonbanks to expand their footprint in corporate credit markets. Our findings highlight that the side effects of tighter MP and MaPP are non-trivial as credit intermediation migrates to a sector largely outside the regulatory perimeter, posing new financial stability risks.

Policy Writings

1.  From Banks to Nonbanks: Macroprudential and Monetary Policy Effects on Corporate Lending, with Bruno Albuquerque, Eugenio Cerutti, and Melih Firat,  [VOXEU]

A non-technical policy note on the growing role of nonbank financial institutions in corporate credit intermediation and how they differ from traditional banks in lending behaviors in response to monetary and macroprudential policy shocks.

Selected Work in Progress

1. Optimal Capital Control with FX Derivative Markets

2. Quantifying Capital Control: a Portfolio Choice Approach

3. Global Investment and Monetary Policy, with Wenxin Du, Haonan Zhou, and Qifei Zhu