06477oam 22012974 450 991078834790332120230721045657.01-4623-3660-41-4527-3292-21-4518-7196-197866128427021-282-84270-6(CKB)3170000000055192(EBL)1608157(SSID)ssj0000941802(PQKBManifestationID)11505472(PQKBTitleCode)TC0000941802(PQKBWorkID)10963924(PQKB)10825723(OCoLC)650278667(MiAaPQ)EBC1608157(IMF)WPIEE2009048(EXLCZ)99317000000005519220020129d2009 uf 0engtxtccrInternational Currency Portfolios /Michael KumhofWashington, D.C. :International Monetary Fund,2009.1 online resource (37 p.)IMF Working PapersDescription based upon print version of record.1-4519-1631-0 Includes bibliographical references.Contents; I. Introduction; II. The Model; A. Uncertainty; 1. Exogenous Processes; 2. Endogenous Processes; B. Households; C. Government; D. Equilibrium and Current Account; E. Interpretation of the Portfolio Share Equations; F. Equilibrium Diffusions; G. Computation of Equilibrium; H. Government Bond Market Interventions; III. The Baseline Economy; A. Calibration; B. Baseline Portfolio Equilibrium; IV. Comparing Alternative Economies; A. Standard Deviation of Monetary Shocks; B. Standard Deviation of Fiscal Shocks; C. Government Debt to GDP Ratios; V. Open Market Operations in Government DebtVI. Conclusions Figures; 1. Household and Government Balance Sheets; 2. Effects of Money Supply Volatility, phi=phistar=1; 3. Effects of Money Supply Volatility, phi=phistar=0; 4. Effects of Government Spending Volatility, phi=phistar=1; 5. Effects of Government Debt, phi=phistar=1; 6. Home Open Market Operations, phi=phistar=1; 7. Home Open Market Operations, phi=phistar=0; 8. Home Open Market Operations, Large Gross FX Positions; ReferencesThis paper develops a theory of international currency portfolios that holds in general equilibrium, and that is therefore not subject to the criticisms directed at the portfolio balance literature of the 1980s. It shows that, under plausible assumptions about fiscal policy, the relationship between the rates of return of different currency bonds is not correctly described by an arbitrage relationship but instead also depends on outstanding bond stocks. Other findings are: (1) There is a monotonically increasing relationship between domestic interest rates and the portfolio share of domestic currency denominated assets. This relationship is steep at low levels of government debt, and almost flat at high levels of government debt. (2) Optimal private sector foreign currency positions are negative, and their size is decreasing in exchange rate volatility. Under volatile exchange rates large negative aggregate net foreign asset positions can only be rationalized by assuming large public sector borrowing from foreign governments. (3) For a baseline economy with zero net foreign assets, open market sales of domestic government debt lead to valuation gains (losses) when the country as a whole has a short (long) position in foreign currency. (4) A fiscal theory of exchange rate determination is compatible with general equilibrium in a two-country world. (5) Equilibria are determinate when both fiscal and monetary policy are passive.IMF Working Papers; Working Paper ;No. 2009/048Fiscal policyOpen market operationsBanks and BankingimfForeign ExchangeimfInvestments: StocksimfMoney and Monetary PolicyimfMonetary SystemsimfStandardsimfRegimesimfGovernment and the Monetary SystemimfPayment SystemsimfOpen Economy MacroeconomicsimfCentral Banks and Their PoliciesimfMonetary Policy, Central Banking, and the Supply of Money and Credit: GeneralimfPension FundsimfNon-bank Financial InstitutionsimfFinancial InstrumentsimfInstitutional InvestorsimfMonetary economicsimfCurrencyimfForeign exchangeimfBankingimfInvestment & securitiesimfCurrenciesimfExchange ratesimfOpen market operationsimfMonetary baseimfStocksimfMoneyimfCentral banksimfFinancial institutionsimfMoney supplyimfUnited StatesimfFiscal policy.Open market operations.Banks and BankingForeign ExchangeInvestments: StocksMoney and Monetary PolicyMonetary SystemsStandardsRegimesGovernment and the Monetary SystemPayment SystemsOpen Economy MacroeconomicsCentral Banks and Their PoliciesMonetary Policy, Central Banking, and the Supply of Money and Credit: GeneralPension FundsNon-bank Financial InstitutionsFinancial InstrumentsInstitutional InvestorsMonetary economicsCurrencyForeign exchangeBankingInvestment & securitiesCurrenciesExchange ratesOpen market operationsMonetary baseStocksMoneyCentral banksFinancial institutionsMoney supplyKumhof Michael1472664International Monetary Fund.DcWaIMFBOOK9910788347903321International Currency Portfolios3716530UNINA