As part of the Vilfredo Pareto Research Seminar series, the International Economics Department at the Geneva Graduate Institute is pleased to invite you to a public talk given by Nadav Ben Zeev, Senior Lecturer at Ben-Gurion University of the Negev.
He will present his work titled The Persistent Widening of Cross-Currency Basis: When Increased FX Swap Demand Meets a Shortage of Global Arbitrage Capital
Abstract: Recent research has documented and studied a persistent widening of cross-currency basis (i.e., deviation from covered interest rate parity) for a wide range of currencies with respect to the dollar since the global financial crisis. Theory of the foreign exchange (FX) swap market predicts that shortage of global arbitrage capital (GAC), by making the FX swap supply curve less elastic, would amplify the effect of increases in institutional investors’ (IIs’) demand for FX swaps on cross-currency basis. We use novel daily data on Israeli IIs’ and global banks’ FX swap flows to test this prediction within a suitable Bayesian local projection model, finding strong evidence supporting a meaningful and persistent such amplification mechanism.
About the Speaker
Nadav Ben Zeev obtained his PhD from Hebrew University in 2012, after which he spent one year at European University Institute as a Max Weber postdoctoral fellow. Since 2013 he holds an assistant professor position in the department of economics at Ben-Gurion University of the Negev in Israel.