Our speaker will be Zhengyang Jiang(Kellogg School of Management, Northwestern University).

He will give a talk on "Exorbitant Privilege: A Safe-Asset View".

Abstract: I develop a model of the reserve currency paradigm that centers on demand for safe assets. In global recessions, the demand for U.S. safe bond increases and raises its convenience yield, giving rise to a stronger dollar and a countercyclical seigniorage revenue. This seigniorage revenue raises the U.S. wealth and consumption shares in recessions, despite the U.S. suffering portfolio losses from its external positions. The asset demand channel also connects wealth decline during local recessions to local currency depreciation, which generates procyclical exchange rates and provides a new perspective on the relationship between exchange rates and capital flows. Under this safe asset view, exorbitant privilege does not require exorbitant duty.

The talk will take place on May 22, 2024 at 01:00 pm in room D3.0.222.