Research

• Abstract: This paper provides the first empirical evidence that cross-country variation in domestic media narratives about a destination country shapes global institutional investment flows. Using modern natural language processing methods, including transformer-based sentiment models and LLMs, applied to large-scale newspaper text from multiple countries, we measure narrative disagreement across investor countries about the same foreign economy. Drawing on more than one million newspaper articles from 39 outlets across 16 economies, we construct country-specific measures of media attention and sentiment toward China, an increasingly important investment destination with severe information frictions. We document large and persistent cross-country dispersion in sentiment, even when media cover the same topics. A counterfactual decomposition reveals that this dispersion is driven almost entirely by differences in within-topic sentiment rather than topic attention, indicating heterogeneous framing of common information. Further analysis shows that narrative disagreement reflects both slow-moving country-specific priors and heterogeneous responses to new information. Linking narratives to behavior, we find that domestic media sentiment significantly influences cross-border portfolio flows to China after controlling for fundamentals. By systematically measuring narrative disagreement and linking it to international portfolio allocation, our findings establish domestic media narratives as an important channel shaping belief formation and global capital flows. 

Abstract: In the post-QE environment, reserves are abundant, unevenly distributed, and increasingly remunerated non-linearly. These features break the traditional view that a single policy rate determines a uniform marginal funding cost. This paper shows that when the return on reserves is tiered, monetary policy acts through distributional channels: it reallocates liquidity across financial institutions, shifts intermediation capacity in the interbank market, and reshapes the entire distribution of loan rates. I develop a general framework in which institutions differ in their exposure to low-remuneration reserves. A non-linear reserve pricing schedule, such as reserve tiering, creates asymmetric funding incentives. These asymmetries prompt institutions with excess reserves to supply interbank liquidity and those with scarce reserves to borrow and expand low-rate lending. The model predicts that monetary easing compresses medium-risk loan rates, disproportionately lowers rates for riskier borrowers, and generates distinct distributional changes in credit supply. Using data on reserve balances, interbank trades, and firm-bank lending in Japan, I provide empirical evidence consistent with these mechanisms. The framework offers new insight into monetary transmission under abundant reserves and guidance for designing reserve remuneration systems in both low-rate and overheating environments.

• Abstract: This paper studies domestic monetary policy transmission in European countries with a significant share of lending and deposits in foreign currency, referred to as ‘euroized economies’. We find that the impact of domestic monetary policy shocks on both inflation and GDP diminishes with the degree of euroization across countries: the effects are twice as high in non-euroized countries compared to countries in our sample with the highest level of euroization. We further examine the exchange rate, credit and interest rate transmission channels, which are typically less effective in euroized economies. We show that domestic monetary policy has at best limited effects on the exchange rate. In addition, during the post-pandemic monetary tightening episodes, an increase in foreign-currency loans often softened the decline in overall credit growth, and rates of foreign-currency loans have followed the ECB policy rate rather than the domestic ones. By contrast, our analysis suggests that the pass-through to interest rates of domestic currency loans is similar across countries with different levels of euroization.