Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/53840 
Authors: 
Year of Publication: 
2010
Series/Report no.: 
Bank of Canada Working Paper No. 2010-14
Publisher: 
Bank of Canada, Ottawa
Abstract: 
This paper studies the impact of international capital flows on asset prices through risk premia. We investigate whether foreign purchases of U.S. Treasury securities significantly contributed to the decline in excess returns on long-term bonds between 1995 and 2008. We run forecasting regressions of realized excess returns on measures of net purchases of treasuries by both foreign official and private agents. We find a clear distinction in the effects of flows on excess returns. Official flows, with a negative and non-linear effect, appear similar to relative supply shocks; private net purchases, with a positive and linear effect, resemble flows that absorb excess supply and are thus compensated in equilibrium for this service, similar to the role of arbitrageurs in preferred-habitat models of the term structure.
Subjects: 
Financial markets
JEL: 
G11
G12
G15
F31
F32
F34
C22
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
322.63 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.