class: center, middle, inverse, title-slide .title[ # Carry trade <br/>and the real economy<br/><span style='font-size: 32px'>Switzerland and Brazil got carried away?<br /> </style> ] .author[ ### <span style='font-size: 32px'><a href="https://bttomio.github.io">Bruno Thiago Tomio</a><br /> </style><br /> <span style='font-size: 22px; font-weight: bold'> ] .institute[ ### <span style='font-size: 22px'>20th Time Series and Econometrics Meeting [ESTE] <br/>Florianópolis, 31<sup>st</sup> July 2023<br /> </style> ] --- count: false class: inverse, center, middle # General introduction --- # Financialization of FX markets <img src="./Motivation-1.png" width="80%" style="display: block; margin: auto;" /> --- # Two key currencies involved <img src="./Motivation-2.png" width="100%" /> --- # Lack of empirical studies <img src="./Motivation-3.png" width="100%" /> --- class: center, middle # <span style="color:#2541b2; font-weight: bold"> How does carry trade impact the real economy activity?</span> --- count: false class: inverse, center, middle # Research design --- # Carry trade definition - No generally accepted -- - Borrowing and investing (canonical) -- - In this article, the carry trade is + Leveraged -- + Futures market -- + Short (funding) and Long (target) --- # Data - Volume approach, instead of prices -- - Weekly CFTC data -- - Best public data -- - Limitations + Small proportion -- + Classify traders, not activity -- + Short data range for Brazil --- # Main results - Reproducible research + <svg role="img" viewBox="0 0 24 24" style="height:1em;position:relative;display:inline-block;top:.1em;size:2;" xmlns="http://www.w3.org/2000/svg"> <title></title> <path d="M12 2.746c-6.627 0-12 3.599-12 8.037 0 3.897 4.144 7.144 9.64 7.88V16.26c-2.924-.915-4.925-2.755-4.925-4.877 0-3.035 4.084-5.494 9.12-5.494 5.038 0 8.757 1.683 8.757 5.494 0 1.976-.999 3.379-2.662 4.272.09.066.174.128.258.216.169.149.25.363.372.544 2.128-1.45 3.44-3.437 3.44-5.631 0-4.44-5.373-8.038-12-8.038zm-2.111 4.99v13.516l4.093-.002-.002-5.291h1.1c.225 0 .321.066.549.25.272.22.715.982.715.982l2.164 4.063 4.627-.002-2.864-4.826s-.086-.193-.265-.383a2.22 2.22 0 00-.582-.416c-.422-.214-1.149-.434-1.149-.434s3.578-.264 3.578-3.826c0-3.562-3.744-3.63-3.744-3.63zm4.127 2.93l2.478.002s1.149-.062 1.149 1.127c0 1.165-1.149 1.17-1.149 1.17h-2.478zm1.754 6.119c-.494.049-1.012.079-1.54.088v1.807a16.622 16.622 0 002.37-.473l-.471-.891s-.108-.183-.248-.394c-.039-.054-.08-.098-.111-.137z"></path></svg> (manuscript, presentation and econometric procedures) + Check https://github.com/bttomio/UGA_thesisdown --- # Empirical approach [I] - World economy is proxied with 21 countries and the Euro area (84% of global nominal output) <span style='font-size: 22px; font-weight: bold'>Country coverage</style> <img src="./Ch4-Table1.png" width="80%" style="display: block; margin: auto;" /> --- # Empirical approach [II] - Monthly and quarterly models (roughly) - Two measures of global risk <span style='font-size: 22px; font-weight: bold'>List of variables</style> <img src="./Ch4-Table2.png" width="100%" style="display: block; margin: auto;" /> --- # Empirical approach [III] <span style='font-size: 22px; font-weight: bold'>Time span for each model</style> <img src="./Ch4-Table3.png" width="80%" style="display: block; margin: auto;" /> --- # Empirical approach [IV] - Bayesian global vector autoregressive model (BGVAR) -- - Negative carry trade effects in both countries (main hypothesis) <span style='font-size: 22px; font-weight: bold'>GVAR setup with global risk modelled separately</style> <img src="./Ch4-Fig1.png" width="100%" style="display: block; margin: auto;" /> --- # Main results [Switzerland] <span style='font-size: 22px; font-weight: bold'> **`Negative shock on carry trade`**</style> <img src="./Ch4-CH.png" width="80%" style="display: block; margin: auto;" /> --- # Main results [Brazil] <span style='font-size: 22px; font-weight: bold'> **`Positive shock on carry trade`**</style> <img src="./Ch4-BR.png" width="80%" style="display: block; margin: auto;" /> --- count: false class: inverse, center, middle # General conclusion --- # Final remarks - In general, this article **`contributes to a better understanding`** of the carry trade effects in developed and developing countries (notably, Switzerland and Brazil) -- - By making all econometric procedures **`reproducible`**, there is a contribution for **`enhanced transparency and ethics`** in Economics -- - The **`macro-financial linkages`** remain a field widely open for new developments, wherein this article aimed to contribute on exploring the carry trade -- - Central banks... + need more research to **`tame the negative spillovers`** of monetary policy -- + could **`follow`** the CFTC to create better datasets on futures market --- count: false class: inverse, center .pull-left[ <br> # Thank you! 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