Adam Smith Business School

Professor Pasquale Della Corte, Imperial College London

"The Global Network of Financial Intermediation and Exchange Rates"
Wednesday, 29 May 2024. 15:00-16:30
Room 383, Adam Smith Business School & PGT Hub

Abstract

In a world with imperfect financial markets, the ability financiers to intermediate bilateral financial flows matters for exchange rate determination. This bilateral financial connection has been the focus of the literature. In this paper, we show both theoretically and empirically, that higher-order connections, and thus the entire network structure of cross-border financial intermediation, matters for exchange rates. Empirically, we find that, conditional on external financing needs (i.e., trade imbalances), higher-order financial connections predict future exchange rate returns, with different effects depending on both the source of the trade shock and the size of the country. We rationalize these findings by extending Gabaix and Maggiori (2015) model to a multicountry set-up with a rich financial network structure and heterogeneous country sizes that unveils the importance of network effects for exchange rate determination.

Bio

I am a Professor of Finance at Imperial College London and a Research Affiliate at the Centre for Economic Policy Research (CEPR). Prior to joining Imperial College, I was an Assistant Professor of Finance at the University of Warwick and I held visiting research positions at the Bank of England, CEMFI, City University of Hong Kong, Einaudi Institute for Economics and Finance, Federal Reserve Bank of St. Louis, Norges Bank, Hong Kong Institute for Monetary Research, and Washington University in St. Louis.

My research focuses on international finance, empirical asset pricing, financial intermediation, and Bayesian econometrics, and has been published in the Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Review of Economics and Statistics, and the Journal of Empirical Finance. I have also received the Inquire UK 2010 and Inquire UK 2011 Best Paper Awards, and the Kepos Capital Award for the Best Paper on Investments at the 2013 WFA meetings.

I hold a Laurea in Economics and Banking summa cum laude from the University of Siena (Italy), a Master in Economics and Finance from the University of Brescia (Italy), and a PhD in Finance from the University of Warwick (United Kingdom).

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First published: 19 May 2024