Global Financial Dynamics : rates, dollarization, and investor behavior

Abstract: In Washington D.C., big decisions impact global markets. At the same time, these very markets are also moved by the choices of individual investors, guided by their beliefs, biases, and emotions. It is this interplay between macro-level policies and micro-level decisions that drives financial markets. On the macro side, the US has a substantial influence on the global economy. In Ripple Effect, I examine how shifts in US monetary policy reverberate across international markets. Meanwhile, in Stubborn Dollarization in Emerging Markets and Heterogeneous Currency Risk, I shed light on dollarization, investigating its roots, risks, and the ramifications of US dollar fluctuations on economies abroad. Turning to the micro level, Legacy Liability in the Green Transition outlines biases in human perception affecting their financial choices; and offers strategies for firms to effectively navigate them. Specifically, I examine how a firm’s ties to outdated technologies impact investor trust during green transitions, and find that creating a spin-off is most effective for major shifts. From the ripples caused by the Fed’s interest rate hikes that spread across the global economy, the origins and perils of dollarization, to the subtle behavioral biases affecting sustainable investment, this work is grounded in the realities of the financial world. It’s about getting to the heart of why markets move the way they do and why investors often make the choices they do.