Graph 1: Currency share of cross-border claims In % of total in all currencies
Graph 1, titled Currency share of cross-border claims (in percent of total in all currencies), shows the shares of various currencies (USD, EUR, GBP, JPY, and CHF) in the total cross-border claims of the 17 banking systems in our sample. The graph has three panels. In all three panels, the x axis shows dates in years with range [2012; 2024]. The y axis shows percent shares with range [0; 60].
The left panel shows currency shares for claims on the bank sector. The share of USD was approximately 50 percent in 2012, then increased to over 60 percent, before gradually declining. With a recent uptick, the share was just below 50 percent at end-2023. The share of EUR rose gradually from around 25 percent over the past 12 years, constituting around 30 percent of cross-border shares in 2023. The shares of GBP, JPY, and CHF remained little changed, hovering at around 10 percent or below, each.
The middle panel shows currency shares for claims on the non-bank sector. The share of USD was approximately 60 percent in 2012, then increased to over 60 percent, and remained little changed for about a decade before gradually declining to around 50 percent over the past years. The share of EUR, GBP, and CHF remained little changed, hovering around 15 percent, 10 percent, and less than 5 percent, respectively. The share of JPY rose gradually to around 12 percent by end-2023.
The right panel shows currency shares for claims on all sectors combined. The patterns of currency shares over time are very similar to those seen for claims on the bank sector, with the USD showing a slightly small dip, and the EUR showing a slightly smaller uptick, during the pandemic years.
Graph 2: Central bank policy rate and Krippner shadow short rate by currency In percentage
Graph 2 is titled central bank policy rate and Krippner shadow short rate by currency, in percentage. There are five panels, each showing interest rates associated with one of the five currencies studied in the paper. In each panel, the x axis shows dates in years, with range [2012; 2024]. The y axis shows percents (interest rates), with [-6; 4] range.
The top left panel shows the policy and shadow interest rates for the US. The policy rate (the mid-point of the fed funds rate target range) remained at the zero lower bound until the liftoff at end-2015, rose gradually to over 2 percent until the third quarter of 2019, then declined to near zero in Q1 2020. The policy rate then lifted from zero in Q1 2022 and increased gradually through the end of the sample. The short-term shadow rate was near -4 percent in the first year of the sample period, then gradually increased to zero by end-2015. The shadow rate was identical to the policy rate when the policy rate was positive, from end-2015 to Q1 2020. After the onset of COVID, the shadow rate dipped to below -2 percent then rose back to zero by Q1 2022. The shadow and policy rates have been identical for the remainder of the sample period.
The top middle panel shows the policy and shadow interest rates for the euro zone. The policy rate declined about half a percentage point to 50 basis points by the second part of 2014, then to the zero lower bound by the start of 2016, where it remained until the third quarter of 2022. The policy rate then gradually increased to 4.5 percent by end-2023. The short-term shadow rate for the euro area was around -0.6 percent at the start of the sample, then remained in negative territory (with notable dips in 2014 and 2016), then returned to positive values, co-moving with the policy rate, starting in the first half of 2022.
The top right panel shows the policy and shadow interest rates for Japan. After starting the sample near zero, the policy rate rises to around 0.3 percent through 2016, then dips into slightly negative territory at end-2016 and remains there unchanged through the end of the sample. The short-term shadow rate starts the sample at around -2.7 percent, then declines to near -6 percent by 2016, rises back to near -1.5 percent by 2018, then dips again to below -4.5 percent by the second half of 2019. The shadow rate then rises to near -1 percent in Q1 2022, and gradually approaches zero by the end of the sample.
The bottom left panel shows the policy and shadow interest rates for the UK. The policy rate starts the sample at 0.5 percent, drops to 0.25 percent at end-2016 for a year, rises to 0.75 percent by end-2019, before dropping to near zero in Q1 2020. The policy rate begins to gradually rise at end-2021 and reaches over 5 percent by the end of our sample. The short-term shadow rate starts the sample at near -3.5 percent, drops to near -5 percent by Q1 2013, then rises gradually and turns positive by Q2 2014. The rate turns negative again in 2016 and dips below -2 percent before rising to the positive range again in in the second half of 2017. The shadow rate then moves with the policy rate in tandem before turning negative again in Q1 2020, dipping below -2 percent by the end of 2020, then turns positive again in the second half of 2013 and moves with the policy rate through the end of the sample.
The bottom middle panel shows the policy and shadow interest rates for Switzerland. The policy rate starts the sample just above zero, where it remains unchanged until Q3 2014. The policy rate then decreases to -0.75 percent where it stays through 2022. The rate turns positive in Q3 2022 and gradually increases to 1.75 percent in 2023. The shadow rate started the sample around -1.6 percent, then hovered around -2 percent through 2022, with temporary dips in 2016 (to around -3.4 percent) and at end-2019 (to near -4.7 percent). The shadow rate turned positive with the policy rate in the second half of 2022, then rose in tandem with the policy rate through the end of the sample.