【Macro Seminar】Geopolitics and Reserve Demand: Theory and Evidence from China
2026/06/08
研討會日期 : 2026-06-08
時間 : 14:30
主講人 : Dr. Russell Wong
地點 : Conference Room B110
主持人 : Professor Terry Cheung
演講者簡介 : Dr. Russell Wong received his Ph.D. in Economics from Washington University in St. Louis in 2012. He is currently a Senior Economist and Research Advisor at the Federal Reserve Bank of Richmond. His research interests are Macroeconomics, Monetary Economics, and Financial Economics.
演講摘要 : Global banks' demand for U.S. reserve as the primary payment instrument is central to dollar dominance. This paper examines how geopolitical tension alters that demand. We build a search-theoretic model of interbank loans in which reserves serve both as payment and asset. Geopolitical tension appears as three forms of counterparty risks. Unlike predictions from existing models, we show that banks increase unsecured interbank borrowing under freeze and primary-sanction risks, but increase reserve holding and secured borrowing under secondary-sanction risk. To test these predictions, we construct a new U.S.—China geopolitical tension index using a large language model trained to classify high-frequency Chinese news, and combine it with bank-level data in China and U.S. In periods of elevated tension, U.S. banks in China hold larger reserve balances, reduce unsecured borrowing but expand secured borrowing, consistent with our predicted responses to the secondary-sanction risk. Chinese banks in the United States exhibit responses consistent with the freeze and primary-sanction risks. We also found that Chinese banks were able to shift exposures toward Hong Kong institutions. These findings indicate that geopolitical tension can raise the demand for payment asset; at peak U.S.—China tension, reserve holdings were about 9.6% higher. This margin is largely absent from existing studies.
