We show that exchange rate correlations tend to be explained by the global trade network while consumption correlations tend to be explained by productivity correlations. Sharing common trade linkages with other countries increases exchange rate correlations beyond bilateral linkages. We explain these findings using a model of the global trade network with market segmentation. Interdependent global production generates international comovements, while market segmentation disconnects the drivers of exchange rate correlations from the drivers of consumption correlations. Moreover, we show that the trade network generates common factors found in exchange rates. Our findings offer a trade-based account of the origins of international comovements and shed light on important frictions in international markets.

We find that central bank reserves injected by QE crowd out bank lending. We estimate a structural model with cross-sectional instrumental variables for deposit and loan demand. Our results are determined by the elasticity of loan demand and the impact of reserve holdings on the cost of supplying loans. The reserves injected by QE raise loan rates by 7.4 basis points, and each dollar of reserves reduces bank lending by 7.7 cents. Our results imply that a large injection of central bank reserves has the unintended consequence of crowding out bank loans because of bank balance sheet costs.

We attribute variation in the strength of the U.S. dollar and its covariance with other currencies to economic primitives using a global asset demand system. We take global investor savings, asset supply, and monetary policy as exogenous primitives, and show how these variables explain dollar exchange rate behavior. Prior to the global financial crisis, global savings and demand shifts explain dollar depreciation, whereas post-crisis they explain dollar appreciation. Interest rates and cross-border bank loans explain short-term fluctuations in the dollar, but decline in significance over longer horizons. When explaining the dollar factor structure, we find that global savings explain common variations across dollar exchange rates, whereas investor demand shifts account for cross-sectional heterogeneity in dollar betas.

We survey thousands of affluent American investors to examine the relationship between personalities and investment decisions. The Big Five personality traits correlate with investors' beliefs about the stock market and economy, risk preferences, and social interaction tendencies. Two personality traits, Neuroticism and Openness, stand out in their explanatory power for equity investments. Investors with high Neuroticism and those with low Openness tend to allocate less investment to equities. We examine the underlying mechanisms and find evidence for both standard channels of preferences and beliefs and other nonstandard channels. We show consistent out-of-sample evidence in representative panels of Australian and German households.