Subject Area

Economic policy


Major: Business Economics
Minor: Finance and Spanish

Faculty Mentor: Dr. Fang Dong and Dr. Leo Kahane, Economics

Largely motivated by the recent yield curve inversion, the paper examines the effect of a negative interest rate environment abroad on foreign countries holdings of U.S. Treasuries. The study uses a panel dataset covering 95 developed countries over 16 years, including economic and financial composition variables, as well as push and pull factors that impact capital flows. The study uses Poisson regression as its estimation method and ultimately finds that countries facing a negative real interest rate are expected to hold 24% more Treasury bills compared to countries facing a positive real interest rate, ceteris paribus. Additionally, the model leverages a factor variable of the real interest rate to predict the marginal effect of higher interest rate levels compared to countries facing a negative interest rate on a country’s Treasury bill holdings. The paper leaves significant implications for monetary policy and investor decisions in low and negative interest rate environments.


Providence College



Start Date

4-22-2020 12:00 AM






Included in

Economics Commons



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