Carry trade in an agent-based stock flow-consistent model

CAVERZASI, EUGENIO; CATULLO, ERMANNO; BORTZ PABLO GABRIEL

Workshop; Agent-based models and central banking: where from and where to; 2025

Banco Central Europeo

This paper explores the macroeconomic implications of carry-trade indebtedness by Non-FinancialCorporations (NFCs) and banks of Emerging Market Economies (EMEs), who borrow in internationalmarkets (and in foreign currency) to (partially) invest in domestic  nancial instruments. For thataim, we develop an Agent-Based Stock-Flow Consistent model (AB-SFC) to explore the interactionbetween different sectors without imposing exceedingly restrictive information requirements on agents.The model allows us to further explore the impact of macroprudential policies aimed to restrict creditgrowth by NFCs. The model is conceived so as to be easily adapted to different contexts, as it aspiresin representing a benchmark AB-SFC model for the investigation of Carry Trades and international financial flows in general.