Stein, JeremyHall, Helene Natalia2026-07-0720262026-05-062026Hall, Helene Natalia. 2026. Essays on Frictions in International Finance and Macroeconomics. Doctoral Dissertation, Harvard University Graduate School of Arts and Sciences.32675435https://dash.harvard.edu/handle/1/42744144This thesis examines the implications of market frictions in international finance and macroeconomics in three contexts. The first chapter documents the effect of trading relationships on client trading outcomes in the over-the-counter (OTC) foreign exchange (FX) derivatives market. The second chapter documents the effect of nominal wage setting frictions on employment. The third chapter examines the behavior of non-U.S. central banks when firms engage in currency mismatch, borrowing more in dollars than given by their dollar operating exposures, emphasizing how imperfect regulation may affect U.S. dollar interest rates. In the first chapter, joint with Gerardo Ferrara, I study whether clients that rely more heavily on a dealer in the OTC FX derivatives market have worse trading outcomes after the dealer is adversely shocked. Using granular transaction-level data, we document that trading relationships are persistent—in an active trading week, clients are more likely to trade with a dealer that they had a relationship with and relied on more heavily. Then, we exploit the March 2023 collapse of Credit Suisse as an exogenous shock to exposed clients’ set of trading alternatives when relationships are persistent. Using difference-in differences analyses, we find that, although Credit Suisse’s EURUSD notional traded and trade count declined, clients that relied less heavily on Credit Suisse did not differentially reduce their Credit Suisse-specific trading activity relative to more reliant clients. Instead, more reliant clients continued trading at the client level and increased activity with other existing dealer relationships without incurring additional costs, relative to less reliant clients. These findings suggest that search and bargaining frictions were not particularly costly for heavily reliant clients after the shock—relationship persistence did not differentially prevent them from reallocating activity to existing alternative dealers, or lead to relatively greater costs, when their relationship dealer came under stress. In the second chapter, joint with Gert Bijnens, Hugo Monnery, and Laura Nicolae, I empirically document the effect of wage changes, driven by wage indexation to inflation, on firm-level employment growth. In Belgium, nearly all employees’ wages are indexed to inflation and firms are grouped into labor agreements that determine the exact timing and frequency at which wages are indexed, e.g. every year or every month. Using firm-level administrative data, we estimate two-stage least squares regressions of firm-level employment growth on wage growth, instrumented by the wage growth implied by the firm’s indexation policy. We find that employment contracts by 0.4% over four quarters for each 1% increase in wages. This result is robust to including NACE sector-date fixed effects and to using only variation in firms’ indexation timing, controlling for their chosen indexation frequency. About one-third of the response comes via anticipation of future wage increases. The elasticity is more than twice as large in magnitude in the post-pandemic period than before it, suggesting strong nonlinearities. Overall, these results show that, by preventing inflation from reducing real wages, inflation indexation reduces employment. In the third chapter, joint with Mitali Das, Gita Gopinath, Taehoon Kim, and Jeremy Stein, I document an externality of central banks’ imperfect regulation of firms that engage in currency mismatch, which results from central banks’ dollar reserve accumulation decisions. We explore how foreign central banks behave when firms engage in currency mismatch. Using a panel of 56 countries, we document that central bank holdings of dollar reserves are correlated with the dollar-denominated bank borrowing of their non-financial corporate sectors. Then, we build a model in which the central bank can deal with private-sector mismatch, and the associated risk of a domestic financial crisis, by: (i) imposing ex ante financial regulations; or (ii) accumulating dollar reserves to serve as an ex post dollar lender of last resort. The model highlights a novel externality: individual central banks may over-accumulate dollar reserves, relative to what a global planner would choose. Under imperfect regulation of currency mismatch, individual central banks do not internalize that their hoarding of reserves exacerbates a global scarcity of dollar-denominated safe assets, which lowers dollar interest rates and encourages firms to further increase the currency mismatch of their liabilities. Relative to the decentralized outcome, a global planner may therefore prefer higher capital requirements and reduced holdings of dollar reserves.application/pdfenCurrency mismatchForeign exchangeInflation indexationTrading relationshipsEconomicsThesis or Dissertation2026-07-070009-0008-3984-723X