Friederike Niepmann's Personal Webpage

Principal Economist
Board of Governors of
the Federal Reserve System
International Finance Division
Constitution Avenue NW
Washington, DC 20551
Tel.: +1-202-452-2485


Webpage at the Federal Reserve Board:


I am a Principal Economist in the International Finance Division at the Federal Reserve Board, a research affiliate of the Centre for Economic Policy Research (CEPR), and a fellow of the CESifo Group Munich. From September 2012 to August 2015, I was a researcher in Research and Statistics at the New York FED. I received my PhD from the European University Institute (EUI) in Florence in 2012. My research focuses on international aspects of banking. My broader interests span topics in international trade and investment, international finance and macro, and financial intermediation.

Curriculum Vitae

My CV can be downloaded from here (as a pdf-file).


In joint work with Annie McCrone, Ralf Meisenzahl and Tim Schmidt-Eisenlohr, we show how the FED's provision of global dollar liquidity, especially through its swap lines with other central banks, supports U.S. borrowers in the leveraged loan market. Read our Chicago Fed Letter here.

My paper "The Dollar and Corporate Borrowing Costs" joint with Ralf Meisenzahl and Tim Schmidt-Eisenlohr shows that a stronger dollar implies higher borrowing costs and lower lending volumes for U.S. corporations in the leverage loan market. This is because institutional investors' demand for these loans falls when the dollar appreciates. We conclude that global factors, reflected in the dollar, significantly affect U.S. borrowing costs.

My IFDP note with Nicholas Coleman and Stefan Walz provides an estimate of the cost of Brexit for U.S. banks. The paper is available here.

My Liberty Street Economics Blog post "Around the world in 8,379 foreign entities" explores the locations of U.S. financial institutions' foreign affiliates and the complexity of their ownership structures.

You can read summaries of my work on trade finance as VoxEU blog posts here and here.

Research Papers


"The Dollar and Corporate Borrowing Costs" (with Ralf Meisenzahl and Tim Schmidt-Eisenlohr), CEPR Discussion Papers 14892.

Abstract: We show that U.S. dollar movements affect syndicated loan terms for U.S. borrowers, even for those without trade exposure. We identify the effect of dollar movements using spread and loan amount adjustments during the syndication process. Using this high-frequency, within loan variation, we find that a one standard deviation increase in the dollar index increases spreads by up to 15 basis points and reduces loan amounts and underpricing by up to 2 percent and 7 basis points, respectively. These effects are concentrated in dollar appreciations. Our results suggest that global factors reflected in the dollar determine U.S. borrowing costs.


"The Effect of U.S. Stress Tests on Monetary Policy Spillovers to Emerging Markets" (with Emily Liu and Tim Schmidt-Eisenlohr), International Finance Discussion Paper 1265, forthcoming in a special issue of the Review of International Economics.

Read the VoxEU blog post summarizing the paper here.

Abstract: This paper shows that monetary policy and prudential policies interact. U.S. banks issue more commercial and industrial loans to emerging market borrowers when U.S. monetary policy eases. The effect is less pronounced for banks that are more constrained through the U.S. bank stress tests, reflected in a lower minimum capital ratio in the severely adverse scenario. This suggests that monetary policy spillovers depend on banks' capital constraints. In particular, during a period of quantitative easing when liquidity is abundant, banks are more flexible, and the scope for adjusting lending is larger when they have a bigger capital buffer. We conjecture that bank lending to emerging markets during the zero-lower bound period would have been even higher had the United States not introduced stress tests for their banks.


"Institutional Investors, the Dollar, and U.S. Credit Conditions" (with Tim Schmidt-Eisenlohr), International Finance Discussion Paper 1246.

Read the VoxEU blog post summarizing the paper here.

Abstract: This paper documents that an appreciation of the U.S. dollar is associated with a reduction in the supply of commercial and industrial loans by U.S. banks. An increase in the broad dollar index by 2.5 points (one standard deviation) reduces U.S. banks' corporate loan originations by 10 percent. This decline is driven by a reduction in the demand for loans on the secondary market where prices fall and liquidity worsens when the dollar appreciates, with stronger effects for riskier loans. Today, the main buyers of U.S. corporate loans-and, hence, suppliers of funding for these loans-are institutional investors, in particular mutual funds, which experience outflows when the dollar appreciates. A shift of traditional financial intermediation to these relatively unregulated entities, which are more sensitive to global developments, has led to the emergence of this new channel through which the dollar affects the U.S. economy, which we term the secondary market channel.


"Modeling Your Stress Away" (with Viktors Stebunovs), International Finance Discussion Paper 1232.

Read the VoxEU blog post summarizing the paper here.

Abstract: We investigate systematic changes in banks' projected credit losses between the 2014 and 2016 EBA stress tests, employing methodology from Philippon et al. (2017). We find that projected credit losses were smoothed across the tests through systematic model adjustments. Those banks whose losses would have increased the most from 2014 to 2016 due to changes in their exposures and supervisory scenarios, keeping the models constant, saw the largest decrease in losses due to model changes. Model changes were realistic and more pronounced for banks that rely more on the Internal Ratings Based approach, and they explain the cross-section of market responses to the release of the 2016 results. Stock prices and CDS spreads increased more for banks with larger reductions in projected credit losses due to model changes, as investors apparently did not interpret lower loan losses as reflecting a decrease in credit risk but, instead, as a sign of lower capital requirements going forward.


"Foreign Currency Loans and Credit Risk: Evidence from U.S. Banks" (with Tim Schmidt-Eisenlohr), CEPR Working Papers 14212 (new version as of December 2019!).

Abstract: When firms borrow in foreign currency, exchange rate changes can affect their ability to repay the debt. Loan-level data from U.S. banks' regulatory filings show that a 10 percent depreciation of the local currency quarter-to-quarter increases the probability that a firm becomes past due on its loans by 37 basis points for firms with foreign currency debt relative to those with local currency debt. Because firms do not perfectly hedge, exchange rate risk of the borrowers translates into credit risk for banks. Firms are more likely to borrow in foreign currency if they have foreign income and if a UIP deviation makes foreign currency loans cheaper. The paper establishes additional facts on large U.S. banks' international corporate loan portfolios, offering a more comprehensive perspective than syndicated loan data.


"Banking Across Borders With Heterogeneous Banks", International Finance Discussion Papers 1177. Latest version as of June 2016

Abstract: This paper develops a model of banking across borders where banks differ in their efficiencies that can replicate key patterns in the data. More efficient banks are more likely to have assets, liabilities and affiliates abroad and have larger foreign operations. Banks are more likely to be active in countries that have less efficient domestic banks, are bigger and more open to foreign entry. In the model, banking sector integration leads to bank exit and entry and convergence in the return on loans and funding costs across countries. Bank heterogeneity matters for the associated welfare gains. Results suggest that differences in bank efficiencies across countries drive banking across borders, that fixed costs are crucial for foreign bank operations and that globalization makes larger banks even larger.

Published Work


"No Guarantees, No Trade: How Banks Affect Export Patterns" (with Tim Schmidt-Eisenlohr), Journal of International Economics 108: 338-350.

Read what the Real Time Economics Blog of the Wall Street Journal has to say about this research here. A Liberty Street Economics Blog post summarizes the findings of this study. Read the post here.

Abstract: Employing new data on U.S. banks' trade-finance claims by country, this paper estimates the effect of letter-of-credit supply shocks on U.S. exports. We show that a one-standard deviation negative shock to a country's letter-of-credit supply reduces U.S. exports to that country by 1.5 percentage points. This effect is driven by countries that are small and where few banks are active. It more than doubles during the 2007-09 crisis. The provision of letters of credit is highly concentrated and banks are geographically specialized. Therefore, shocks to individual banks can have sizable effects in the aggregate and affect trade patterns.


"International Trade, Risk and the Role of Banks" (with Tim Schmidt-Eisenlohr), Journal of International Economics 107: 111-126.

An earlier version of this paper was circulated under the title "Banks in International Trade Finance: Evidence from the U.S.''

Two Liberty Street Economics Blog posts summarize key findings of the paper. Read about The Trade Finance Business of U.S. Banks and Why U.S. Exporters Use Letters of Credit.

A short version of the paper is also available as a Berne Union Working Paper.

Abstract: International trade exposes exporters and importers to substantial risks. To mitigate these risks, firms can buy special trade finance products from banks. This paper explores under which conditions and to what extent firms use these products. We find that letters of credit and documentary collections cover about 10 percent of U.S. exports and are preferred for larger transactions, indicating substantial fixed costs. Letters of credit are employed the most for exports to countries with intermediate contract enforcement. Compared to documentary collections, they are used for riskier destinations. We provide a model that rationalizes these empirical findings and discuss implications.


"International Banks and Cross-border Effects of Regulation: Lessons from the United States" (with Jose Berrospide, Ricardo Correa and Linda Goldberg), International Journal of Central Banking, March 2017. (Circulated as NBER Working Paper No. 22645.)

Abstract: Domestic prudential regulation can have unintended effects across borders and may be less effective in an environment where banks operate globally. Using U.S. micro-banking data for the first quarter of 2000 through the third quarter of 2013, this study shows that some regulatory changes indeed spill over. First, a foreign country's tightening of limits on loan-to-value ratios and local currency reserve requirements increase lending growth in the United States through the U.S. branches and subsidiaries of foreign banks. Second, a foreign tightening of capital requirements shifts lending by U.S. global banks away from the country where the tightening occurs to the United States and to other countries. Third, tighter U.S. capital regulation reduces lending by large U.S. global banks to foreign residents.


"What Determines the Composition of International Bank Flows?" (with Cornelia Kerl), IMF Economic Review 63(4): 792-829.

Abstract: This paper studies how frictions to foreign bank operations affect the sectoral composition of banks' foreign positions, their funding sources and international bank flows. It presents a parsimonious model of banking across borders, which is matched to bank-level data and used to quantify cross-border frictions. The counterfactual analysis shows how higher barriers to foreign bank entry alter the composition of international bank flows and may reverse the direction of net interbank flows. It also highlights that interbank lending and lending to non-banking firms respond differently to changes in foreign and domestic conditions. Ultimately, the analysis suggests that policies that change cross-border banking frictions and, thereby, the composition of banks' foreign activities affect how shocks are transmitted across borders.


"Banking across Borders", Journal of International Economics, 96(2): 244-265.

Awarded the CESifo Distinguished Affiliate Prize in 2012.

Abstract: The international linkages between banks play a crucial role in today's global economy. Existing models explain these links on the basis of portfolio theory, in which banks diversify lending. These models have found only limited empirical support and do not speak to many relevant dimensions of the data. For example, they do not address heterogeneity in the degree to which banking sectors fund their foreign operations locally in foreign markets. This paper proposes a complementary theory to explain banking across borders that is based on elements of international trade theory. In the model, banking across borders arises because countries differ in their relative factor endowments and in the efficiency of their banking sectors. Based on these differences, the pattern of foreign bank asset and liability holdings emerges endogenously. This parsimonious model provides a rationale for different dimensions of heterogeneity in foreign bank activities and clarifies the interpretation of international banking data. Its predictions are consistent with observed patterns in the data.


"Bank Bail-outs, International Linkages and Cooperation" (with Tim Schmidt-Eisenlohr), American Economic Journal: Economic Policy, 5(4): 270-305.

Awarded the Klaus-Liebscher-Award 2011 by the Austrian National Bank. Previous versions: CEP Discussion Paper No 1023, EUI Working paper ECO 2010/05.

Abstract: Financial institutions are increasingly linked internationally. As a result, financial crisis and government intervention have stronger effects beyond borders. We provide a model of international contagion allowing for bank bailouts. While a social planner trades off tax distortions, liquidation losses and intra- and intercountry income inequality, in the non-cooperative game between governments there are inefficiencies due to externalities, a lack of burden sharing and free-riding. We show that, in absence of cooperation, stronger interbank linkages make government interests diverge, whereas cross-border asset holdings tend to align them. We analyze different forms of cooperation and their effects on global and national welfare.


"Globalization and the spatial concentration of production" (with Gabriel Felbermayr), The World Economy 33(5): 680-709.

Abstract: In new trade theory (NTT) models, freer trade tends to increase the spatial concentration of industrial production across countries. While nations with large home markets and central geographical location become increasingly attractive business locations, small peripheral countries gradually deindustrialise. Using data for 26 industries, 20 OECD countries and 20 years, we investigate the empirical validity of this claim. Separating out the role of home market size from geographical factors, and using various panel methods, we find robust evidence in line with theory. Freer trade has indeed magnified the importance of domestic demand and geographical location for the pattern of industrial production across the globe and has therefore exacerbated spatial disparities.

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