We address the paradox that financial innovations aimed at risk-sharing appear to have made the world riskier. Financial innovations facilitate hedging idiosyncratic risks among agents; however, aggregate risks can be hedged only with liquid assets. When risk-sharing is primitive, agents...

We study the period of the COVID-19 pandemic to assess the impact of foreign institutional investor (FII) flows on asset prices in an emerging market. Using a dataset of stock-level foreign fund flows of Indian equities, we show that stocks experiencing abnormally high innovations in foreign...

We show corporate real effects from Covered Interest Parity (CIP) deviations, exploiting administrative data from Norway as well as CIP deviation shocks. Banks with access to U.S. money markets strongly increase short-term USD funding in response to CIP deviations. This, in turn, leads to higher...