Paper: foreign fund inflows raised US pre-crisis risk-taking

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Inflows of foreign funds into the US considerably increased the amount of risk-taking in the country’s financial sector, argues a working paper published by the Bank of Italy. 

In International financial flows and the risk-taking channel, Pietro Cova and Filippo Natoli use data on flows of foreign funds into US bonds and securities between 1994 and 2007. 

They correlate this data with information on several indicators of risk-taking in US markets: the Chicago Board Options Exchange’s

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