I study the composition of international portfolios under collateral constraints and the implied cross-border transmission of shocks. I develop an international portfolio model with these features, in which leveraged investors seek diversification in both assets and secured liabilities and in...

Despite the EU Stability & Growth Pact and existing constitutional limits on public deficit/debt at the (sub)national level in many EU member countries, in the wake of the 2010 Greek bailout, many politicians and policy advisors have proposed new constitutional “debt brakes” to prevent...

This letter explores the role of costly liquidation of the collateralized asset in a stochastic version of the Kiyotaki and Moore (1997) model. We document that the degree of inefficiency in the debt enforcement procedure plays a key role in the endogenous amplification of productivity shocks...

This paper studies the pricing of money in an infinite-horizon economy with heterogeneous agents, incomplete financial markets and arbitrary borrowing restrictions. Purchases of the consumption good are subject to a cash-in-advance constraint. Under general conditions I show that the price of...