We examine the relationship between exchange-rate changes and stock returns for a sample of Dutch firms over 1994-1998. We find that over 50% of the firms are significantly exposed to exchange-rate risk. Furthermore, all firms with significant exchange-rate exposure benefit from a depreciation...

Systemic crises can largely affect asset allocations due to the rapid deterioration of the risk-return trade-off. We investigate the effects of systemic crises, interpreted as global simultaneous shocks to financial markets, by introducing an investor adopting a crisis ignorant or crisis...

This paper examines the influence of institutional differences on risk management practices in the US and the Netherlands. This comparison is interesting because the Dutch firms' institutional setting differs from the US setting with respect to shareholder orientation, international trade,...

Greater openness has become an almost universal feature of modern, developed economies. This paper develops a workhorse international model, and explores the role of standard monetary policy rules applied to an open economy. For this purpose, I build a two-country DSGE model with monopolistic...

Despite the liberalization of capital flows among OECD countries, equity home bias remains sizable. We depart from the two familiar explanations of equity home bias: transaction costs that impede international diversification, and terms of trade responses to supply shocks that provide risk...

This paper analyses the impact of the shift away from a U.S. dollar focus of systemically important emerging market economies (EMEs) on configurations between the U.S. dollar, the euro and the yen. Given the difficulty that fixed or managed U.S. dollar exchange rate regimes remain pervasive and...

This paper re-examines the ability of sticky-price models to generate volatile and persistent real exchange rates. We use a DSGE framework with pricing-to-market akin to those in Chari, et al. (2002) and Steinsson (2008) to illustrate the link between real exchange rate dynamics and what the...

This technical note is developed as a mathematical companion to the paper "The Real Exchange Rate in Sticky Price Models: Does Investment Matter?" (Institute working paper no. 17). It contains three basic calculations. First, we derive the equilibrium conditions of the model. Second, we compute...

We estimate an open economy VAR model to quantify the effect of monetary policy and capital inflows shocks on the US housing market. The shocks are identified with sign restrictions derived from a standard DSGE model. We find that monetary policy shocks have a limited effect on house prices and...

Based on a classification of countries and territories according to their regime and anchor currency choice, the study considers the two major currency blocs of the present world. A nested logit regression suggests that long-term structural economic variables determine a given country's currency...