We investigate whether the classic Mundell-Flemming "trilemma" has morphed into a "dilemma" due to financial globalisation. According to the dilemma hypothesis, global financial cycles determine domestic financial conditions regardless of an economy's exchange rate regime and monetary policy...

I estimate the transmission of large global volatility shocks in international equity markets from the earlier (pre-1914) to the modern era of globalisation. To that end, I identify 43 such shocks over the period 1885-2011, defined as significant increases in unanticipated volatility in US...

We investigate whether the role of national currencies as international reserves was fundamentally altered by the shift from fixed to flexible exchange rates (what we call the “upheaval hypothesis”), a view that gained adherents following the collapse of the Bretton Woods System. We extend...

Does distance matter for the volatility of international real and financial transactions? We show that it does, in addition to its well-established relevance for the level of trade. A simple model of trade with endogenous markups shows that demand shocks have a larger impact on trade between...

This paper provides empirical evidence showing that smaller countries tend to have more volatile government spending for a sample of 160 countries from 1960 to 2000. We argue that the larger size of a country decreases the volatility of government spending because it acts as an insurance against...

We estimate the effects of quantitative easing (QE) measures by the ECB and the Federal Reserve on the US dollar-euro exchange rate at frequencies and horizons relevant for policymakers. To do so, we derive a theoretically-consistent local projection regression equation from the standard asset...

This paper presents the most comprehensive and up-to-date panel data set of invoicing currencies in global trade. It provides data on the shares of exports and imports invoiced in US dollars, euros, and other currencies for more than 100 countries since 1990. The evidence from these data...

This paper offers new evidence on the emergence of the dollar as the leading international currency, focusing on its role as currency of denomination in global bond markets. We show that the dollar overtook sterling much earlier than commonly supposed, as early as in 1929. Financial market...