Monetary arrangements in Europe vacillated wildly over the last decade, and they may be expected to continue to do so over the next. The literature on this chaotic process has focused on issues of credibility. Here, we focus instead on the longer-run implications of Europe's choice of monetary...

Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities (with the exception of China’s FDI liabilities), these countries are large holders of official reserves....

This paper assesses whether the international monetary system is already tri-polar and centred around the US dollar, the euro and the Chinese renminbi (RMB). It focuses on what we call China’s" dominance hypothesis", i.e. whether the renminbi is already the dominant currency in Asia, exerting...

We show that international consumption risk sharing is significantly improved by capital flows, especially portfolio investment. Concomitantly, we show that poor institutions hamper risk sharing, but to an extent that decreases with openness. In particular, risk sharing is prevalent even among...

The paper analyzes the effects of changes to regulatory policy and to monetary policy on cross-border bank lending since the global financial crisis. Cross-border bank lending has decreased, and the home bias in the credit portfolio of banks has risen sharply, especially among banks in the euro...

Since the 2008 global financial crisis, and after decades of relative neglect, the importance of the financial system and its episodic crises as drivers of macroeconomic outcomes has attracted fresh scrutiny from academics, policy makers, and practitioners. Theoretical advances are following a...

Estimating the effect of trade on capital flows is difficult given the inherent identification problem. We use fluctuations in rainfall to capture the exogenous variation in trade between Germany, France, the U.K., and the Ottoman Empire during 1859-1913. The provisionistic policy of the Ottoman...

This paper investigates the empirical link between fiscal vulnerabilities and currency crashes in advanced economies over the last 130 years, building on a new dataset of real effective exchange rates and fiscal balances for 21 countries since 1880. We find evidence that crashes depend more on...

Great attention is now being paid to global imbalances, the growing U.S. current account deficit financed by growing surpluses in the rest of the world. How can the issue be understood in a more historical perspective? We seek a meaningful comparison between the two eras of globalization:...

This paper examines the depth and duration of the slump that invariably follows severe financial crises, which tend to be protracted affairs. We find that asset market collapses are deep and prolonged. On a peak-to-trough basis, real housing price declines average 35 percent stretched out over...