Using both panel and cross-sectional models for 28 industrialized countries observed from 2001 to 2009, we report a number of findings regarding the determinants of the volatility of returns on cross-border asset holdings (i.e., equity and debt). Greater portfolio concentration and an increase...

The global financial crisis of 2008 was a crisis affecting both the financial sector and the “real economy”. This paper analyzes the transmission of unexpected shocks from the financial sector in the US to other countries and sectors. We test the hypothesis that the financial crisis spread...

The possible crucial role of international bank lending in the transmission of adverse economic disturbance from advanced economies to emerging economies in the recent global financial crisis has once again placed this type of capital flows into sharper scrutiny both in academic and policy...

An important requirement, prior to countries’ adopting a common currency or maintaining an independent monetary policy, is establishing the extent to which they share a common economic cycle and how susceptible they are to region-specific shocks. For example, Kouparitsas (2001) has examined...

Arguments for and against abandoning independent national currencies and monetary policies have varied considerably over time and by country. For New Zealand, it can be argued that a key driving force behind recent debates has been the conduct of monetary policy and the need for improved overall...

Standard macro models cannot explain why real exchange rates are volatile and disconnected from macro aggregates. Recent research argues that models with persistent growth rate shocks and recursive preferences can solve that puzzle. I show that this result is highly sensitive to the structure of...

This paper is motivated by the popular view that the surge in China’s foreign exchange reserves is due to a distortionary exchange rate policy aimed at keeping the real exchange rate undervalued to support export-led growth. It undertakes an in-depth empirical investigation to quantify how...

In theory, valuation effects (changes in net external assets of a country arising from movements in exchange rates or asset returns) are an important channel of international risk sharing as they facilitate external adjustment. However, the effects can also be economically destabilizing in the...

This paper poses a multivariate test for contagion that distinguishes between vulnerability, positive and negative contagion. The model proides a time series of contagion with which the existence, severity and significance of crisis periods can be endogenously determined. Eleven stock markets...

The Bogor Declaration of 1994 proposed free trade in the Asia Pacific region by the year 2020. If implemented as announced, this program will have important implications for the world economy over the next few decades. This paper uses a new dynamic multi-sector global model called the...