We study the contraction of Foreign Direct Investment (FDI) flows in the United States during the recent financial crisis and show their unusual non-resiliency, which depends in part on the global nature of the economic recession, but also on the increases in the cost of financing FDI in the...

Characterizing asset price volatility is an important goal for financial economists. The literature has shown that variables that proxy for the information arrival process can help explain and/or forecast volatility. Unfortunately, however, obtaining good measures of volume and/or order flow is...

Address before the Tucson Chapter of the Association for Investment Management Research (AIMR), Tuscon, Ariz., Nov. 14, 2003

We describe the second-moment properties of the components of international capital flows and their relationship (covariance and correlation) to business cycle variables of 22 emerging and OECD countries. Disaggregated flows have different volatility properties, with debt being the most volatile...

This paper presents a general model of the determination of the interest rate and the exchange rate which is relevant for a small economy with any degree of capital mobility. The model is tested by using the quarterly data of Korea and Singapore. The emperical results show that in the Korean...

This paper examines international capital flows in the context of a simple Diamond-Dybvig model in which there are neither moral hazard nor adverse selection problems, thus isolating exchange rate risk as the propagator of capital flows. The model shows that adverse changes in exchange rate...

Conventional wisdom posits that high interest rates stem capital flight and currency depreciation. Some have argued, however that the standard prescription exacerbates the problems. This paper set out a framework for evaluating the conditions under which an increase in domestic interest rates...

Address before the Tucson Chapter of the Association for Investment Management Research (AIMR), Tuscon, Ariz., Nov. 14, 2003

A growing body of empirical evidence suggests that investors’ behavior is not well described by the traditional paradigm of (subjective) expected utility maximization under rational expectations. A literature has arisen that models agents whose choices are consistent with models that are less...