In a Tobin's q model with productivity and liquidity shocks, we study the mechanism through which strong creditor protection increases the level and lowers the volatility of stock market prices. There are two channels at work: (1) the Tobin's q value under a credit crunch regime increases with...

This paper studies whether the volume and composition of capital flows affect the degree of credit crunch during the 2007-2009 crisis. Using data on 3823 firms in 24 emerging countries, we find that, on average, the decline in stock prices was more severe for firms that are intrinsically more...

China's high corporate savings rate is commonly claimed to be a key driver for the country's large current account surplus. The mainstream explanation for high corporate savings is a combination of windfall profits in state-owned firms, especially in resource sectors, and mis-governance of...

The paper develops a model with ¡§lumpy¡¨ setup costs, which govern the flow of bilateral foreign direct investment (FDI). Every country is potentially both a source for FDI flows to several host countries, and a host for FDI flows from several source countries. But technologically-advanced...

We develop a framework in which the host-country productivity has a positive effect on the intensive margin (the size of FDI flows), but only an ambiguous effect on the extensive margin (the likelihood of FDI flows to occur). The source-country productivity has a negative effect on the extensive...

The paper discusses a theory of FDI, which captures a unique feature: hands-on management standards to react in real time to a changing economic environment in the firms that FDI investors gain control. Equipped with superior managerial skills, foreign direct investors outbid portfolio investors...

The literature has not being able to identify clear-cut real effects of exchange-rate regimes on output growth. Similarly, no definitive view emerges from the literature in regard to the effects of open capital markets on macroeconomic performance. The paper attributes the failure of the...

The paper analyzes how globalization forces induce monetary authorities, guided in their policies by the welfare criterion of a representative household, to put a greater emphasis on reducing the inflation rate than on narrowing the output gaps. We demonstrate that with capital account...

The paper provides a unified analysis of globalization effects on the inflation-output tradeoff and monetary policy, in the New-Keynesian framework. The main proposition of the paper is threefold. First, labor, goods, and capital mobility tend to flatten the tradeoff between inflation and...

The New-Keynesian aggregate supply derives from micro-foundations an inflation-dynamics model very much like the tradition in the monetary literature. Inflation is primarily affected by: (i) Economic slack; (ii) Expectations; (iii) Supply shocks; and, (iv) Inflation persistence. This paper...