We analyze the international transmission of financial stress and its effects on economic activity. We construct country specific monthly financial stress indexes (FSI) using dynamic factor models from 1970 until 2012 for 20 countries. We show that there is a strong co-movement of the FSI during...

Economic theory predicts that the integration of financial markets lowers the volatility of consumption. In this paper, we study long-term trends in the consumption volatility of the G7 countries. Using different measures of financial openness, we find that greater financial openness has been...

This paper provides compelling evidence that equity market liberalization, the most efficient way to smooth financial market frictions such as credit constraints, can alleviate persistent cross-dynastic income inequality through increasing the accumulation of human capital. We examine the impact...

The paper surveys the literature on the effects of finance on productivity growth. In both the theoretical and empirical literature, there is no consensus regarding the contribution of financial liberalization and financial development to growth. Focusing on the direct channels of growth, the...

This paper develops a model of the circumstances under which it is beneficial to participate in a currency area. The proposed two-country monetary model of trade with nominal rigidities encompasses the real and monetary arguments suggested by the optimum currency area literature: correlation of...

The paper discusses the issue of estimating short- and long-run exchange rate pass-through to import prices in euro area countries and reviews some problems with the measures recently proposed in the literature. Theoretical considerations suggest a long-run Engle and Granger cointegrating...

In the current era of strong worldwide market couplings the global financial village became highly prone to systemic collapses, events that can rapidly sweep through out the entire village. Here we present a new methodology to assess and quantify inter-market relations. The approach is based on...

Banking and balance of payments crises often happen quite simultaneously. We show that the impact of an expected devaluation on the net worth of commercial banks with a short open foreign exchange position speeds up the timing of a balance of payments crisis. We employ an asymmetric information...

The paper presents labor productivities in the member countries of Euroland. The result is that there is quite a divergence in labor productivities (per head) in the European Monetary Union. The Netherlands and Italy reach 85 percent of the West German level, Spain 62 and Portugal 35. This...

Financial markets in Euroland differ from those of a national monetary union in two regards. First, capital markets in general and banking markets in particular show a greater degree of segmentation than national financial markets as a result of information costs and regulatory barriers to full...