How will worldwide changes in population affect pressures for international migration in the future? We contrast the past three decades, during which population pressures contributed to substantial labor flows from neighboring countries into the United States and Europe, with the coming three...

We identify a new set of stylized facts on the 2008-2009 trade collapse that we hope can be used to shed light on the importance of demand and supply-side factors in explaining the fall in trade. In particular, we decompose the fall in international trade into product entry and exit, price...

This paper explains the puzzle of how a developing economy can shift from a path of reasonable growth before a financial crisis, as in Mexico in 1994, to a sharp decline in economic activity after a crisis occurs. It does so by outlining an asymmetric information framework for analyzing banking...

This paper provides, for the first time, large-scale evidence that liquidity transformation by banks creates fragility, as their uninsured depositors face an incentive to withdraw their money before others (a so-called panic run). Such fragility manifests itself in stronger sensitivity of...

Every major financial crisis leaves its unique footprint on economic thought. The early banking crises taught us the importance of financial sector liquidity and the lender of last resort. The Great Depression highlighted the devastating effects of bank failures and the need for counter-cyclical...

Financial systems are inherently fragile because of the very function which makes them valuable: liquidity transformation. Regulatory reforms can strengthen the financial system and decrease the risk of liquidity crises, but they cannot eliminate it completely. This leaves monetary policy with a...

We propose several econometric measures of systemic risk to capture the interconnectedness among the monthly returns of hedge funds, banks, brokers, and insurance companies based on principal components analysis and Granger-causality tests. We find that all four sectors have become highly...

The accumulation of international reserves by emerging markets raises the question of how to best utilize these funds. This paper explores two routes through which the pooling of reserves could enhance stability and welfare. First, the reserve pool could be used for emergency lending in response...

We present a model of flight to quality episodes that emphasizes financial system risk and the Knightian uncertainty surrounding these episodes. In the model, agents are uncertain about the probability distribution of shocks in markets different from theirs, treating such uncertainty as...