Frequent, yet uninformed, fund flows in Chilean pension plans generate substantial trading in currency markets due to the high allocation to international securities. These non-fundamental flows have a significant impact on the Chilean peso, which is estimated to have a relatively low price...

Many central banks whose exchange rate regimes are classified as flexible are reluctant to let the exchange rate fluctuate. This phenomenon is known as "fear of floating". We present a simple theory in which fear of floating emerges as an optimal policy outcome. The key feature of the model is...

We study the effects of an anticipated dollarization, announced today but planned to be implemented at some future date, in a simple open-economy model. Motivated by the profile of countries considering dollarization we make the following assumptions. First, the government faces a scarcity of...

In this paper I analyze the work on exchange rates and external imbalances by University of Chicago faculty members during the university's first hundred years, 1892-1992. Many people associate Chicago's views with Milton Friedman's advocacy for flexible exchange rates. But, of course, there was...

This paper finds that limited exchange rate flexibility in the form of "fear of appreciation" significantly slows adjustment of current account imbalances, providing novel support for Friedman's conjecture regarding exchange-rate flexibility. We present a new stylized fact: floaters have faster...

This paper investigates the implications of international financial sanctions for the reserve currency status of the US dollar. We propose a simple model of a reserve currency, demonstrate how the anticipation of financial sanctions can weaken the dollar's status, and evaluate the welfare...

This paper uses U.S. loan-level credit register data and the 2018-2019 Trade War to test for the effects of international trade uncertainty on domestic credit supply. We exploit cross-sectional heterogeneity in banks' ex-ante exposure to trade uncertainty and find that an increase in trade...

The evolution of the IMS and IFS in the past several hundred years can be viewed through the lens of the Copernican heliocentric system developed over 500 years ago. We trace out the evolution across regimes of the IMS and IFS in terms of network representations of the Copernican system. We...

Recent trends suggest the world economy may be tending towards an equilibrium with two distinct trading blocs, each internally integrated, but with significant isolation between the blocs. This paper uses a quantitative theory to explore how far this bifurcation would need to go to pose a threat...

Written on the 50th anniversary of floating exchange rates, this paper deals with possible alternatives to a unipolar dollar-based system. It considers (1) measures of international currency use; (2) potential challengers to the dollar; (3) network externalities; and (4) the plausibility of gold...