We provide a theory of the determination of exchange rates based on capital flows in imperfect financial markets … their required compensation for holding currency risk, thus impacting both the level and volatility of exchange rates. Our … theory of exchange rate determination in imperfect financial markets not only helps to rationalize the empirical disconnect …

these facts, we propose a simple model of sovereign risk in which debt can be traded in secondary markets. The model has two …

equilibrium model with international equity trading in incomplete asset markets. We show that the risk-sharing properties of … goods, and the persistence of shocks. Finally, moving from less to more international financial integration, risk sharing …

returns, Sharpe ratios and the price of risk are also much larger, and the distribution of returns displays endogenous fat …

current account imbalances and possibly to the recent global financial crisis. This paper proposes a theory of excess savings …

non-tradable income risk), (ii) asset trade costs in international financial markets (such as transaction costs or …