How did the Subprime Crisis, a problem in a small corner of U.S. financial markets, affect the entire global banking system? To shed light on this question we use principal components analysis to identify common factors in the movement of banks' credit default swap spreads. We find that fortunes...

Conventional wisdom says that, in the absence of sufficient default penalties, sovereign risk constrains credit and lowers welfare. We show that this conventional wisdom rests on one implicit assumption: that assets cannot be retraded in secondary markets. Once this assumption is relaxed, there...

Despite an abundance of cross-section, panel, and event studies, there is strikingly little convincing documentation of direct positive impacts of financial opening on the economic welfare levels or growth rates of developing countries. The econometric difficulties are similar to those that...

What is the impact of firms that cross-list, issue depositary receipts, or raise capital in international stock markets on the liquidity of remaining firms in domestic markets? Using a panel of over 3,200 firms from 55 countries during 1989-2000, we find that internationalization reduces the...

The onset of the US credit crisis in 2008, and its rapid globalization induced the FED to extend unprecedented swap-lines of 30 billion dollars to four emerging markets, and the proliferation of other cross-countries selective swap arrangements. This paper explores the logic for these...

What is the impact of internationalization (firms raising capital and trading in international markets) on the liquidity of the remaining firms in domestic markets? To address this question, we assemble a panel database of nearly 2,900 firms from 45 emerging economies over the period 1989-2000,...

What idiosyncratic consumption risks can countries trade away on international asset markets? This paper develops an empirical methodology for answering the question. The tests are based on the proposition that in an integrated world asset market with representative national agents, the ex post...

Financial openness is often associated with higher rates of economic growth. We show that the impact of openness on factor productivity growth is more important than the effect on capital growth. This explains why the growth effects of liberalization appear to be largely permanent, not...

We measure a country's growth opportunities by investigating how its industry mix is priced in global capital markets, using price earnings ratios of global industry portfolios. We derive three sets of empirical results. First, these exogenous growth opportunities strongly predict future changes...

By documenting the evolution of Tobin's "q" before, during, and after firms internationalize, this paper provides evidence on the bonding, segmentation, and market timing theories of internationalization. Using new data on 9,096 firms across 74 countries over the period 1989-2000, we find that...