This paper evaluates the monetary and macroprudential policies that mitigate the procyclicality arising from the interlinkages between current account deficits and financial vulnerabilities. We develop a two-country dynamic stochastic general equilibrium (DSGE) model with heterogeneous...

We allow for heterogeneity in investors’ ability to borrow from collateral in a Kiyotaki- Moore style macro model. We calibrate the model to match the quintiles of the distribution of leverage ratios of US non-financial firms. We show that financial amplification of the model with...

This paper presents VAR results on the recent economic history of the U.S and focuses on the dependence of U.S. macrofinancial variables on international capital flows. Both gross and net flows are included in the analysis. The results indicate that cross-border funding has affected the build-up...