Standard macro models cannot explain why real exchange rates are volatile and disconnected from macro aggregates. Recent research argues that models with persistent growth rate shocks and recursive preferences can solve that puzzle. I show that this result is highly sensitive to the structure of...

This paper examines the behavior of remittances over the business cycle and their potential to act as a stabilizer during periods of high business cycle volatility. Four main findings are reported. First, in theory, the cyclical behavior of remittances depends on the motives to remit. Second,...

The world economy has experienced four global recessions over the past seven decades: in 1975, 1982, 1991, and 2009. During each of these episodes, annual real per capita global GDP contracted, and this contraction was accompanied by weakening of other key indicators of global economic activity....

This paper surveys the literature on the linkages between asset prices and macroeconomic outcomes. It focuses on three major questions. First, what are the basic theoretical linkages between asset prices and macroeconomic outcomes? Second, what is the empirical evidence supporting these...

This paper surveys the theoretical and empirical literature on the macroeconomic implications of financial imperfections. It focuses on two major channels through which financial imperfections can affect macroeconomic outcomes. The first channel, which operates through the demand side of finance...

China's GDP growth slowdown and a surge in global financial market volatility could both adversely affect an already weak global economic recovery. To quantify the global macroeconomic consequences of these shocks, we employ a GVAR model estimated for 26 countries/regions over the period 1981Q1...

The recent plunge in oil prices has brought into question the generally accepted view that lower oil prices are good for the US and the global economy. In this paper, using a quarterly multi-country econometric model, we first show that a fall in oil prices tends relatively quickly to lower...

Debt in emerging market and developing economies (EMDEs) is at its highest level in half a century. In about nine out of 10 EMDEs, debt is higher now than it was in 2010 and, in half of the EMDEs, debt is more than 30 percentage points of gross domestic product higher. Historically, elevated...

We propose a new measure of high order trade, labeled HOT, based on the fraction of a sector’s downstream uses that cross a border. Because it decomposes gross output, HOT evaluates a sector’s exposure to foreign shocks abstracting altogether from observed direct trade, which we exploit to...

The COVID-19-triggered collapse in oil prices in March and April 2020 was the seventh, and by far the most severe, in a series of such collapses since 1970. This paper, first, compares this most recent collapse and its drivers with previous ones in an event study. It finds that it was associated...