This paper provides an explanation for the observed decline of the exchange rate pass-through into import prices by modeling the effects of financial market integration on the optimal choice of the pricing currency in the context of rigid nominal goods prices. Contrary to previous literature, we...

When firms trade forward contracts with banks to protect foreign currency cash flows against exchange rate movements, foreign exchange risk migrates to the banking sector. We show how this migrated risk may induce systemic repercussions with severe implications for the real economy. For...

Financial assistance provided by the International Monetary Fund (IMF) is supposed to unlock other financing, acting as a catalyst for private capital flows. The empirical evidence of the presence of such a catalytic effect has, however, been mixed. This paper shows that a possible explanation...

During the 2008 financial crisis, increasing risk and spillovers became a main concern for policy makers and banks. In addition, changes in sovereign and bank risk are believed to have had strong effects on world-wide exchange rates. This paper aims to analyze these dynamics empirically. We...

In the light of the recent financial crisis, the discussion on the nature of runs and on the stabilizing role of liquidity holdings has intensified. This paper explores the cash management conducted by German open-end equity funds for the period between 2005 and 2010. Since ownership structures...

The subprime crisis revealed that the adoption of suitable systems for the management of credit risk is of utmost concern. The Basel Committee on Banking Supervision (2009) advises banks to use credit portfolio models with caution when assessing the capital adequacy. This paper investigates...

Using new quarterly U.S. data for the past 120 years, I show that sudden reversals in equity and credit market sentiment approximated by several measures of corporate securities issuance are highly predictive of banking crises and recessions. Deviations in equity issuance from historical...

This paper examines the Lucas Paradox and the Allocation Puzzle of international capital flows referring to a panel data set of EMU countries and major industrialized and emerging economies. Overall, the results do not provide evidence in favour of the Lucas Paradox and the Allocation Puzzle....

We analyze the relation between market-based credit risk interconnectedness among banks during the crisis and the associated balance sheet linkages via funding and securities holdings. For identification, we use a proprietary dataset that has the funding positions of banks at the bank-to-bank...

This paper proposes a new perspective on international capital flows and countries' long-run external asset position. Cross-sectional evidence for 84 developing countries shows that over the last three decades countries that have had on average higher volatility of output growth (1) accumulated...