Foreign exchange rates and capital movements are expected to be closely related to each other as international capital markets become more and more integrated. To account for this fact we construct an index of real effective exchange rates as a weighted average of cross-country asset price...

We consider a general framework of optimal mechanism design under adverse selection and ambiguity about the type distribution of agents. We prove the existence of optimal mechanisms under minimal assumptions on the contract space and prove that centralized contracting implemented via mechanisms...

We analyze the impact of market liquidity on bank lending in the euro area for different segments over the period 2003 to 2016. Our results on the aggregate level show that market liquidity is positively related to loan volumes and negatively related to credit spreads. Particularly during the...

Economic convergence of the new member states (NMS) of the EU towards the old EU countries (EU-15), not only in terms of real income, but also in nominal terms, is of paramount importance for the whole of the EU. We build a dynamic CGE model, starting from the Balassa-Samuelson two-sector...

This paper provides the first in-depth study of the organization of knowledge in multinational firms. The paper develops a theoretical model that studies how firms optimally split knowledge between their headquarters and their production plants if communication costs impede the access of...

German-Pakistani relations cannot be analyzed in isolation of the larger domestic and international trajectories, economic and political, on both sides of the partnership. After a recent democratic power transfer in 2013, Pakistan continues to face complex challenges. The instable security...

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....

Large current account deficits, and the corresponding reliance on capital flows from abroad, can increase a country's vulnerability to periods of heightened risk and uncertainty. This paper develops a framework to evaluate such vulnerabilities. It highlights the central importance of two...

Foreign-owned subsidiaries make significant contributions to national Research and Development (R&D) in many host countries. Policymakers often support subsidiaries through R&D grants and R&D tax credits. A key objective of this funding is to leverage R&D-driven firm performance benefits for the...

Banking across borders has risen substantially over the past two decades. Yet there is significant heterogeneity in the international and global activities of banks across countries. This paper develops and tests a theoretical model that explains this variation from an international trade theory...