Using a novel panel data set on corporate foreign-currency credit ratings and capital account restrictions in advanced and emerging economies during 1995–2004, we find a strong positive effect of capital account liberalization on firms' credit risk, as measured by corporate credit ratings. As...

This paper analyzes the implications of a production technology in developed countries (DC) characterized by the share of imported raw materials coming from the less developed countries (LDC). We focus on the question of how this richer productive structure affects the international transmission...

This paper explores the theory of optimal currency basket in a small open economy general equilibrium model with sticky prices. In contrast to existing literature, we focus on an economy with vertical trade, where the currencies in the basket may play different roles in invoicing trade flow. In...

This paper examines the importance of exchange rate exposure in the return generating process for a large sample of non-financial firms from 37 countries. We argue that the effect of exchange rate exposure on stock returns is conditional and show evidence of a significant return impact to...

This study shows that the Feldstein-Horioka puzzle resembles a spurious ratio correlation due to a common deflator (Pearson 1896/7). Empirically, the Feldstein-Horioka specification and its counterpart with an arbitrary deflator – final domestic demand – give similar results. Monte Carlo...

This paper develops a small open economy model with sticky prices to show why a flexible exchange rate policy is not desirable in East Asian emerging market economies. We argue that weak input substitution between local labor and import intermediates in traded good production and extensive use...

We test the hypothesis that the government bond markets in the Eurozone are more fragile and more susceptible to self-fulfilling liquidity crises than in stand-alone countries. We find evidence that a significant part of the surge in the spreads of the peripheral Eurozone countries during...

Prior to the global financial crisis of 2008, the UK had the largest banking sector asset to GDP ratio among large countries, and had experienced rapid real property price increases as well as a persistent current account deficit in the preceding decade. These factors, together with its role as...

We examine the determinants of net private capital inflows to emerging market economies (EMEs) since 2002. Our main findings are: First, growth and interest rate differentials between EMEs and advanced economies and global risk appetite are statistically and economically important determinants...

The aim of this paper is to gauge the importance of foreign demand, supply and interest rate shocks on the UK economy and assess how their role has changed over time. To that end we devise a time-varying factor augmented VAR model that captures the relationship between 17 industrialised...