Foreign investors' changing appetite for risk-taking have been shown to be a key determinant of the global financial … cycle. Such fluctuations in risk sentiment also correlate with the dynamics of UIP premia, capital flows, and exchange rates …. To understand how these risk sentiment changes transmit across borders, we propose a two-country macroeconomic framework …

-country risk-sharing at the business cycle frequency. We find that cross-country risk-sharing is still limited and this is unlikely … to be the result of financial frictions that limit state-contingent contracts. Part of the limited international risk …

uncertainty is time-varying, and (2) countries have heterogeneous exposures to a world aggregate shock. We embed these features in …

Recent trends suggest the world economy may be tending towards an equilibrium with two distinct trading blocs, each … internally integrated, but with significant isolation between the blocs. This paper uses a quantitative theory to explore how far … this bifurcation would need to go to pose a threat to the special role of the dollar in international exchange. The theory …

We present a dynamic two-country model in which military spending, geopolitical risk, and government bond prices are …

producing sector, when fiscal rules generate sustained fiscal surpluses, when the rest of the world has lower expansion …. The latter is more likely if bubbles develop along the expansionary path. These (rational) bubbles can emerge even when …

bonds, greater risk-bearing capacity in the U.S. than the rest of the world, and nominal rigidities. A flight to safety … generates a dollar appreciation and decline in global output. Dollar bonds thus command a negative risk premium and the U ….S. holds a levered portfolio of capital financed in dollars. We quantify the effects of safety shocks and heterogeneity in risk …