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The "Other" Imbalance and the Financial Crisis

Caballero, Ricardo J. - 2010

the U.S. would experience a sudden stop of capital flows, which would unavoidably drag the world economy into a deep … instead that the root imbalance was of a different kind: The entire world had an insatiable demand for safe debt instruments … of exposing the economy to a systemic panic. This structural problem can be alleviated if governments around the world …

Persistent link: https://www.econbiz.de/10013149302

An Equilibrium Model of "Global Imbalances" and Low Interest Rates

Caballero, Ricardo J. - 2009

the world and, b) heterogeneity in these regions' capacity to generate financial assets from real investments. In …

Persistent link: https://www.econbiz.de/10012767437

Financial Crash, Commodity Prices and Global Imbalances

Caballero, Ricardo J.; Farhi, Emmanuel; Gourinchas, … - 2021

In this paper we argue that the persistent global imbalances, the subprime crisis, and the volatile oil and asset prices that followed it, are tightly interconnected. They all stem from a global environment where sound and liquid financial assets are in scarce supply

Persistent link: https://www.econbiz.de/10013243462

Emerging Market Crises : an Asset Markets Perspective

Caballero, Ricardo J. - 2010

Although internal policy mismanagements can be cited in most recent emerging market crises, they seldom account fully for the severity of these crises. The reluctance of international investors to provide the resources that would limit the extent of the reversal almost invariably plays a key...

Persistent link: https://www.econbiz.de/10012763359

International and Domestic Collateral Constraints in a Model of Emerging Market Crises

Caballero, Ricardo J.; Krishnamurthy, Arvind - 2021

We build a model of emerging markets crises which features two types of collateral constraints. Firms in a domestic economy have limited borrowing capacity from international investors. They also have limited borrowing capacity with respect to each other. We study how the presence of and changes...

Persistent link: https://www.econbiz.de/10013233429

International Liquidity Management : Sterilization Policy in Illiquid Financial Markets

Caballero, Ricardo J.; Krishnamurthy, Arvind - 2021

During the booms that precede crises in emerging economies, policy makers often struggle to limit capital flows and their expansionary consequences. The main policy tool for this task is sterilization - essentially a swap of international reserves for public bonds. However, there is an extensive...

Persistent link: https://www.econbiz.de/10013245510

Carry Trade and Systemic Risk : Why are FX Options so Cheap?

Caballero, Ricardo J. - 2013

In this paper we document first that, in contrast with their widely perceived excess returns, popular carry trade strategies yield low systemic-risk-adjusted returns. In particular, we show that carry trade returns are highly correlated with the return of a VIX rolldown strategy --i.e., the...

Persistent link: https://www.econbiz.de/10013089284

On the Global Impact of Risk-Off Shocks and Policy-Put Frameworks

Caballero, Ricardo J. - 2019

Global risk-off shocks can be highly destabilizing for financial markets and, absent an adequate policy response, may trigger severe recessions. Policy responses were more complex for developed economies with very low interest rates after the Global Financial Crisis (GFC). We document, however,...

Persistent link: https://www.econbiz.de/10012867100

Global Imbalances and Policy Wars at the Zero Lower Bound

Caballero, Ricardo J. - 2015

This paper explores the consequences of extremely low real interest rates in a world with integrated but heterogenous … capital markets and nominal rigidities. We establish four main results: (i) Liquidity traps spread to the rest of the world …

Persistent link: https://www.econbiz.de/10013013171

A "Vertical" Analysis of Crises and Intervention : Fear of Floating and Ex-Ante Problems

Caballero, Ricardo J.; Krishnamurthy, Arvind - 2021

Emerging economies are prone to crises triggered by external shocks. During these crises, should the central bank stabilize the currency or domestic interest rates? If the choice is outside the central bank's control, as in a currency board, are there good policy substitutes? We argue that these...

Persistent link: https://www.econbiz.de/10013219686