We construct a two-country New Keynesian model in which US government debt has an advantage as a superior collateral asset in the balance sheets of banks. The model can account for the observed response of the US dollar and US bond returns to a global downturn, in particular when the downturn is...

This paper explores the effect of global shocks in a two-country New Keynesian model in which US government debt has an advantage as a superior collateral asset in the balance sheets of banks. We show that the model can account for the observed response of the US dollar and US bond returns to a...

This paper develops a simple theoretical model that can be used to account for the determinants of exchange rate pass-through to consumer prices. While recent evidence has found low estimates of pass-through in many countries, there is little consensus on an explanation for this. Our paper...