There is a large and growing literature that studies the effects of weak enforcement institutions on economic performance. This literature has focused almost exclusively on primary markets, in which assets are issued and traded to improve the allocation of investment and consumption. The general...

The goal of this paper is to study the effects of globalization on risk sharing. We consider risk sharing with respect to both individual shocks - or domestic risk sharing - and to regional shocks - or international risk sharing. We adopt a technological view of globalization, which consists of...

The goal of this paper is to study the effects of globalization on the workings of asset markets and welfare. To do this, we adopt a technological view of the globalization process. That is, we model this process as consisting of a gradual (and exogenous) reduction in the costs of shipping goods...

Over the past decade the US has experienced widening current account deficits and a steady deterioration of its net foreign asset position. During the second half of the 1990s, this deterioration was fueled by foreign investment in a booming US stock market. During the first half of the 2000s,...

This paper presents a stylized model of international trade and asset price bubbles. Its central insight is that bubbles tend to appear and expand in countries where productivity is low relative to the rest of the world. These bubbles absorb local savings, eliminating inefficient investments and...

We study a dynamic economy where credit is limited by insufficient collateral and, as a result, investment and output are too low. In this environment, changes in investor sentiment or market expectations can give rise to credit bubbles, that is, expansions in credit that are backed not by...

In 2007, countries in the euro periphery were enjoying stable growth, low deficits and low spreads. Then the financial crisis erupted and pushed them into deep recession, raising their deficits and debt levels. By 2010, they were facing severe debt problems. Spreads increased and, surprisingly,...

In 2007, countries in the Euro periphery were enjoying stable growth, low deficits, and low spreads. Then the financial crisis erupted and pushed them into deep recessions, raising their deficits and debt levels. By 2010,they were facing severe debt problems. Spreads increased and, surprisingly,...

During the last few decades, emerging markets have lifted most restrictions on international asset trade. The conventional view was that (i) capital would flow into these countries raising investment and growth; (ii) these countries would use international capital markets to smooth productivity,...

In 2007, countries in the euro periphery were enjoying stable growth, low deficits, and low spreads. Then the financial crisis erupted and pushed them into deep recessions, raising their deficits and debt levels. By 2010, they were facing severe debt problems. Spreads increased and,...