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...

Recent research has shown that gross capital inflows and outflows are positively correlated and highly procyclical. This poses a puzzle since most theory predicts that capital inflows and outflows should be negatively correlated, and while capital inflows should be procyclical, capital outflows...

This paper attempts to bring the tradition of estimating policy reaction functions from monetary policy literature to capital controls policy literature. Using a novel, weekly dataset on capital controls policy actions in 21 emerging economies over the period 1 January 2001 – 31 December 2015,...

We build a model for the analysis of financial flows from advanced to emerging economies and introduce the quality dimension in cross-border asset trade. We reformulate the issue of transaction costs (Martin and Rey, 2004) in terms of a problem of trade in assets with different quality. The...

This paper examines how the 1990s capital account liberalization policy trend affected international capital flows, and tests a new hypothesis that the depth and efficiency of the domestic financial system impacts the efficacy of capital account policy. The paper exploits a recently published...

Are capital controls and macroprudential measures successful in achieving their objectives? Assessing their effectiveness is complicated by selection bias and endogeneity; countries which change their capital-flow management measures (CFMs) often share specific characteristics and are responding...

Are capital controls and macroprudential measures successful in achieving their objectives? Assessing their effectiveness is complicated by selection bias and endogeneity; countries which change their capital-flow management measures (CFMs) often share specific characteristics and are responding...

This paper attempts to borrow the tradition of estimating policy reaction functions in monetary policy literature and apply it to capital controls policy literature. Using a novel weekly dataset on capital controls policy actions in 21 emerging economies over the period 1 January 2001 to 31...

We introduce external risks, in the form of shocks to the level and volatility of world interest rates, into a small open economy model subject to the risk of sudden stops—large recessions together with abrupt reversals in capital inflows| and characterize optimal macroprudential policy in...

We develop a model of gross capital flows and analyze their role in global financial stability. In our model, consistent with the data, when a country experiences asset fire sales, foreign investments exit (fickleness) while domestic investments abroad return home (retrenchment). When countries...