We provide a theory of the determination of exchange rates based on capital flows in imperfect financial markets … their required compensation for holding currency risk, thus impacting both the level and volatility of exchange rates. Our … theory of exchange rate determination in imperfect financial markets not only rationalizes the empirical disconnect between …

real effects resulting from a more efficient resource allocation predicted by theory. We find that: (a) financial … systemic real risk realizations; (c) financial integration fosters domestic financial development and the liquidity of equity … in the form of improved countries' growth prospects and lower systemic real risk …

Conventional wisdom suggests that financial liberalization can help countries insure against idiosyncratic risk. There … is little evidence, however, that countries have increased risk sharing despite recent widespread financial …, financial contracts are incomplete and enforceability of debt repayment is limited. Default risk of debt contracts constrains …

global factors and developments in the world's leading financial centers have on financial conditions in EMEs. Importantly …

highlight the role that global factors and developments in the world's leading financial centers have on financial conditions in …