I characterize the global solution to the portfolio problem of two heterogeneous investors with general preferences, in a two-tree, two-good environment. Investors have recursive preferences and a bias in consumption towards a preferred good. The framework highlights the role of the allocation...

I adapt the framework of Sauzet (2021) to an international setting to characterize the global solution to the international portfolio problem in full generality, a long-standing open issue in international finance. In this two-country, two-good environment, investors have recursive preferences...

One of the most serious problems that a central bank in an emerging market economy can face is the sudden reversal of capital inflows. Hoarding international reserves can be used to smooth the impact of such reversals, but these reserves are seldom sufficient and always expensive to hold. In...