I develop an open economy portfolio model to study how leveraged investors' wholesale funding affects the international transmission of shocks. Under binding borrowing limits, there is a link between the international investment positions of integrated economies as investors diversify the asset...

A good deal of time has been devoted to whether more open economies have bigger governments (compensation hypothesis) or smaller ones (efficiency hypothesis). However, most of the research has been focused mainly on trade openness, which is clearly restrictive in a world with increasingly...

Capital flows to developing countries are small and mostly take the form of loans rather than direct foreign investment. Kraay, Loayza, and Serven build a simple model of North-South capital flows that highlights the interplay between diminishing returns, production risk, and sovereign risk. The...

This paper analyzes how the combination of borrowing constraints and idiosyncratic risk affects the equity premium in an overlapping generations economy. I find that introducing a zero-borrowing constraint in an economy without idiosyncratic risk increases the equity premium by 70 percent, which...

The paper analyses the global spillovers of the Federal Reserve's unconventional monetary policy measures. First, we find that Fed measures in the early phase of the crisis (QE1), but not since 2010 (QE2), were highly effective in lowering sovereign yields and raising equity markets in the US...

The paper analyses the global spillovers of the Federal Reserve's unconventional monetary policy measures. First, we find that Fed measures in the early phase of the crisis (QE1), but not since 2010 (QE2), were highly effective in lowering sovereign yields and raising equity markets in the US...