We study how foreign financial developments influence the conditional distribution of domestic GDP growth. Within a quantile regression setup, we propose a method to parsimoniously account for foreign vulnerabilities using bilateral-exposure weights when assessing downside macroeconomic risks....

The excess procyclicality of fiscal policy is commonly viewed as a central malaise in emerging economies. We document that procyclicality is more pervasive in countries with higher sovereign risk and provide a model of optimal fiscal policy with nominal rigidities and endogenous sovereign...

Jesús Fernández-Villaverde, Pablo A. Guerrón-Quintana, Juan F. Rubio-Ramírez and Martín Uribe (2011) find that risk shocks are an important factor in explaining emerging market business cycles. We show that their model needs to be recalibrated because it underpredicts the targeted business...

Most of the international macro models, in contrast to the data, imply a very high level of risk sharing across countries and very low real exchange rate (RER) volatility relative to output. In this paper we show that a standard two-country two-good model augmented with conintegrated TFP...

We extend Jurado et al. (2015)'s forecast-error-based uncertainty measure to the international context, and construct a new measure of global uncertainty. We examine dynamic causal effects among global uncertainty and other global macroeconomic variables, and provide two important applications...

We assess to which degree an international transfer mechanism can enhance consumption risk sharing as well as allocative efficiency and apply our results to the implicit transfers generated by a potential European unemployment benefit scheme (EUBS). Specifically, we first develop a simple model...

Economists, observers and policy-makers often emphasize the role of sentiment as a potential driver of the business cycle. In this paper we provide three contributions to this debate. First, we critically survey the existing literature on sentiment (considering both confidence and uncertainty)...

We add agency costs as in Carlstrom and Fuerst (1997) into a two-country, two-good international business-cycle model. In our model, changes in the relative price of investment arise endogenously. Despite the fact that technology shocks are uncorrelated across countries, the relative price of...

Economists, observers and policy-makers often emphasize the role of sentiment as a potential driver of the business cycle. In this paper we provide three contributions to this debate. First, we critically survey the existing literature on sentiment (considering both confidence and uncertainty)...

We study spillover of monetary policy uncertainty shock from the US to other economies with different exchange rate regimes. A surge of monetary policy uncertainty in the US incurs contractionary consequences in other economies and decreases output, consumption, and stock market prices. Such...