the presence of borrowing and lending constraints on that bond. In a US versus the rest of the world (RoW) scenario, we … consumption risk relative to the rest of the world, and therefore decreases its motives for precautionary asset holdings relative … to the rest of the world. As a result of these asymmetric shifts in countries’ barriers to capital mobility, the US runs …

: Volatility increased generally, but less so for international capital flows than for GDP. This pattern is consistent with shocks …

U.S.-specific uncertainty, modeled as higher volatility in U.S. assets, leads to higher risk premia in both countries …