We analyze the implications of financial openness to macroeconomic volatility in a small open economy. Major … macroeconomic aggregates show non-monotonic volatility patterns with respect to the degree of financial openness in the model … without domestic financial frictions. The introduction of domestic financial frictions makes the volatility patterns flatter …

We propose a dynamic factor model with time-varying parameters and stochastic volatility to analyze the relationship … country-specific capital flow volatility and that the impact of these variables has become even more important since the 2008 …

is robust across different estimation methods. Moreover, the Markov switching VAR also indicates that the reaction of …

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 …