How do financial development and financial integration interact? We focus on Japan's Great Recession after 1990 to study this question. Regional differences in banking integration affected how the recession spread across the country: financing frictions for credit-dependent firms were more...

We model capital flows among Chinese provinces using a theory-based variance decomposition that allows us to gauge the importance of various channels of external adjustments at the regional level: variation in intertemporal prices—domestic and international interest rates and the real exchange...

We provide an analysis that might help distinguish rationally justified movements in house prices from potentially non-rational movements, using a two-sector business cycle model, in which investment in housing is subject to collateral constraints. A large portion of the evolution of U.S. house...

How do financial development and financial integration interact? We focus on Japan’s Great Recession after 1990 to study this question. Regional differences in banking integration affected how the recession spread across the country: financing frictions for credit-dependent firms were more...

Securitization makes mortgage-related risks internationally tradeable and thus contributes considerably to the international diversification of macroeconomic risk: in the years 2003-2008, the increase in international cross-holdings of securitized mortgage debt has lowered industrialized...

We define decoupling as an increase in the cross-country heterogeneity in long-term growth expectations. We identify growth expectations from a cointegrating relation between a country's output level and its stock market valuation. Fluctuations in this output-price or yp-ratio reflect changes in...

We sort currencies into portfolios by countries’ consumption growth over the past year. The excess return of the highest-consumption-growth currency portfolio over the portfolio of lowest-consumption-growth currencies is positive on average, compensating investors for large negative returns...

This paper evaluates simple monetary policy rules in the tradition of the Poole analysis within a general two-country model for a large economy and a small open economy. The results for the large economy resemble those of the original Poole scenario and also extend to the welfare measure. In...

We investigate the impact of EMU on macroeconomic volatility. The volatilities of inflation and nominal interest rates have declined, as has, more importantly, the volatility of real consumption growth. Since global volatility has fallen for reasons unrelated to EMU (the “great...

We show that including distribution costs into a general equilibrium model of inter- national portfolio choice contributes to explaining the "home bias" in international equity investment. Our model is able to replicate observed investment positions for a wide range of parameter values, even if...