Credit constraints that link a private agent’s debt to market-determined prices embody a credit externality that drives a wedge between competitive and constrained socially optimal equilibria, inducing private agents to overborrow. The externality arises because agents fail to internalize the...

By employing a novel dataset on international capital flows, this paper examines the impact of Fed's quantitative easing (QE) policies on flows to emerging markets economies (EMEs) and the EU countries. Episodes of QE are examined separately, with the last episode divided between pre- and...

This paper studies the role of the financial sector in affecting domestic resource allocation and cross-border capital flows. I develop a quantitative, two-country, macroeconomic model in which banks face endogenous and occasionally binding leverage constraints. Banks lend funds to be invested...

Die im August 2007 ausgebrochene Finanzkrise erfüllt alle Kriterien einer systemischen Bankenkrise. Zahlungsschwierigkeiten häufen sich, die Kapitalisierung von Banken sinkt und Aktienkurse fallen, während die realen Zinssätze steigen. Ausschlaggebend für diese Entwicklungen ist der...

We estimate international spillover effects of US Quantitative Easing (QE) on emerging market economies (EMEs). Using a Bayesian VAR on monthly US macroeconomic and financial data, we first identify the US QE shock. The identified US QE shock is then used in a monthly Bayesian panel VAR for EMEs...

We build a two-country model with imperfect financial intermediation. Banks face limits to arbitrage which lead to positive excess returns in the investment markets and a risk premium in the international credit market. Gross capital flows affect the exchange rate since banks are balance sheet...

We propose a small open economy model where agents borrow internationally and invest in liquid foreign assets to insure against liquidity shocks, which temporarily shut out the economy of short-term credit markets. Due to the presence of a pecuniary externality individual agents borrow too much...

How does news about future economic fundamentals affect within-country and cross-country credit allocation? How effective is unconventional policy when financial crises are driven by unfulfilled favorable news? I study these questions by employing a two-sector, two-country macroeconomic model...

Empirically, net capital inflows are pro-cyclical in developed countries and countercyclical in developing countries. That said, private inflows are pro-cyclical and public inflows are counter-cyclical in both groups of countries. The dominance of private (public) inflows in developed...