We lay down a standard macroeconomic model of a small open economy with a fixed exchange rate and study optimal capital controls (defined as maximizing the utility of a representative household). We provide sharp analytical and numerical characterizations for a variety of shocks. We find that...

Over the one and a half decades prior to the global financial crisis, advanced economies experienced a large growth in gross external portfolio positions. This phenomenon has been described as Financial Globalization. Over roughly the same time frame, most of these countries also saw a...

This study examines whether pre-crisis international reserve accumulations, as well as exchange rate and reserve policy decisions made during the global financial crisis, can help to explain cross-country differences in post-crisis economic performance. Our approach focuses not only on the total...

We provide an overview of the recent developments of the literature on the determinants of long-term capital flows, global imbalances, and valuation effects. We present the main stylized facts of the new international financial landscape in which external balance sheets of countries have grown...

The global economy has a chronic shortage of safe assets which lies behind many recent macroeconomic imbalances. This paper provides a simple model of the Safe Asset Mechanism (SAM), its recessionary safety traps, and its policy antidotes. Safety traps share many common features with...

We provide an overview of the recent developments of the literature on the determinants of long term capital flows, global imbalances and valuation effects. We present the main stylized facts of the new international financial landscape in which external balance sheets of countries have grown in...

A central result in international macroeconomics is that a government cannot simultaneously opt for open financial markets, fixed exchange rates, and monetary autonomy; rather, it is constrained to choosing no more than two of these three. In the wake of the Great Recession, however, there has...

There have been several proposals to reduce the observed volatility of flexible exchange rates. The paper reviews two recent opposite views on the appropriateness of a common world currency for this purpose. Referring to an adequately formulated theory of world money, it is shown that there is...

In this paper, we argue that differences in the cost structures across sectors play an important role in firms' decisions to adjust their prices. We develop a menu-cost model of pricing in which retail firms intermediate trade between producers and consumers. An important facet of our analysis...

We investigate the drivers of daily changes in the exchange value of the Chinese currency (CNY) since early 2016, when a new regime was introduced for setting the fix - the midpoint of the CNY's daily trading range against the U.S. dollar. Daily changes in the fix, which is announced just prior...