Motivated by the Chinese experience, we analyze a semi-open economy where the centralbank has access to international capital markets, but the private sector has not. Thisenables the central bank to choose an interest rate different from the international rate.We examine the optimal policy of...

In the recent decade, capital outows from emerging economies, in the form of a demandfor liquid assets, have played a key role in the context of global imbalances. In this paper,we model the demand for liquid assets by rms in a dynamic open-economy macroeconomicmodel. We nd that the implications...

This paper studies how liability dollarization conditions the effectof exchange rate exibility on growth. It develops a model with creditconstrainedrms facing liquidity shocks denominated in tradables while theirrevenues are both in tradable and nontradables. With frictions in the...

Paradoxically, high-investment and high-growth developing countries tend toexperience capital outows. This paper shows that this allocation puzzle can beexplained simply by introducing uninsurable idiosyncratic investment risk in theneoclassical growth model. Using a sample of 67 countries...

This paper lays down a model where dispersed information generates booms and busts in economic activity. Boom-and-bust dynamics start when firms are initially over-optimistic about demand due to an aggregate noise shock in their signals. Consequently, they over-produce, which generates a boom....