Has financial globalisation compromised central banks' ability to manage domestic financial conditions? This paper tackles this question by studying the dynamics of bond yields encompassing 31 advanced and emerging market economies. To gauge the extent to which external financial conditions...

The rise and fall of Argentina's currency board illustrates the extent to which the advantages of hard pegs have been overstated. The currency board did provide nominal stability and boosted financial intermediation, at the cost of endogenous financial dollarization, but did not foster fiscal or...

We analyze the relationships between bubbles, capital flows, and economic activities in a rational bubble model with two large open economies. We establish a reinforcing relationship between global imbalances and bubbles. Capital flows from South to North facilitate the emergence and the size of...

Fluctuations in GDP are more synchronized internationally than fluctuations in Consumption, and they remain so even between financially integrated economies, where the ranking should in theory be the reverse. This paper shows this happens because correlations in GDP fluctuations rise with...

This paper shows correlations in GDP fluctuations rise with financial integration. Finance serves to increase international correlations in both consumption and GDP fluctuations, which explains the persistent gap between the two in the data, a quantity puzzle. The positive association between...

The literature on capital controls has (at least) four very serious apples-to-oranges problems: (i) There is no unified theoretical framework to analyze the macroeconomic consequences of controls; (ii) there is significant heterogeneity across countries and time in the control measures...

Unless there is a radical reform of the global financial system, it will continue to be conducive to financial crises and the necessary reforms are looking increasingly unlikely. Government rhetoric and actions can often influence in desirable ways both the speculative actions that now determine...

We study how foreign financial developments influence the conditional distribution of domestic GDP growth. Within a quantile regression setup, we propose a method to parsimoniously account for foreign vulnerabilities using bilateral-exposure weights when assessing downside macroeconomic risks....

In this paper we investigate the price, volatility and micro-level effects of central bank swap lines during the 2020 pandemic. These policies lowered the ceiling on covered interest rate parity violations and reduced volatility following settlement of swap line auctions. We then combine...

The corporate basis measures the pricing difference between dollar and foreign currency bonds issued by the same corporate entity. In this paper, we decompose the basis into a risky asset yield spread, a safe asset convenience yield, and FX hedging costs with the covered interest rate parity...