International macro-finance is a new area of open economy macroeconomics that brings portfolio choice and asset pricing considerations into models of international macroeconomics. The importance of these considerations - typically relegated to Finance and largely overlooked in traditional...

We develop an equilibrium model in a two-country, two-good, pure exchange economy in which investors with logarithmic utility functions have heterogeneous beliefs about exogenously given output or endowment processes. We obtain closed-form representations of real exchange rate and of stock...

We study investment restrictions in a dynamic, two-country, two-good general equilibrium model. The issues that we are concerned with are the impact of the investment restrictions on the cost of capital, the asset returns' volatilities, the international stock market co-movement, and the optimal...

Recent evidence on the importance of cross-border equity flows calls for a rethinking of the standard theory of external adjustment. We introduce equity holdings and portfolio choice into an otherwise conventional open-economy dynamic equilibrium model. Our model is simple and admits an exact...

We study the comovement among stock prices and among exchange rates in a three-good three-country Center-Periphery dynamic equilibrium model in which the Center's agents face portfolio constraints. We characterize equilibrium in closed form for a broad class of portfolio constraints, solving for...

In this paper we study the implications of introducing demand shocks and trade in goods into an otherwise standard international asset pricing model. Trade in goods gives rise to an additional channel of international propagation - through the terms of trade - absent in traditional single-good...

This introductory note summarizes and draws together the work reported in eight research papers written by staff economists of the Board's Division of International Finance as part of a project on global financial integration. The eight papers are also International Discussion Finance Discussion...

We study the implications of introducing demand shocks and trade in goods into an otherwise standard international asset pricing model. Trade in goods gives rise to an additional channel of international propagation - through the terms of trade - absent in traditional single-good models. The...

This paper investigates the effects of liberalization on the pricing of market and currency risk for a number of financial markets in the European Union (EU). An International Asset Pricing Model with a multivariate GARCH-in-Mean specification and time-varying prices of risk is used for the four...

We consider an incomplete markets international economy in discrete-time. The first result is an impossibility theorem showing that if cross-currency no-arbitrage is to hold, the exchange rate cannot be a stationary process in levels. The second result is a system of stochastic discount factor...