the presence of borrowing and lending constraints on that bond. In a US versus the rest of the world (RoW) scenario, we … liabilities. We present a simple two-country model with an internationally traded bond, in which capital controls are reflected in … consumption risk relative to the rest of the world, and therefore decreases its motives for precautionary asset holdings relative …

) and I(1) periods. We find that (1) With very few exceptions, inflation around the world rejects a unit root, (2) for …