The connection between the financial crisis and global imbalances is controversial. This paper argues that this relationship is likely to be connected to the existence of heterogenous financial frictions in different domestic credit markets. By developing a general equilibrium model where...

This paper analyzes the impact of large-scale, unconventional asset purchases by advanced country central banks on emerging market economies (EMEs) during 2008–2014. I show that there was substantial heterogeneity in the way EME currency, equity, and long-term sovereign bond markets were...

Contrary to the prediction of benchmark neoclassical models, growth accelerations in developing countries tend to be associated with current account improvements, resulting from larger increases in saving than in investment. I argue that this can be driven by the behavior of entrepreneurs facing...

This paper examines a canonical stochastic overlapping generations model with dynamically complete markets. Belief differences lead agents to place bets against each other and so wealth shifts across agents and across generations. Such changes in the wealth distribution strongly affect prices of...

This paper studies the welfare properties of competitive equilibria in an economy with incomplete markets subject to idiosyncratic and aggregate shocks. We focus on the role of securitization, whereby borrowers can reduce idiosyncratic asset risk, which enables increased leverage and investment....

We calibrate an incomplete markets large scale OLG model to the US income and wealth distribution and examine the effects of alternative government debt levels and adjustment policies on macroeconomic aggregates and welfare. We find that the government should hold negative debt. Due to the high...

With the Euro Area context in mind, we show that currency arrangements impact on credit available through default incentives. To this end we build a symmetric two-country model with money and imperfect credit market integration. Differences in credit market integration are captured by variations...

It is well documented that since the mid-1980s there has been a surge in capital flows due to an increased integration of world financial markets. Absent limited commitment, the increase in financial linkages should improve risk-sharing opportunities and foster consumption smoothing. However the...

Integration to international capital markets is one of the key pillars of development. However, capital flows also bring volatility to emerging markets. Are there mechanisms to reap the benefits of capital flows without being hurt by their volatility? Are current practices, such as large...