The aim of this paper is to investigate whether the idiosyncratic risk is remunerated in the mean-variance asset pricing approach. Our theoretical and empirical results show that idiosyncratic risk is internationally priced and its price is time varying.

This paper analyzes how those global shocks as foreign business cycles and exchange rate realignments affect the Japanese economy and whether there are structural changes in the transmission mechanism of these shocks in the recent period by using a VAR model. This paper finds that, since the...

We examine whether financial systems facilitate efficient allocation of resources into perspective projects. Employing European micro-level data from 1996-2005, we show that firms in industries with the best growth opportunities use more external finance in financially more developed countries....

En éste documento Juan Esteban Carranza y Carlos Giovanni González buscan, desde una perspectiva analítica, presentar algunas consideraciones sobre la tasa de cambio en Colombia, precisando los hechos antes de asignar culpables. Las preguntas base del documento son: ¿a qué se deben las...

The paper considers the case for an internationally coordinated further fiscal stimulus during the second half of 2009. Although this makes some of the analysis period-specific, most of the issues and principles considered are timeless. For a fiscal stimulus to be both effective there must be...

We study how financial frictions and the saving rate shape the long-run effects of trade liberalization on income, consumption, and the distribution of wealth in financially underdeveloped economies. In our model, regardless of whether the capital account is open or not, trade liberalization...

In our recent paper, (Reinhart and Reinhart, 2010) we examine the behavior of real GDP (levels and growth rates), unemployment, inflation, bank credit, and real estate prices in a twenty one-year window surrounding selected adverse global and country-specific shocks or events. In this note, we...

This paper estimates a pricing-to-market equation for Italy over the period 1990-99 with the aim of assessing the degree of exchange rate pass-through (ERPT). As compared to previous works, we minimize aggregation and selection biases using export data on all products (about 700 from 4 digits of...

This paper builds a baseline two-country model of real and monetary transmission in the presence of optimal international price discrimination by firms. Distributing traded goods to consumers requires nontradables, intensive in local labor. Because of distributive trade the price elasticity of...

Sudden stops seem to create the perfect environment for disinflation, especially when central banks defend the exchange rate by increasing interest rates. We propose a variation of the output gap model that incorporates the sudden stop shock. The use of the model in policy analysis shows that...