This paper studies how U.S. monetary policy affects global stock prices. We find that global stock prices respond strongly to changes in U.S. interest rate policy, with stock prices increasing (decreasing) following unexpected monetary loosening (tightening). This impact is more pronounced for...

This paper examines the co-movement among stock market prices and exchange rates within a three-country Centre-Periphery dynamic equilibrium model in which agents in the Centre country face portfolio constraints. In our model, international transmission occurs through the terms of trade, through...

While financial markets have recently become more complete and international capital flows well liberalized, markets for goods remain segmented. To investigate how more complete security markets may relieve the effects of this segmentation, we examine a series of two-country economies with...

This paper studies international equity markets when some investors have private information that is valuable for trading in many countries simultaneously. We use a dynamic model of equity trading to show that 'global' private information helps understand US investors’ trading behaviour and...

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

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 examine trade credit links between firms as a channel of international return comovement. We model firms in different countries connected by trade credit links in segmented stock markets with asymmetrically informed investors. The model predicts that the cross-serial correlation of country...

This paper provides a theory of foreign equity investment restrictions. We consider a model where the demand function for domestic shares differs between domestic and foreign investors because of dead-weight costs in holding domestic and foreign securities that depend on the country of residence...

We measure the amount of income insurance and cross-sectional consumption smoothing (lending and borrowing) achieved within subgroups of states, such as regions or clubs, e.g. the club of rich states. We find that there is as much income insurance between, as well as within, regions. By...

Because of recent economic crises, financial fragility has regained prominence in both the theory and practice of macroeconomic policy. Consistent with macroeconomic paradigms prevalent at the time, the original architecture of the euro zone assumed that safeguards against inflation and...