Existing methods for constructing confidence bands for multivariate impulse response functions depend on auxiliary assumptions on the order of integration of the variables. Thus, they may have poor coverage at long lead times when variables are highly persistent. Solutions that have been...

By fixing the exchange rate, a country rules out the possibility of using the exchange rate to adjust to aggregate demand shocks. But adjustment may be enhanced if internal prices are more flexible. This paper asks whether this increase in price flexibility is likely to take place endogenously...

We introduce technological differences in a Heckscher-Ohlin model and study how the technology and endowment differences interact to determine the effects of trade on factor prices. When the endowment effect is dominant in determining the autarky relative factor prices, the relative factor...

In this paper we review the main features of the Chilean-Style of capital controls during the nineties. In particular, we analyze empirically the effectiveness of the unremunerated reserve requirement (URR) in three key areas: its capacity to open space for monetary policy, its influence on the...

The paper analyzes the transmission mechanisms of fiscal shocks in a two-country general equilibrium model with sticky prices in line with the new open economy macroeconomics (NOEM) approach. Specifically, the model allows for both market segmentation and asymmetric preferences. We introduce...

Empirical evidence against both risk-sharing across countries and the uncovered interest rate parity (UIP) condition have been extensively documented. This paper investigates the empirical implications of imperfectly integrated financial markets resulting from these two issues. Under this asset...

This paper investigates the determining factors in private capital flow, differentiating foreign direct investment (FDI) from other flows and emphasizing the role of financial liberalization and. Two reasons brought about this examination. The first is the substantial increase in private capital...

Today?s level of financial integration and development of international capital markets is often compared to the pre-World War I Gold Standard. However, the propensity to currency crises seems higher today than in the past. Furthermore, the dynamics of crises has changed: In the most recent...

This paper proposes a model encompassing alternative views of contagion by highlighting the different channels of transmission of financial crises in an unifying framework. We study investor behaviour when they are affected by external habit formation. It is shown how international portfolio...

Before the currency crisis of 1997-1998, East Asian financial intermediaries borrowed heavily in international markets. During the crisis, the intermediaries’ stock market value declined sharply, and a sizable fraction of the institutions were closed or nationalized. We find that 1) the...