We analyze the global imbalances and the required adjustments for rebalancing in current accounts and real exchange rates. We set up a two-country two-sector model for the US-China with two asymmetries. First, we assume that the size of China initially is one third of the US but its size becomes...

This paper analyzes the dynamics of risk premia, real exchange rates and portfolio movements in a two-country, two-good, two-bond model. We use an asymmetric set-up in the model, where one of the countries is emerging and the other one is developed and both countries issue bonds in domestic...

We study the trilemma configuration of the Turkish economy for the period between 2002 and 2012. The paper starts by empirically testing the Mundell-Fleming theoretical concept of an \impossible trinity" (trilemma) for Turkey, following Aizenman, Chinn and Ito (ACI, 2008). This includes...

In this paper, we show that tradable and non-tradable TFP processes of the US and Europe have unit roots and can be modeled by a vector error correction model (VECM). Then, we develop a standard two country and two good (tradable and non-tradable) DSGE model. Our model implies that using...

External financial stress is one of the causes of capital outflows and reduction in borrowing ability of emerging markets. Sudden reversal of capital inflows and disruption in access to the international capital markets could be a threat for the domestic financial stability as in the case of...

We present and study the properties of a sticky information exchange rate model where consumers and producers update their information sets infrequently. We find that introducing inattentive consumers has important implications. Through a mechanism resembling the limited participation models, we...

We analyze business cycle implications of oil price uncertainty in an oil-importing small open economy, where oil is used for both consumption and production. In our framework, higher volatility in oil prices works through two main channels. On the one hand, it makes the marginal product of...

Exploring the determinants and dynamics of the current account balance is one of the priorities of academic literature and policy circles. Although the effects of structural variables are deeply analyzed, a lesser attention has been paid to the impact of financial variables. Drawing on standard...

This paper tries to identify the monetary policy shocks in Turkey during the explicit inflation targeting period starting from 2006 using a structural VAR approach. We model Turkey as a small open economy where domestic variables are affected by external factors like commodity prices and global...