This paper empirically investigates international equity investors' foreign portfolios before and during the financial crisis by estimating a gravity model for 22 source and 42 destination countries during 2001–2009. The results show a significant negative relationship between foreign equity...

This paper studies the international transmission of pledgeability shocks, as the recent crisis involved a negative shock to the pledgeability of assets. The paper develops a two-country portfolio model, with leveraged investors, that incorporates this type of shock and a solution approach for...

Measures of de facto capital account openness for China and India raise the question whether the Chinn-Ito measure of de jure capital account openness is useful and whether the Lane-Milesi-Ferretti measure of de facto openness ranks the two countries correctly. We examine eight dimensions of de...

While the current account of the euro area as a whole has remained almost balanced in the past two decades, several member countries have sizeable deficits or surpluses. In this paper, we interpret these imbalances as indicators of net capital flows among the euro-area countries. We distinguish...

The nature of the microeconomic frictions that transform sudden stops into output collapses is not only of academic interest, but also crucial for the correct design of policy responses intended to prevent and address these episodes. This paper uses industry-level data in a sample of 45...

This paper studies the implications of cross-country housing-market heterogeneity in a monetary union for both shock transmission and welfare. I develop a two-country new Keynesian general equilibrium model with housing and collateral constraints to explore this issue. The conventional wisdom is...

This paper investigates how the withdrawal of banks from their cross-border business impacted the borrowing costs of European firms since the crisis. We combine aggregate information on total and cross-border credit with firm-level survey data for the period 2010–2014. We find that the decline...

This paper studies spillovers across sovereign debt markets in the wake of sovereign rating changes. We compile an extensive dataset covering all announcements by the three major agencies (Standard & Poor's, Moody's, Fitch) and daily sovereign bond market movements of up to 73 developed and...

The so-called German Dominance Hypothesis (GDH) claimed that Bundesbank policies were transmitted into other European Monetary System (EMS) interest rates during the pre-euro era. We reformulate this hypothesis for the Central and Eastern European (CEE) countries that are on the verge of...

Recent empirical work has shown that ongoing international financial integration facilitates cross-country consumption risk sharing. These studies typically find that countries with high equity home bias exhibit relatively low international consumption risk sharing. We extend this line of...