This article reviews the literature on currency and country risk with a focus on its macroeconomic origins and implications. A growing body of evidence shows countries with safer currencies enjoy persistently lower interest rates and a lower required return to capital. As a result, they...

We propose a novel, risk-based transmission mechanism for the effects of currency manipulation: policies that systematically induce a country's currency to appreciate in bad times lower its risk premium in international markets and, as a result, lower the country's risk-free interest rate and...

We investigate the link between stochastic properties of exchange rates and differences in capital-output ratios across industrialized countries. To this end, we endogenize capital accumulation within a standard model of exchange rate determination with nontraded goods. The model predicts that...

We use a portfolio-based framework to understand what drives the decline of the U.S. net foreign asset (NFA) position and the reversal in returns earned on the US NFA (exorbitant privilege). We show that global savings gluts and monetary policies widened the U.S. NFA position, while investor...

We link the sustained appreciation of the U.S. dollar from 2011 to 2019 to international capital flows driven by primitive economic factors. We show that increases in foreign investors' net savings, increases in U.S. monetary policy rates relative to the rest of the world, and shifts in investor...