China was extremely successful in recent decades in managing external equilibrium in the short and medium term using three mechanisms to cushion the balance of payments shocks. First, it maintained a flexible rate, so could adjust to the fluctuations in trade balance and capital flows via...

The objective of this paper is to analyze the macroeconomic effects of media coverage related to the trade conflict between China and the U.S. for selected countries of the European Union. Our main aim is to evaluate whether media coverage constitutes a relevant transmission channel for...

The Democratic Republic of Congo (DRC) has faced persistent current account deficits despite a period of economic growth fueled by Foreign Direct Investment (FDI). This paper uses an Autoregressive Distributed Lag (ARDL) model and the Balance of Payments (BOP) framework to explore the dynamics...

This paper provides novel insights into the Feldstein-Horioka puzzle. The famous finding of Feldstein and Horioka (1980) is that despite perfect international capital mobility, domestic saving does not flow among countries to equalise yields but instead is tightly related to domestic investment....

In this short note we further discuss the role of macroeconomic policies to deal with surges in capital inflows. Primarily policies aimed at avoiding financial crises or an overvaluation of the real exchange rate.

The characteristics of recent capital inflows to Latin America are discussed. It is argued that these inflows are partially explained by economic conditions outside the region, like the recession in the United States and lower international interest rates. The importance of external factors...

This paper presents a theoretical and empirical analysis of policies aimed at setting a more depreciated level of the real exchange rate. An intertemporal optimizing model suggests that, in the absence of changes in fiscal policy, a more depreciated level of the real exchange can only be...

The characteristfcs of recent capital inflows into Latin America are discussed. It is argued that these inflows are partly explained by conditions outside the region, like recession in the United States and lower international interest rates. This suggests the possibility that a reversal of...

In this paper we examine the macroeconomic stability in a simple dynamic open economy model, in which monetary authorities adopt an flexible inflation-targeting regime in an environment with a liberalised capital account and flexible exchange rates. In this respect, inflation targeting is an...

Estimated DSGE models tend to ascribe a significant and often predominant part of a country's trade balance (TB) dynamics to domestic drivers ("shocks"), suggesting foreign factors to be only of secondary importance. This paper revisits the result based on more agnostic approaches to shock...