risky assets, if asset markets are integrated across the board, reflecting a strong pressure towards the cross-border equalization of external finance premia faced by levered investors. In turn, the resulting global flight to quality may bring about tight international linkages in...

Financial integration in the markets for banks' assets and liabilities makes balance sheet constraints highly correlated across countries, resulting in a high degree of financial and macroeconomic interdependence. Likewise, under financial integration unconventional policies aimed at stabilizing...

This paper shows that, by disentangling the degree of monopolistic distortion from the elasticity of substitution between domestic and im-ported goods, we can obtain a negative response of the trade balance to positive monetary shocks, without introducing capital accumula-tion. This result could...

We use a version of the New Area-Wide Model (NAWM) developed at the ECB in order to quantify the gains from monetary policy cooperation. The model is calibrated in order to match a set of empirical moments. We then derive the cooperative and (open-loop) Nash monetary policies, assuming that the...

This paper shows how to compute a second-order accurate solution of a non-linear rational expectation model using algorithms developed for the solution of linear rational expectation models. The result is a state-space representation for the realized values of the variables of the model. This...

Non-coordinated monetary policy is analysed in a stochastic two-country general equilibrium model. Non-coordinated equilibria are compared in two cases: one where policy is set in terms of state-contingent money supply rules, and one where policy is set in terms of state-contingent nominal...

Using a stochastic business cycle model of a small open economy we ask how the problem of the optimizing policy-maker changes endogenously as the international trade structure is altered. From input-output data for OECD and emerging market economies, we document that differences in trade across...

We show that the composition of international trade has important implications for the optimal volatility of the exchange rate, above and beyond the size of trade flows. Using an analytically tractable small open economy model, we characterize the impact of the trade composition on the policy...