Standard theoretical models predict that domestic residents should diversify their portfolios into foreign assets much more than observed in practice. Whether this lack of diversification is important depends on the potential gains from risk-sharing. General equilibrium models and consumption...

A frequently cited explanation for why foreign exchange interventions affect the exchange rate is that these interventions signal future monetary policy intentions. This explanation says that central banks signal a more contractionary monetary policy in the future by buying domestic currency...

International consumption risk sharing studies often generate counterfactual implications for asset return behavior with potentially misleading results. We address this contradiction using data moments of consumption and asset returns to fit a canonical international consumption risk sharing...