This paper examines the co-movement among stock market prices and exchange rates within a three-country Centre-Periphery dynamic equilibrium model in which agents in the Centre country face portfolio constraints. In our model, international transmission occurs through the terms of trade, through...

We measure the amount of income insurance and cross-sectional consumption smoothing (lending and borrowing) achieved within subgroups of states, such as regions or clubs, e.g. the club of rich states. We find that there is as much income insurance between, as well as within, regions. By...

The international financial system (IFS) has undergone a series of financial crises over the past decade. This paper analyzes the shortcomings of said system (that have contributed to the crises) and, with them in mind, reviews and evaluates the IFS refor

Our contribution in this paper is threefold. First, we survey the empirical literature on consumption smoothing mechanisms of regional economic shocks. Second, building on the work of Asdrubali et al. (1996), we present evidence on the role played by various smoothing mechanisms for specific...

Yield spreads over 10-year German government securities of the EU-15 countries converged dramatically in the seven years after the beginning of Monetary Integration. In this paper, we investigate the relative influence of systemic and idiosyncratic risk factors on their behaviour. Our...

This paper reviews the first evidence on the impact of European Monetary Union on European capital markets, one year after the launch of the single currency. Our assessment of this evidence is very favourable. On almost all counts EMU has either changed the European financial landscape already...

We study how investability, or openness to foreign equity investors, affects firm value in a sample of over 1,400 firms from 26 emerging markets. We find that, on average, investability is associated with a 9% valuation premium (as measured by Tobin's q). However, in firm-fixed effects...

In the crises of 1980s, ever-increasing current account deficits, fueled by unsustainable economic expansions, were invariably the main cause of rising devaluation risk that eventually led to the reversal of capital flows. By contrast, in the 1990s, considerations of financial fragility and...

We apply the fractionally integrated exponential GARCH with volatility-in-mean (FIEGARCH-M) model of Christensen, Nielsen & Zhu (2007) to estimate the risk premium after different crises occurred in major stock markets during the past two decades. The model allows keeping the long memory...

Banks act as maturity transformers, who take liquid deposit and invest in illiquid assets. In this classical framework, we introduce uncertainty in the asset returns. We show that banks can insure individuals against the risk of illiquidity at the cost of increasing the riskIness of their...