Countries with intermediate levels of institutional quality suffer larger output contractions following sudden stops of capital inflows than less developed nations. However, countries with strong institutions seldom experience significant falls in output after capital flow reversals. We...

This paper estimates a 3-country DSGE model to identify the drivers of exchange rate volatility in small open economies (SOE). In addition to the usual cross-country linkages through trade and asset holdings, the model features common shocks that affect economies symmetrically. Using data from...