international equity transactions that accentuate the role of international risk sharing as a factor for the macroeconomic response … shock affecting only one country. Efficient global risk-sharing imply that expected productivity gains in one country will … for the productivity gains can further increase the risk exposure of foreign shareholders. The model is calibrated to show …

The U.S. could be the source of the global financial risk because it longs risky assets and shorts safe assets in the … international capital market. This paper builds a stylized two-country model to highlight that when the developed country's risk …-bearing capacity improves, it holds more foreign risky assets and issue more risk-free debt. The foreign country's risk …

We provide a theory of the determination of exchange rates based on capital flows in imperfect financial markets … their required compensation for holding currency risk, thus impacting both the level and volatility of exchange rates. Our … theory of exchange rate determination in imperfect financial markets not only rationalizes the empirical disconnect between …