We provide a review of macro-finance models featuring nonlinear dynamics. We survey the models developed recently in the literature, including models with amplification effects of financial constraints, models with households' leverage constraints, and models with financial networks. We also...

This paper proposes an intermediary-based explanation of the risk premium of currency carry trade in a model with a cross-section of small open economies. In the model, bankers in each country lever up and hold interest-free cash as liquid assets against funding shocks. Countries set different...

We propose and estimate a quantitative model of exchange rates in which the participantsin the FX market are intermediaries subject to value-at-risk (VaR) constraints. Higher volatilitytranslates into tighter VaR constraints, and intermediaries require higher returns to holdforeign assets....