Identification of structural VARs using sign restrictions has become increasingly popular in the academic literature. This paper (i) argues that identification of shocks can benefit from introducing a global dimension, and (ii) shows that summarising information by the median of the available...

Identification of structural VARs using sign restrictions has become increasingly popular in the academic literature. This paper (i) argues that identification of shocks can benefit from introducing a global dimension, and (ii) shows that summarising information by the median of the available...

This paper focuses on the role of real exchange rate volatility as a driver of portfolio home bias, and in particular as an explanation for differences in home bias across financial assets. We present a Markowitz-type portfolio selection model in which real exchange rate volatility induces a...

The influential work of Obstfeld and Rogoff argues that a closing-up of the US current account deficit involves a large exchange rate adjustment. However, the Obstfeld-Rogoff model works exclusively via demand-side channels and abstracts from possible supply-side changes. We extend the framework...

Since the late-1990s, the global economy is characterised by historically low risk premia and an unprecedented widening of external imbalances. This paper explores to what extent these two global trends can be understood as a reaction to three structural shocks in different regions of the global...

Capital flows into the euro area were particularly large in the mid-2000s and the share of foreign holdings of euro area securities increased substantially between the introduction of the euro and the outbreak of the global financial crisis. We show that the increase in foreign holdings of euro...

In light of persistently large net foreign liability (NFL) positions in several euro area countries, we analyse 138 episodes of sizeable NFL reductions for a broad sample of advanced and emerging economies. We provide stylised facts on the channels through which NFLs were reduced and estimate...

We analyse euro area investors' portfolio rebalancing during the ECB's Asset Purchase Pro- gramme at the security level. Based on net transactions of domestic and foreign securities, we observe euro area sectors' capital ows into individual securities, cleaned from valuation effects. Our...

This paper analyses the incidence and severity of sudden stops in euro area countries before and after the introduction of the ECB's asset purchase programmes. We define sudden stops as abrupt declines in private net financial inflows, i.e. total flows adjusted for EU and IMF loans and changes...

Building upon a Behavioural Equilibrium Exchange Rate (BEER) model, estimated at a quarterly frequency since 1999 on a broad sample of 57 countries, this paper assesses whether both the size and the persistence of real effective exchange rate misalignments from the levels implied by economic...