the presence of borrowing and lending constraints on that bond. In a US versus the rest of the world (RoW) scenario, we … consumption risk relative to the rest of the world, and therefore decreases its motives for precautionary asset holdings relative … to the rest of the world. As a result of these asymmetric shifts in countries' barriers to capital mobility, the US runs …

) and I(1) periods. We find that (1) With very few exceptions, inflation around the world rejects a unit root, (2) for …