This paper is an empirical study of the Banco de Mexico's monetary policy during the 1970s. In particular, it studies the Mexican monetary equilibria and the extent to which capital mobility undermined monetary control. Estimates of a Banco de Mexico reaction function suggest that the Mexican...

Several puzzling aspects of the behavior of United States stock prices can be explained by the presence of a specific type of rational bubble that depends exclusively on dividends. We call such bubbles quot;intrinsicquot; bubbles because they derive all of their variability from exogenous...

There is a large and growing empirical literature that tests forthe existence of asset-price bubbles or quot;sunspotquot; equilibria -- equilibria unrelated to market fundamentals. Our view is that even tests for non-stationary asset-price bubbles should not be interpreted as such. In the...

This paper shows that the optimal extraction of seigniorage implies a strong tendency for inflation to fall over time toward its socially optimal level. The point is made using a multi-period model in which (i) the government can finance deficits through bond issue or money creation, (ii)...

This paper surveys the evolution of international capital mobility since the late nineteenth century. We begin with an overview of empirical evidence on the fall and rise of integration in the global capital market. A discussion of institutional developments focuses on the use of capital...

In dynamic stochastic welfare comparisons, a failure clearly to distinguish between risk aversion and intertemporal substitutability can result in misleading assessments of the impact of risk aversion on the welfare costs of consumption-risk changes. The problem arises in any setting in which...

What idiosyncratic consumption risks can countries trade away on international asset markets? This paper develops an empirical methodology for answering the question. The tests are based on the proposition that in an integrated world asset market with representative national agents, the ex post...

The rapid growth of international reserves---a development concentrated in the emerging markets---remains a puzzle. In this paper we suggest that a model based on financial stability and financial openness goes far toward explaining reserve holdings in the modern era of globalized capital...

The interwar period was marked by the end of the classical gold standard regime and new levels of macroeconomic disorder in the world economy. The interwar disorder often is linked to policies inconsistent with the constraint of the open-economy trilemma the inability of policymakers...

In this paper we connect the events of the last twelve months, quot;The Panic of 2008quot; as it has been called, to the demand for international reserves. In previous work, we have shown that international reserve demand can be rationalized by a central bank's desire to backstop the broad money...