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This paper analyzes the determinants of cross-border asset holdings on cross-country data and a Swedish data set. We focus our analysis on the effect of the euro not only for the determinants of bond holdings, but also of equity and banking assets. With the help of a simple theoretical model, we...
This paper analyzes the determinants of cross-border asset holdings on cross-country data and a Swedish data set. We focus our analysis on the effect of the euro not only for the determinants of bond holdings, but also of equity and banking assets. With the help of a simple theoretical model, we...
In a two-country portfolio model with leverage constraints, I focus on private assets in order to understand how their behaviour can justify an expected excess return as well as the flight-to-safety observed in the data. The specific goal is to study how much these phenomena are explained by the...
I develop an open economy portfolio model to study how leveraged investors' wholesale funding affects the international transmission of shocks. Under binding borrowing limits, there is a link between the international investment positions of integrated economies as investors diversify the asset...
Financial stability is an important policy objective, since crises are associated with large economic, social and political costs. Promoting stability requires preventing 'sudden stops' in capital flows, which are events in which foreign financing abruptly disappears. This paper contributes to...
Openness to trade is one factor that has been identified as determining whether a country is prone to sudden stops in capital inflows, crashes in currencies, or severe recessions. Some believe that openness raises vulnerability to foreign shocks, while others believe that it makes adjustment to...
In an in‡uential series of contributions, Kraay and Ventura (2000, 2003) o¤er a“new rule” for the current account: in response to a temporary income shock, thechange in the current account is equal to the change in saving times the ratio of netforeign assets to wealth. We analyze the...
We develop a new theory of international capital flows based on dispersed in-formation across individual investors. There is extensive evidence of informationheterogeneity within and across countries, which has proven critical to under-standing asset price behavior. We introduce information...
The paper investigates whether higher financial integration leads in general to slower current account adjustments. The study estimates theoretically founded trade balance reaction functions for a panel of seventy countries from 1970-2004. The empirical analysis finds that adjustment in...
We study international business cycles and capital flows in the UK, the United States and the Emerging Periphery in the period 1885-1939. Based on the same set of parameters, our model explains current account dynamics under both the Classical Gold Standard and during the Interwar period. We...