F41

Suman Basu · Emine Boz · Gita Gopinath · Francisco Roch · Filiz Unsal

Prepared as background for the IMF's Integrated Policy Framework, this paper builds a three-period small open economy in which monetary policy, capital inflow controls, sterilized foreign exchange …

Tobias Adrian · Christopher Erceg · Marcin Kolasa · Jesper Lindé · Pawel Zabczyk

A microfounded two-country New Keynesian model, calibrated separately to a representative emerging market and a representative advanced economy, in which limited FX-market risk-bearing capacity and an …

Tobias Adrian · Christopher Erceg · Jesper Lindé · Pawel Zabczyk · Jianping Zhou

An empirically-oriented New Keynesian small open economy model, of the kind central banks use, built to quantify when foreign exchange intervention and capital flow management tools improve monetary …

R. A. Mundell

This 1963 Canadian Journal of Economics and Political Science paper by Robert Mundell asks what happens to monetary and fiscal policy's power over domestic income and employment once capital is …

Maurice Obstfeld · Kenneth Rogoff

The intertemporal approach treats the current account as the outcome of forward-looking saving and investment decisions rather than as a function of relative prices, and this chapter develops it from …

David K. Backus · Gregor W. Smith

Nontraded goods had been invoked to explain several international puzzles at once -- persistent deviations from purchasing power parity, low cross-country consumption correlations, and real interest …

Michael B. Devereux · Alan Sutherland

This paper develops a simple, widely applicable approximation method for computing equilibrium country portfolios in dynamic stochastic general equilibrium open-economy macro models -- any number of …

Julien Bengui · Louphou Coulibaly

Bengui and Coulibaly ask whether the pattern of capital flows observed during the 2021–2023 global monetary tightening cycle — whereby capital flowed from low-inflation to high-inflation countries — …

Francesco Ferrante · Nils Gornemann

Ferrante and Gornemann study the aggregate and redistributive effects of currency devaluations in emerging market economies, focusing on a feature that prior open-economy HANK models had not jointly …

Michael McLeay · Silvana Tenreyro

An emerging view in international macroeconomics contends that dollar invoicing of exports renders monetary policy ineffective for non-U.S. countries: because export prices are allegedly sticky in …

J. Marcus Fleming

This 1962 IMF Staff Papers article by J. Marcus Fleming compares how effective monetary policy and budgetary (fiscal) policy are at stimulating domestic income and output under fixed versus floating …

Rishabh Aggarwal · Adrien Auclert · Matthew Rognlie · Ludwig Straub

In a multi-country heterogeneous-agent New Keynesian model, debt-financed fiscal transfers eventually raise the world interest rate and are entirely absorbed by foreign lenders, but in the short run a …

Adrien Auclert · Matthew Rognlie · Martin Souchier · Ludwig Straub

Introducing heterogeneous households with realistically high marginal propensities to consume into an otherwise-standard small open economy New Keynesian model creates a powerful real income channel …

Rudiger Dornbusch

This 1976 Journal of Political Economy paper by Rudiger Dornbusch builds a small open-economy model in which capital is perfectly mobile and asset markets clear instantly, but the price of domestic …

Alessandro Moro · Valerio Nispi Landi

Moro and Nispi Landi develop FraNK, a multi-country New Keynesian model designed to study geoeconomic fragmentation — defined, following Aiyar et al. (2023), as a policy-driven reversal of economic …

Nicolas Coeurdacier · Hélène Rey

A survey of why international investors hold a disproportionate share of domestic equities, bonds and bank assets ("home bias") despite the diversification gains foreign holdings would offer, …

Sergio de Ferra · Kurt Mitman · Federica Romei

This paper builds a Heterogeneous-Agent New-Keynesian Small Open Model Economy (HANKSOME), calibrated to Hungary's pre-2009 current account boom and sudden-stop reversal, and shows that when …

Sergio Villalvazo

This paper studies the cross-sectional dimension of Fisher's (1933) debt-deflation mechanism as it operates during Sudden Stop crises — episodes characterized by large, abrupt reversals in the current …

Cédric Tille · Eric van Wincoop

This paper develops a solution method for dynamic stochastic general-equilibrium open-economy models with portfolio choice -- extending standard first- and second-order perturbation techniques, which …

Mauricio Barbosa-Alves · Javier Bianchi · César Sosa-Padilla

The paper extends the Cole-Kehoe (2000) sovereign rollover crisis model to include international reserves and derives the joint optimal management of sovereign debt and reserves in a small open …

Fabio Ghironi · Daisoon Kim · Galip Kemal Ozhan

Sanctions are increasingly used as an instrument of economic statecraft, yet their macroeconomic consequences—especially the transitional dynamics and their effects on business cycles—are poorly …

Chun-Che Chi

This paper studies how the lender structure of external debt — specifically, the degree to which a borrowing country's external debt is concentrated among a small number of large lenders — affects …

Jordi Galí · Tommaso Monacelli

This paper builds a tractable small open economy version of the Calvo sticky-price New Keynesian model, shows its equilibrium reduces to a two-equation system in domestic inflation and the output gap …

Xing Guo · Pablo Ottonello · Diego J. Perez

This paper builds an open-economy heterogeneous-agent New Keynesian (HANK) model in which households differ not only in income and wealth but in their real integration (tradable vs. nontradable …

Yan Bai · Jing Zhang

A frictionless multi-country model implies no cross-country correlation between long-run savings and investment rates, so the Feldstein-Horioka finding really is a puzzle for it. Neither limited …

Mark Aguiar · Manuel Amador

A Handbook survey that organises the economics of sovereign debt around a single benchmark limited-commitment model, then shows how each strand of the literature -- debt overhang, equilibrium default, …

Jeremy Bulow · Kenneth Rogoff

A sovereign that can still hold assets abroad after defaulting can always replace any reputation-based loan contract with a sequence of cash-in-advance insurance contracts collateralised out of the …

Enrique G. Mendoza

A standard small-open-economy business-cycle model, augmented with a collateral constraint that caps total debt -- including within-period working-capital loans -- at a fraction of the market value of …

Maurizio Michael Habib · Fabrizio Venditti

Decomposing a global risk factor built from stock returns in 63 economies into structural shocks, this paper finds that exogenous shifts in the financial sector's risk-bearing capacity matter more …

Masao Fukui · Emi Nakamura · Jón Steinsson

How does an exchange rate depreciation causally affect macroeconomic outcomes? The paper asks whether depreciations are expansionary or contractionary, and through which mechanism. The core …

Felipe Saffie · Liliana Varela · Kei-Mu Yi

Using the 2001 Hungarian capital account liberalization as a quasi-natural experiment and census-level firm data covering the entire economy (1992–2008), the paper identifies two channels through …

Maurice Obstfeld · Kenneth Rogoff

Six of international macroeconomics' most stubborn puzzles -- home bias in trade, Feldstein-Horioka, home bias in equity portfolios, low consumption correlations, the slow mean reversion of real …

Mamoon Kader · Hashmat Khan · Minjoon Lee · Raúl Razo-García

This paper uses an open-economy heterogeneous-household model with incomplete markets to evaluate the welfare and distributional consequences of the U.S. Tax Cuts and Jobs Act (TCJA) of 2017 — which …

Michael D. Bordo · Carlos A. Végh

Comparing Argentina's high, chronic nineteenth-century inflation to the United States' price stability, this paper argues the divergence reflects not differing policy competence but the different …