International Finance

Alvaro Garcia-Marin · Santiago Justel · Tim Schmidt-Eisenlohr

This paper provides a theory and evidence for why firms with higher markups extend more trade credit, focusing on a financing cost channel that is distinct from existing competition-based …

Zhiguo He · Arvind Krishnamurthy · Konstantin Milbradt

What makes a sovereign bond a safe asset is not the strength of its fundamentals in absolute terms but their strength relative to the alternatives, together with the size of the debt outstanding -- …

Pierre-Olivier Gourinchas · Walker Ray · Dimitri Vayanos

The paper develops a two-country preferred-habitat model in which currency and bond markets are populated by different investor clienteles — currency traders with price-elastic demand for foreign …

Gaurav Khanna · Emir Murathanoglu · Caroline Theoharides · Dean Yang

This paper asks how persistent increases in international migrant income prospects affect long-run economic development in migrant-origin areas. The central question is whether Philippine provinces …

Marco Errico · Danial Lashkari

Errico and Lashkari address two intertwined problems in the measurement of aggregate price indices: how to account for quality change and variety entry/exit when the demand system is not CES, and how …

Gita Gopinath · Jeremy C Stein

A currency's role as the unit of account in which trade is invoiced and its role as a safe store of value reinforce each other, because households who buy dollar-priced imports want dollar-denominated …

Bruno Pellegrino · Enrico Spolaore · Romain Wacziarg

Why do observed international investment positions and cross-country differences in rates of return to capital fail to conform to a frictionless capital-market benchmark? The paper asks how large the …

Alfred Wong · Jiayue Zhang

Cross-currency basis swap spreads are widely read as a post-crisis anomaly in which covered interest parity has broken down; this paper argues the opposite -- that a swap dealer who priced a …

Farid Farrokhi · Ahmad Lashkaripour

Farrokhi and Lashkaripour (2025) study the interaction between trade policy and climate change. The central research question is whether and how countries can use trade policy — specifically import …

Peter Blair Henry

The literature's standard finding -- that countries with open capital accounts do not grow faster -- tests a prediction the neoclassical growth model never makes, because in that model liberalization …

Kristin J. Forbes · Francis E. Warnock

Dating extreme capital-flow episodes from gross rather than net flows splits the picture in two -- "surges" and "stops" driven by foreign investors, "flight" and "retrenchment" driven by domestic …

Anusha Chari · Karlye Dilts Stedman · Christian Lundblad

Shifts in global risk appetite move not just the middle of the emerging-market capital-flow and return distributions but their left tails, and usually the left tail more. Estimating panel quantile …

Pierre-Olivier Gourinchas · Olivier Jeanne

The textbook neoclassical growth model says countries whose productivity is catching up should invest more and import more capital. Across 68 developing countries over 1980-2000 the cross-country …

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 …

Wenxin Du · Jesse Schreger

A Handbook chapter reviewing the breakdown of covered interest rate parity during the Global Financial Crisis and its persistence through the following decade -- how the cross-currency basis is …

Hanno Lustig · Nikolai Roussanov · Adrien Verdelhan

Sorting currencies into six portfolios by their forward discounts, this paper shows that a single return-based factor -- the return on the highest minus the return on the lowest interest rate currency …

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 …

Cristina Arellano

In a small open economy where a risk-averse government borrows from risk-neutral lenders using only non-contingent one-period bonds, default happens in equilibrium and happens in *recessions* -- the …

Adrien Auclert · Hannes Malmberg · Frédéric Martenet · Matthew Rognlie

A popular argument — the "asset market meltdown" of the 1990s, revived as the "great demographic reversal" — holds that once the old start running down their savings, aging will push interest rates …

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 …

Wenxin Du · Alexander Tepper · Adrien Verdelhan

Covered interest rate parity, the no-arbitrage cornerstone of currency forward pricing, is shown to be systematically and persistently violated among G10 currencies after the 2008 crisis, in ways that …

Anusha Chari · Peter Blair Henry · Racha Moussa

In a calibrated neo-classical growth model, moving from financial autarky to integration raises consumption most in the first years after opening, so the standard infinite-horizon Hicksian welfare …

Hanno Lustig · Adrien Verdelhan

Even the most extreme departure from complete international asset markets -- one in which investors can hold nothing abroad but the foreign risk-free bond -- fails to match the smoothness of exchange …

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 …

Martin Feldstein · Charles Horioka

Across 16 industrial countries whose saving and investment rates are averaged over 1960-74, a one-percentage-point higher ratio of gross domestic saving to GDP comes with roughly nine-tenths of a …

Gita Gopinath · Emine Boz · Camila Casas · Federico J. Díez · Pierre-Olivier Gourinchas · Mikkel Plagborg-Møller

Because most trade is invoiced in a few dominant currencies rather than in the producer's or the destination's currency, it is the dollar exchange rate and not the bilateral one that drives import …

Richard A. Meese · Kenneth Rogoff

Across the dollar/mark, dollar/pound, dollar/yen and trade-weighted dollar rates over November 1976 to June 1981, no structural exchange rate model, univariate time series model, vector autoregression …

Barbara Rossi

Asked whether anything forecasts exchange rates, this survey's answer is "it depends" -- on the predictor, the horizon, the sample, the model and the evaluation test. Predictability shows up most …

Stefan Avdjiev · Cathérine Koch · Hyun Song Shin

Across four econometric approaches and up to 114 borrowing countries, a stronger international funding currency goes with less cross-border bank lending denominated in that currency: a one percentage …

Philip R Lane · Jay C Shambaugh

This paper builds a database of international currency exposures for a large panel of countries over 1990-2004 and uses it to construct financially-weighted exchange rate indices, showing that …

Philippe Bacchetta · Kenza Benhima · Brendan Berthold

Most recent work on optimal foreign-exchange intervention prices the opportunity cost of reserves off either deviations from uncovered interest parity or deviations from covered interest parity, and …

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 …

Maurice Obstfeld · Alan M. Taylor

Global capital mobility traces a U over the past century and a half, and the authors argue the shape is explained by the open-economy policy trilemma rather than by technology: capital moved freely …

John Ammer · Stijn Claessens · Alexandra Tabova · Caleb Wroblewski

When the sovereign yield in an investor's own country falls, that country's private investors hold more U.S. bonds and tilt the mix toward riskier corporate debt rather than Treasuries. Across 31 …

Carlos Arteta · Steven Kamin · Franz U. Ruch

This paper examines how the effects of rising U.S. interest rates on emerging market and developing economies (EMDEs) depend on the underlying source of the interest rate increase. Specifically, it …

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 …

Matteo Maggiori · Brent Neiman · Jesse Schreger

Using a new security-level dataset covering $32 trillion in global investment positions, this paper establishes that the currency a bond is denominated in -- not the nationality of its issuer -- is …

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 …

Julian di Giovanni · Şebnem Kalemli-Özcan · Mehmet Fatih Ulu · Yusuf Soner Baskaya

Using the universe of Turkish corporate credit transactions matched to bank balance sheets over 2003-13, this paper shows that an easing of global financial conditions lowers domestic borrowing costs …

Mathilde Muñoz

This paper asks whether differences in labor market regulations — specifically payroll taxes and minimum wages — shape countries' comparative advantage in the cross-border provision of labor-intensive …

Kenneth R. French · James M. Poterba

At the end of 1989 Japanese investors held 1.9 percent of their equity abroad, US investors 6.2 percent and British investors 18 percent. Inverting a standard portfolio first-order condition, the …

Saleem Bahaj · Ricardo Reis

This paper asks how a currency achieves international status — moving from zero to positive cross-border use — and whether deliberate central bank policy can accelerate that transition. The authors …

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 …

Wenxin Du · Jesse Schreger

Emerging-market governments that borrow in their own currency still pay a measurable default premium: stripping out currency risk with cross-currency swaps leaves a "local currency credit spread" …

Niko Jaakkola · Florian Wagener

This paper by Jaakkola and Wagener addresses a long-standing open problem in the theory of differential games: how to make Markov-perfect equilibria (MPE) well-defined when best-response policy …

Árpád Ábrahám · Eva Carceles-Poveda · Yan Liu · Ramon Marimon

This paper asks how to optimally design a Financial Stability Fund (Fund) for a union of sovereign countries that must simultaneously (i) prevent sovereign default, (ii) provide risk-sharing and …

Antonio Coppola · Matteo Maggiori · Brent Neiman · Jesse Schreger

Because global firms raise capital through subsidiaries incorporated in tax havens, official residency-based statistics attribute those securities to the haven rather than to the parent's country; …

Oleg Itskhoki · Dmitry Mukhin

Itskhoki and Mukhin develop a tractable open-economy model with financial market segmentation — in which only the government sector (including state banks and exporting firms) can intermediate …

Harold L. Cole · Timothy Kehoe

A dynamic stochastic general equilibrium model in which a government that must roll over one-period debt can be forced into default purely because lenders expect it -- and a characterisation of …

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 …

Josefin Meyer · Carmen M Reinhart · Christoph Trebesch

Two centuries of monthly prices for 1,552 foreign-currency government bonds traded in London and New York, matched bond-by-bond to a new archive of defaults and haircuts, show that external sovereign …

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 …

Juan J Cruces · Christoph Trebesch

The first present-value estimates of creditor losses for all 180 sovereign debt restructurings with foreign banks and bondholders between 1978 and 2010 -- average haircut 37%, with half the cases …

Anusha Chari · Karlye Dilts-Stedman · Kristin Forbes

A country's macroprudential stance looks irrelevant to portfolio flows on average, but that average hides the tails. Countries with tighter ex-ante regulation see larger bond and equity outflows in …

George S. Tavlas

This paper sets Milton Friedman's 1953 essay "The Case for Flexible Exchange Rates" side by side with Harry Johnson's near-identically titled 1969 essay, argument by argument, and concludes that …

Benjamin Hébert · Jesse Schreger

US court rulings in Republic of Argentina v. NML Capital moved the market-implied probability that Argentina would default on its restructured bonds without carrying any news about the Argentine …

Richard Portes · Hélène Rey

On a panel of bilateral gross cross-border equity transactions among 14 countries from 1989 to 1996, a gravity specification with market capitalisations, distance and a measure of market …

Stefan Avdjiev · Wenxin Du · Cathérine Koch · Hyun Song Shin

The strength of the US dollar, the size of covered interest parity deviations and the growth of dollar-denominated cross-border bank lending move together in what the authors call a triangular …

Philip R. Lane · Gian Maria Milesi-Ferretti

Capital flows were tracked continuously, but the stocks of foreign assets and liabilities they accumulate into were largely unmeasured outside a handful of industrial countries. This paper builds …

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 …

Bernardo Morais · José-Luis Peydró · Jessica Roldán-Peña · Claudia Ruiz-Ortega

Using the universe of business loans in Mexico matched to firm and bank balance sheets, this paper shows that each foreign monetary policy moves local credit supply mainly through banks headquartered …

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 …

Francesco Caselli · James Feyrer

Backing the marginal product of capital straight out of output, the capital stock and the capital share gives a return in poor countries more than twice that in rich ones -- until two corrections are …

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 …

Laura Alfaro · Anusha Chari · Fabio Kanczuk

Brazil's IOF tax on foreign portfolio inflows was announced overnight and without warning, which makes it readable in stock prices. Two-day cumulative abnormal returns for listed Brazilian firms fall …

Anusha Chari · Jennifer Rhee

Measured firm by firm from accounting and stock-market data rather than imputed from national accounts, the marginal product of capital really is higher in poorer countries -- but inflation-adjusted …

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 …

Silvia Miranda-Agrippino · Hélène Rey

A single global factor extracted from a large panel of risky asset prices traded around the world falls sharply after a US monetary contraction, alongside deleveraging by global banks, a rise in …

Karlye Dilts Stedman · Andrew Hanson

The paper asks why unconventional monetary policy (UMP) spillovers from the European Central Bank (ECB) to the U.S. Treasury yield curve vary so substantially over time, and whether the time-varying …

Robert E. Lucas, Jr.

If two countries produce the same good with the same constant-returns technology, diminishing returns imply the poorer one has the higher marginal product of capital -- and on 1988 data, US output per …