We combine a rarely accessed BIS database on cross-border lending flows with cross-country data on macroprudential regulations. We find significant interactions between the monetary policy of major international currency issuers (USD, EUR and JPY) and macroprudential policies in source (home) lending banking systems. Consistent with the bank lending channel, macroprudential easing in a home country

Understanding the sources of inflation persistence is crucial for monetary policy. This paper provides an assessment of the influence of inflation expectations' anchoring on the persistence of inflation. We construct an index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies since 1989. We then study the response of consumer prices to terms-of-trade shocks

Using supervisory data on the U.S. branches of foreign banks and their syndicated loans, we show that the branches of euro-area banks suffered a liquidity shock in the form of reduced access to wholesale funding from U.S. money market funds during the European sovereign debt crisis. Affected branches cut lending to U.S. firms mostly in the form of revolving credit and along the extensive margin, as

We study the international protection of consumer data in a model where data from product sales generate additional revenue to firms but disutility to consumers. When data usage lacks transparency, a firm suffers a commitment problem and overuses consumer data. Greater transparency enables the firm to commit to less data usage, which boosts consumer demand and leads to a higher price but also higher

Inflation targeting is implemented in different ways – typically by adopting point targets, with or without tolerance bands, or by specifying target ranges. Using data for 20 economies (half of which are advanced and emerging market economies, respectively), this paper tests whether the various target types anchor inflation expectations differently. By studying to what extent inflation expectations

We operationalize the definition of systemic risk provided by the IMF, BIS, and FSB and derive a two-stage hierarchical hypothesis test to identify indicators of systemic risk. Applying the framework to a set of candidate variables for 45 countries, we detect two credit-based financial cycle variables that, by and large, pass our test. However, for many other variables, including the Basel III credit-to-GDP

This paper analyzes how exporters are affected by corporate tax reforms in destination markets. We introduce tax policy in a trade model of multi-product firms and show that producers face tougher competition in export markets with lower corporate tax rates. This competitive effect induces firms to reduce the number of exported products and to skew their export sales towards the better performing varieties

We study how changes in trade barriers contributed to the dynamics of the US trade balance and real exchange rate between 1980 and 2015 - a period when trade tripled. Using two dynamic trade models, we decompose fluctuations in the trade balance into terms related to trade integration (global and unilateral) and business cycle asymmetries. We find three main results. First, the relatively large US

Large US firms, by diffusing embodied technology through trade in intermediates, appear to drive Europe's output over the medium term. We develop a two-country model of endogenous growth in varieties, cross-country firm heterogeneity and trade to match this evidence. A US TFP slowdown generates a pronounced recession in Europe, while a negative investment-specific shock also imparts a protracted recession

We study how trade linkages affect the conduct of monetary policy in a two-country model with heterogeneous firms, endogenous producer entry, and labor market frictions. We show that the ability of the model to replicate key empirical regularities following trade integration—synchronization of business cycles across trading partners and reallocation of market shares toward more productive firms—is

A country may adopt policy measures such as raising its foreign exchange reserves to better prepare for sudden reversal of international capital flows or currency attacks, which in principle should reduce financial vulnerability for its firms and the entire economy, but the beneficial effect of such policies may be partially offset by endogenous firms' decisions to take on more risks. We present a

Can active investment promotion efforts attract FDI towards areas and sectors that would not otherwise be targeted? This paper leverages an ad hoc survey on national and sub-national Investment Promotion Agencies (IPAs) in Europe and applies state-of-the-art policy evaluation methods to estimate the impact of IPAs on FDI attraction. The results show that FDI responds to IPAs even in advanced economies

Using a new firm-level dataset on private and listed firms from advanced economies and emerging markets, we document four stylized facts on market power in global markets. First, competition has declined, but only modestly—average markups increased from 1.22 to 1.29 (6%) during 2000–2015, especially in services and in advanced economies. Second, the markups of listed firms are higher and experienced

International financial institutions (IFIs) generally enjoy preferred creditors treatment (PCT). Although PCT rarely appears in legal contracts, when sovereigns restructure bilateral or commercial debts they normally pay IFIs in full. This paper presents a model where a creditor, such as an IFI, that can commit to lend limited amounts at the risk-free rate and can refrain from lending into arrears

The existence of multinational firms and the rise of global value chains raise the question how international trade contributes to a country's income. Ownership relations between, for example, headquarters and subsidiaries result in international income transfers. These transfers are ignored in standard trade data. Taking them into account in a global input-output analysis allows us to assess how much

The recent literature has derived simple formulas for the Social Cost of Carbon (SCC) that are easy to interpret, but that only apply to the global economy. This is an issue since international transfers to sustain the global optimum with the same carbon price for all countries are still lacking after thirty years of climate summits. The main research objective of our paper is to obtain tractable analytical

This paper studies the conduct of monetary policy in economies with currency mismatch. To this end, I build a model that embeds financial frictions from households' collateralized borrowing in foreign currency into an open-economy Keynesian framework. The monetary authority faces a trade-off between traditional unemployment stabilization gains from currency depreciation and its costs in terms of generating

This paper exploits the Brexit referendum as a quasi-natural experiment to investigate the effect of exchange rate and uncertainty shocks on export volumes, prices, entry and exit. We use transaction-level export data for the universe of exporters in Portugal. Using monthly observations on export quantity and price for products exported by the same firm to buyers in the UK and in other countries allows

This paper shows how crises prompted firms to switch borrowing across debt markets, impacting the amount borrowed, maturity, and currency denomination at the firm and aggregate levels. During financial crises, firms from advanced and emerging economies shifted their issuance activity between domestic and international syndicated loans and corporate bonds. Firms increased their borrowing in markets

We study the macroeconomic consequences of a major trade disruption using the example of the Finnish–Soviet trade collapse in 1991. This is a rare case of a well–identified large trade shock in a developed economy. We find that the shock significantly affected Finnish output. Even so, the trade collapse was insufficient to generate an all–out crisis, and accounts for only a part of the Finnish Great

This paper studies the circular relationship between sovereign credit risk, government fiscal and debt policy, and output. I consider a sovereign default model with fiscal policy and private capital accumulation. I show that, when fiscal policy responds to borrowing conditions in the sovereign debt market, multiple equilibria exist where the expectations of lenders are self-fulfilling. In the bad equilibrium

This paper quantifies the size of internal versus external trade barriers and assesses the trade and welfare impact. I develop a quantitative two-sector international trade model featuring nonhomothetic preferences in which Indian states trade both domestically and internationally. I discipline the model using rich data on price dispersion together with state-based foreign and domestic trade flows

This paper employs a novel multi-country dataset of corporate defaults to develop a model of distress risk specific to emerging markets. The data suggest that global financial variables such as US interest rates and shifts in global liquidity and risk aversion have significant predictive power for forecasting corporate distress risk in emerging markets. We document a positive distress risk premium

Did the Internet make international markets more integrated? To address this question, we study long-term international price differences and their speed of convergence, based on a unique data base for identical goods sold in both online and traditional “brick-and-mortar” distribution channels, covering ten European countries. We find that long-term international price differences are closely comparable

This paper presents a positive and normative study of a world financial market when sovereign countries can default on their debt. We construct a tractable model that enables us to study sovereign default in general equilibrium. The amount of safe assets is thus endogenous and determined by international risk-sharing. We characterize the equilibrium structure and we show that the market equilibrium

We revisit the relationship between foreign investment and productivity of acquired firms. First, we construct a panel firm-level dataset for eight advanced European countries covering domestic and foreign acquisitions together with detailed balance sheet information for the years 1999–2012. Second, we address the challenge of identifying a causal relation. To that end, we compare foreign to domestic

This paper incorporates sloping marginal cost curves and their variations across industries into an open macro model, motivated by the fact that industries’ output, imports, and exports are more procyclical when their economies of scale arise from sloping marginal cost curves rather than fixed costs. The model, consistent with the data, delivers endogenous within-firm interdependence across markets

We analyze the local effect of exogenous shocks to the value of mineral deposits on a panel of manufacturing plants in Indonesia. We introduce heterogeneity in natural resource extraction methods, which helps to explain the mixed evidence found in the ‘Dutch disease’ literature. In districts where mineral extraction is relatively capital intensive, mining booms cause virtually no upward pressure on

Financial frictions can pose a barrier to export entry by altering a firm's long-term capital structure. The focus on long-term firm financing is motivated by our empirical finding that exporting firms tend to be more leveraged than non-exporting firms in terms of long-term debt, as distinct from short-term working capital. We explain this fact by marrying a corporate finance model of capital structure

We introduce time and risk into the fixed-variable cost tradeoff in heterogeneous firm trade models: Investing in exporting gradually and stochastically lowers the costs of exporting. In the model, aggregate trade dynamics arise from producer-level decisions to invest in lowering their future variable export costs, and tariff reforms generate time-varying trade elasticities. The gains from reducing