In the 1990s, Sudden Stops in emerging markets were a harbinger of the 2008 global
financial crisis. During these Sudden Stops, countries lost access to credit, which caused …

This paper analyzes the behavior of international capital flows by foreign and domestic
agents, dubbed gross capital flows, over the business cycle and during financial crises. We …

Credit constraints linking debt to market-determined prices embody a systemic credit
externality that drives a wedge between competitive and constrained socially optimal …

Financial crashes were followed by deep recessions in the Sudden Stops of emerging
economies. An equilibrium business cycle model with a collateral constraint explains this …

Global financial imbalances can result from financial integration when countries differ in
financial markets development. Countries with more advanced financial markets accumulate …

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 …

The textbook neoclassical growth model predicts that countries with faster productivity
growth should invest more and attract more foreign capital. We show that the allocation of …

We present a model of the optimal level of international reserves for a small open economy
seeking insurance against sudden stops in capital flows. We derive a formula for the optimal …

We study the optimal accumulation of international reserves in a quantitative model of
sovereign default with long-term debt and a risk-free asset. Keeping higher levels of …

We show that capital flows to emerging market economies create externalities that differ by
an order of magnitude depending on the state-contingent payoff profile of the flows. Those …