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Working Paper
What drives the German current account? and how does it affect other EU member states?
Kollmann, Robert; in't Veld, Jan; Vogel, Lukas; Roeger, Werner; Ratto, Marco (2014-05-13)
We estimate a three-country model using 1995-2013 data for Germany, the Rest of the Euro Area (REA) and the Rest of the World (ROW) to analyze the determinants of Germany?s current account surplus after the launch of the Euro. The most important factors driving the German surplus were positive shocks to the German saving rate and to ROW demand for German exports, as well as German labour market reforms and other positive German aggregate supply shocks. The convergence of REA interest rates to German rates due to the creation of the Euro only had a modest effect on the German current account ...
Globalization Institute Working Papers , Paper 176

Working Paper
Do oil endowment and productivity matter for accumulation of international reserves?
Fatum, Rasmus; Zhu, Guozhong; Hui, Wenjie (2016-12-01)
We develop a dynamic stochastic optimization model with oil price shocks to show that countries with certain combinations of oil endowment and productivity have strong precautionary incentives to accumulate foreign reserves in response to oil price shocks. Using the Simulated Method of Moments to estimate the model we demonstrate how oil price shocks are absorbed by changes in foreign reserves which, in turn, leads to less variation in aggregate consumption. Along with productivity and oil endowment, we also consider as determinants of reserves holding conventional variables such as trade- ...
Globalization Institute Working Papers , Paper 291

Working Paper
Productivity, Tradability, and the Long-Run Price Puzzle
Taylor, Alan M.; Glick, Reuven; Bergin, Paul R. (2004-06-01)
Long-run cross-country price data exhibit a puzzle. Today, richer countries exhibit higher price levels than poorer countries, a stylized fact usually attributed to the "Balassa-Samuelson" effect. But looking back fifty years, or more, this effect virtually disappears from the data. What is often assumed to be a universal property is actually quite specific to recent times. What might explain this historical pattern? We adopt a framework where goods are differentiated by tradability and productivity. A model with monopolistic competition, a continuum-of-goods, and endogenous tradability ...
Working Paper Series , Paper 2004-08

Working Paper
Vehicle currency
Shi, Shouyong; Devereux, Michael B. (2008)
While in principle, international payments could be carried out using any currency or set of currencies, in practice, the U.S. dollar is predominant in international trade and financial flows. The dollar acts as a "vehicle currency" in the sense that agents in nondollar economies will generally engage in currency trade indirectly using the U.S. dollar rather than using direct bilateral trade among their own currencies. Indirect trade is desirable when there are transactions costs of exchange.> ; This paper constructs a dynamic general equilibrium model of a vehicle currency. We explore the ...
Globalization Institute Working Papers , Paper 10

Journal Article
The balance of payments crisis in the euro area periphery
Klitgaard, Thomas; Higgins, Matthew (2014)
Countries in the euro area periphery borrowed heavily from abroad in the years leading up to the sovereign debt crisis, largely to finance increased consumption and housing investment. When the crisis hit in 2010, capital flight by private investors forced these countries to bring domestic spending back into line with domestic incomes?the same adjustment required of countries facing a typical balance of payments crisis. Nevertheless, adjustment to the pullback of private capital was not as harsh as might have been expected, owing to the workings of the euro area?s system for managing ...
Current Issues in Economics and Finance , Volume 20

Journal Article
Summary of papers presented at the second conference of the International Research Forum on Monetary Policy
Forte, Gregg (2004-04)
The International Research Forum on Monetary Policy held its second conference on November 14 and 15, 2003. The organization is sponsored by the European Central Bank, the Board of Governors of the Federal Reserve System, the Center for German and European Studies, and the Center for Financial Studies. It was formed to encourage research on monetary policy issues that are relevant from a global perspective, and it organizes conferences that are held alternately in the euro area and the United States. ; The 2003 conference, held in Washington, D.C., featured ten papers. Among the topics ...
Federal Reserve Bulletin , Volume 90 , Issue Spr

Working Paper
BGVAR: Bayesian Global Vector Autoregressions with Shrinkage Priors in R
Feldkircher, Martin; Huber, Florian; Böck, Maximilian (2020-08-20)
This document introduces the R library BGVAR to estimate Bayesian global vector autoregressions (GVAR) with shrinkage priors and stochastic volatility. The Bayesian treatment of GVARs allows us to include large information sets by mitigating issues related to overfitting. This improves inference and often leads to better out-of-sample forecasts. Computational efficiency is achieved by using C++ to considerably speed up time-consuming functions. To maximize usability, the package includes numerous functions for carrying out structural inference and forecasting. These include generalized and ...
Globalization Institute Working Papers , Paper 395

Working Paper
A Theory of Net Capital Flows over the Global Financial Cycle
Davis, J. Scott; Van Wincoop, Eric (2023-05-06)
We develop a theory to account for changes in net capital flows of safe and risky assets over the global financial cycle. We show empirically that countries that have a net debt of safe assets experience a rise in net outflows of safe assets (reduced accumulation of safe debt) during a downturn in the global financial cycle. This is accomplished through a rise in total net outflows and a drop in net outflows of risky assets. We develop a multi-country portfolio choice model that can account for these facts. The theory relies on cross-country heterogeneity in the share of an investor's ...
Globalization Institute Working Papers , Paper 420

Working Paper
Bought, Sold and Bought Again: The Impact of Complex Value Chains on Export Elasticities
de Soyres, Francois; http://fedora:8080/fcrepo/rest/objects/authors/; Gunnella, Vanessa; Pavlova, Elena (2021-02-04)
Global value chain (GVC) participation affects the relationship between trade volumes and exchange rate movements. Guided by a simple theory, we show that exports react to the exchange rate between the country producing value added contained in exports and the country of final absorption for this value added. Three predictions follow: (i) a higher share of foreign value added in exports reduce the responsiveness of export volumes to exchange rate changes, (ii) a greater share of exports that returns as imports also reduce the responsiveness of export volumes and (iii) a higher share of inputs ...
International Finance Discussion Papers , Paper 1309

Working Paper
Fewer but Better : Sudden Stops, Firm Entry, and Financial Selection
Saffie, Felipe; Ates, Sina T. (2016-11)
We incorporate endogenous technical change into a real business cycle small open economy framework to study the productivity costs of sudden stops. In this economy, productivity growth is determined by the entry of new firms and the expansion decisions of incumbent firms. New firms are created after the implementation of business ideas, yet the quality of ideas is heterogeneous and good ideas are scarce. Selection of the most promising ideas gives rise to a trade-off between mass (quantity) and composition (quality) in the entrant cohort. Chilean plant-level data from the sudden stop ...
International Finance Discussion Papers , Paper 1187

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