This paper uses issuance-level data to study how equity capital inflows that enter emerging market economies affect issuance and corporate investment. It shows foreign are strongly correlated with country-level issuance. The relation especially reflects the behavior of large firms. To identify supply-side shocks, into each country instrumented exogenous changes in other countries’ attractivenes...

We build a monetary model to show how expected revaluations lead to the instability of a pegged exchange rate regime. This model assumes current account convertibility and some degree of capital control, and fundamentally sound domestic policies and economy, as is the case in China. The model demonstrates that market-oriented interest rates can act as an automatic stabilizer to ease revaluation...

As the global financial crisis has shown, reaping the benefits of financial development and international financial integration without incurring large risks remains a key challenge for many countries around the world. The financial system is inherently procyclical, that is, it tends to amplify the business cycle. Faced with a positive shock, financial institutions and markets can behave in the...

One of the most provocative developments in the u.s. economy during the 191)0s was the rapid increase in net foreign claims on U.S. assets, \vith its counterpart in a large domestic trade deficit. To som(:" observers. the heightened pace of foreign acquisition of u.s. assets was clear evidence of an improved investment climate and so should be regarded as a sign of strength To others, however, ...