Working Paper: CEPR ID: DP8218
Authors: Anna Pavlova; Roberto Rigobon
Abstract: International macro-finance is a new area of open economy macroeconomics that brings portfolio choice and asset pricing considerations into models of international macroeconomics. The importance of these considerations--typically relegated to Finance and largely overlooked in traditional macroeconomics--for the international macroeconomy have been underscored by a series of recent financial crises and by unprecedented global imbalances. In this paper, we survey recent developments in this area, primarily on the theoretical front. We also suggest several promising directions for future research.
Keywords: Asset pricing; Equity prices; International macroeconomics; International portfolios
JEL Codes: F31; F36; G12; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial contagion (F65) | financial stability of others (F65) |
| large swings in exchange rates (F31) | asset values (G32) |
| large swings in exchange rates (F31) | balance sheets (G32) |
| asset values (G32) | lending behaviors across borders (F65) |
| rise in external deficits (F32) | valuation effects from foreign equity positions (G15) |
| fluctuations in asset prices (E32) | sustainability of current accounts (F32) |
| shifts in asset prices (G19) | national economic policies (F52) |
| shifts in asset prices (G19) | overall stability of the global economy (F01) |