J. Scott Davis
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View article: Dollar Shortages, CIP Deviations, and the Safe Haven Role of the Dollar
Dollar Shortages, CIP Deviations, and the Safe Haven Role of the Dollar Open
Since 2007, an increase in risk or risk aversion has resulted in a US dollar appreciation and greater deviations from covered interest parity (CIP).In contrast, prior to 2007, risk had no impact on the dollar, and CIP held.To explain these…
View article: A Theory of Gross and Net Capital Flows over the Global Financial Cycle
A Theory of Gross and Net Capital Flows over the Global Financial Cycle Open
We develop a theory to account for changes in gross and net capital flows over the global financial cycle (GFC).The theory relies critically on portfolio heterogeneity among investors within and across countries, related to risky portfolio…
View article: "The Global Financial Cycle and Capital Flows During the COVID-19 Pandemic"
"The Global Financial Cycle and Capital Flows During the COVID-19 Pandemic" Open
We estimate the heterogeneous effect of the global financial cycle on exchange rates and cross-border capital flows during the COVID-19 pandemic, using weekly exchange rate and portfolio flow data for a panel of 59 advanced and emerging ma…
View article: The Global Financial Cycle and Capital Flows During the COVID-19 Pandemic
The Global Financial Cycle and Capital Flows During the COVID-19 Pandemic Open
We estimate the heterogeneous effect of the global financial cycle on exchange rates and cross-border capital flows during the COVID-19 pandemic, using weekly exchange rate and portfolio flow data for a panel of 48 advanced and emerging ma…
View article: A Theory of the Global Financial Cycle
A Theory of the Global Financial Cycle Open
We develop a theory to account for changes in prices of risky and safe assets and gross and net capital flows over the global financial cycle (GFC).The multi-country model features global risk-aversion shocks and heterogeneity of investors…
View article: Sudden Stops in Emerging Economies: The Role of World Interest Rates and Foreign Exchange Intervention
Sudden Stops in Emerging Economies: The Role of World Interest Rates and Foreign Exchange Intervention Open
Emerging economies are prone to 'sudden stops', characterized by a collapse in external borrowing and aggregate demand.Sudden stops may be triggered by a spike in world interest rates, which causes rapid private sector deleveraging.In resp…
View article: Land Price Dynamics and Macroeconomic Fluctuations with Imperfect Substitution in Real Estate Markets
Land Price Dynamics and Macroeconomic Fluctuations with Imperfect Substitution in Real Estate Markets Open
The collateral channel, whereby an increase in residential house prices leads to an increase in commercial property prices, loosening firm borrowing constraints and leading to higher firm investment, is weaker when residential and commerci…
View article: Sudden Stops and Optimal Foreign Exchange Intervention
Sudden Stops and Optimal Foreign Exchange Intervention Open
This paper shows how foreign exchange intervention can be used to avoid a sudden stop in capital flows in a small open emerging market economy.The model is based around the concept of an under-borrowing equilibrium defined by Schmitt-Grohe…
View article: Imperfect Substitutability in Real Estate Markets and the Effect of Housing Demand on the Macroeconomy
Imperfect Substitutability in Real Estate Markets and the Effect of Housing Demand on the Macroeconomy Open
Changes in housing demand can have a macroeconomic effect through the collateral channel, where the change in residential real estate prices is associated with a change in commercial real estate prices, affecting firm collateral and thus f…
View article: Foreign Exchange Reserves as a Tool for Capital Management
Foreign Exchange Reserves as a Tool for Capital Management Open
Many recent theoretical papers have argued that countries can insulate themselves from volatile world capital flows by using a variable tax on foreign capital as an instrument of monetary policy.But at the same time many empirical papers h…
View article: Dealing with Time Inconsistency: Inflation Targeting versus Exchange Rate Targeting
Dealing with Time Inconsistency: Inflation Targeting versus Exchange Rate Targeting Open
Adopting a single instead of multiple targets can be an effective way to overcome the classic time‐inconsistency problem. The choice of a single mandate depends on the trade openness and the credibility. Reduced‐form empirical results show…
View article: Capital Controls and Monetary Policy Autonomy in a Small Open Economy
Capital Controls and Monetary Policy Autonomy in a Small Open Economy Open
Is there a link between capital controls and monetary policy autonomy in a country with a floating currency? Shocks to capital flows into a small open economy lead to volatility in asset prices and credit supply. To lessen the impact of ca…
View article: Monetary Policy Divergence, Net Capital Flows, and Exchange Rates: Accounting for Endogenous Policy Responses
Monetary Policy Divergence, Net Capital Flows, and Exchange Rates: Accounting for Endogenous Policy Responses Open
This paper measures the effect of monetary tightening in key advanced economies on net capital flows and exchange rates around the world. Measuring this effect is complicated by the fact that the domestic monetary policies of affected econ…
View article: Financial Performance and Macroeconomic Fundamentals in Emerging Market Economies over the Global Financial Cycle
Financial Performance and Macroeconomic Fundamentals in Emerging Market Economies over the Global Financial Cycle Open
This paper explores the relationship between financial performance and macroeconomic fundamentals in emerging market economies not only in times of crises, but in general during crisis and non-crisis years over the global financial cycle.U…