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The competitiveness of U.S. manufacturing
Diez, Federico J.; Gopinath, Gita (2014-06-01)
We study the competitiveness of U.S. manufacturing. For the period 1999?2012 we find little support for a significant offshoring reversal. We show that the share of domestic demand that is met by imports and the terms of trade show no signs of reversal, even in sectors dominated by imports from China. We do, however, find some evidence consistent with the U.S. shale-gas energy revolution raising the competiveness of U.S. energy-intensive sectors.
Current Policy Perspectives , Paper 14-3

Working Paper
Capital Controls and the Global Financial Cycle
Matschke, Johannes; Lovchikova, Marina (2021-09-08)
Capital flows into emerging markets are volatile and associated with risks. A common prescription is to impose counter-cyclical capital controls that tighten during economic booms to mitigate future sudden-stop dynamics, but it has been challenging to document such patterns in the data. Instead, we show that emerging markets tighten their capital controls in response to volatility in international financial markets and elevated risk aversion. We develop a model in which this behavior arises from a desire to manipulate the risk premium. When investors are more risk-averse or markets are ...
Research Working Paper , Paper RWP 21-08

Working Paper
How Times Have Changed: The Impact of the 2026 Iran War on the U.S. Economy
Kilian, Lutz; Plante, Michael D.; Richter, Alexander W. (2026-06-23)
The 2026 Iran war has raised the question of how exposed the U.S. economy is to geopolitical oil supply disruptions. It is widely believed that the U.S. economy has become less vulnerable to such disruptions as it has reduced its dependence on oil and changed from a major net oil importer to a net oil exporter. We develop a two-country model of the global economy with large geopolitical oil supply disruptions that distinguishes between the U.S. economy and the rest of the world. We find that the response of U.S. real GDP growth to the disruption in global oil supplies today is only ...
Working Papers , Paper 2615

Conference Paper
Capital controls: a normative analysis
Lipinska, Anna; De Paoli, Bianca (2012-11)
Countries' concerns with the value of their currency have been extensively studied and documented in the literature. Capital controls can be (and often are) used as a tool to manage exchange rate fluctuations. This paper investigates whether countries can benefi t from using such a tool. We develop a welfare based analysis of whether (or, in fact, how)countries should tax international borrowing. Our results suggest that managing exchange rate movements with the use of these taxes can be benefi cial for individual countries although it would limit cross-border pooling of risk. This is because ...
Proceedings , Issue Nov , Pages 1-36

Working Paper
Policy Rules and Large Crises in Emerging Markets
Espino, Emilio; Sanchez, Juan M.; Martin, Fernando M.; Kozlowski, Julian (2025-06-12)
Emerging economies have adopted fiscal and monetary rules to discipline government policy. We study the value and macroeconomic implications of rules and flexibility within a sovereign-default model that incorporates domestic fiscal and monetary policies and long-term external debt. Adopting monetary targets and debt limits during normal times yields welfare gains. Suspending rules can significantly influence policy, macroeconomic outcomes, and welfare during large, unforeseen crises. The gains from flexibility depend on how quickly policymakers are able to reimpose rules after the crisis.
Working Papers , Paper 2022-018

Working Paper
The Impact of Bretton Woods International Capital Controls on the Global Economy and the Value of Geopolitical Stability: A General Equilibrium Analysis
Restrepo-Echavarria, Paulina; Wright, Mark L. J.; Ohanian, Lee E.; Van Patten, Diana (2025-04-11)
This paper quantifies the positive and normative effects of Bretton Woods capital controls on global economic activity. It applies a three-region DSGE model of the U.S., Western Europe, and the Rest of the World (ROW) that measures capital controls using observed regional consumption growth differences. We find sizable controls during Bretton Woods that prevented ROW capital from flowing to the U.S., and which reduced U.S. welfare and raised ROW welfare. By preventing capital flight in developing economies, we find that Bretton Woods controls promoted the U.S. foreign policy objective of ...
Working Papers , Paper 2020-042

Report
News shocks, monetary policy, and foreign currency positions
Küçük, Hande; De Paoli, Bianca (2015-12-01)
Over the past two decades, before the global financial crisis, there was a rapid rise in the size of gross external portfolio positions as well as a decrease in the net negative foreign currency exposure in external balance sheets. In this paper, we present a theoretical model in which these portfolio facts can be explained by changes in monetary policy rules and the composition of shocks that underlie economic fluctuations. We find that policies with a strong emphasis on price stability would imply shorter positions in foreign currency when the dominant sources of fluctuations are supply ...
Staff Reports , Paper 750

Report
Spillovers and Spillbacks
Acharya, Sushant; Pesenti, Paolo (2024-03-01)
We study international monetary policy spillovers and spillbacks in a tractable two-country Heterogeneous Agent New Keynesian model. Relative to Representative Agent (RANK) models, our framework introduces a precautionary-savings channel, as households in both countries face uninsurable income risk, and a real-income channel, as households have heterogeneous marginal propensities to consume (MPC). While both channels amplify the size of spillovers/spillbacks, only precautionary savings can change their sign relative to RANK. Spillovers are likely to be larger in economies with higher ...
Staff Reports , Paper 1089

Working Paper
Betting the House
Taylor, Alan M.; Schularick, Moritz; Jordà, Òscar (2014-12)
Is there a link between loose monetary conditions, credit growth, house price booms, and financial instability? This paper analyzes the role of interest rates and credit in driving house price booms and busts with data spanning 140 years of modern economic history in the advanced economies. We exploit the implications of the macroeconomic policy trilemma to identify exogenous variation in monetary conditions: countries with fixed exchange regimes often see fluctuations in short-term interest rates unrelated to home economic conditions. We use novel instrumental variable local projection ...
Working Paper Series , Paper 2014-28

Working Paper
Risk sharing in a world economy with uncertainty shocks
Kollmann, Robert (2015-11-01)
This paper analyzes the effects of output volatility shocks and of risk appetite shocks on the dynamics of consumption, trade flows and the real exchange rate, in a two-country world with recursive preferences and complete financial markets. When the risk aversion coefficient exceeds the inverse of the intertemporal substitution elasticity, then an exogenous rise in a country?s output volatility triggers a wealth transfer to that country, in equilibrium; this raises its consumption, lowers its trade balance and appreciates its real exchange rate. The effects of risk appetite shocks resemble ...
Globalization Institute Working Papers , Paper 258

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