Codirectors
Mark Aguiar is the Walker Professor of Economics and International Finance at Princeton University. His research spans both open- and closed-economy macroeconomics, including sovereign debt, business cycles in emerging markets, capital taxation, growth, and the micro-foundations of consumption and labor supply. He has been an NBER affiliate since 2008.
Linda Tesar is a professor of economics at the University of Michigan. Her research examines cross-country business cycle linkages, capital flows to emerging markets, the consequences of exchange rate exposure, and global risk-sharing. She has been an NBER affiliate since 1993.
Featured Program Content
Since the global financial crisis of 2008, policymakers have increasingly turned to unconventional stabilization policies when confronting large macroeconomic...
Foreign investors’ demand for US dollar (USD) denominated securities and their currency hedging activities are important for analyzing international...
Sovereign debt crises have been a recurring phenomenon in the global economy for over two centuries, with far-reaching consequences for both creditors...
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October 24, 2025 - Conference
July 8-11, 2025 - Conference
Oracles are software components that enable data exchange between siloed blockchains and external environments, enhancing smart contract capabilities and platform interoperability. Oracles play key roles in decentralized finance and blockchain applications in centralized finance. We find that...
Tokens offer convenience in digital networks and earn rewards when staked for consensus generation or economic activities. In our continuous-time model, agents dynamically allocate wealth over on-platform transactions and staking. Aggregate staking ratio crucially shapes platform productivity, grows...
The slow adoption of climate change policies stems from concerns about their economic impact. The EU has led global carbon pricing through its Emissions Trading Scheme (ETS). This study examines the effect of ETS policy shocks on global stock market returns at the country-industry level using linear...
March 28, 2025 - ConferenceProgram
We study the role played by Chinese stateowned firms during the USChina trade war. Based on measures constructed from Chinese firmlevel customs microdata, we show that the presence of stateowned enterprises (SOEs) in Chinese imports led to a large negative impact on US exports in addition to the...
We model the competition between digital forms of fiat money and private digital money (PDM). Countries strategically digitize their fiat money upgrading existing or launching new payment systems (including CBDCs) to enhance adoption and counter PDM competition. A pecking order emerges: less...
Author(s) - George A. Alessandria, Shafaat Yar Khan, Armen Khederlarian, Kim J. Ruhl & Joseph B. Steinberg
We study how trade-policy dynamics affect the dynamics of trade volumes and the implications of these effects for estimates of the trade elasticity. We use data on US imports and trade policy from 19742017 for China and Vietnamthe countries with the largest import growth and the largest tariff...
What is the optimal monetary policy response to tariffs? This paper explores this question within an open-economy New Keynesian model and shows that the optimal monetary policy response is expansionary, with inflation rising above and beyond the direct effects of tariffs. This result holds...
Author(s) - Sebastian Edwards
In this essay, I analyze the nationalization of large copper mines during Salvador Allendes socialist government in Chile in the 1970s. This is one of the earliest cases nationalization without compensation. Chiles legal argument was based on the novel idea that adequate payment should be calculated...
Project
This award funds research projects that combine theory and data to understand the geoeconomic mechanisms of international political coercion and great power competition and how these determine international trade movements, as well as international capital and currency markets. Geoeconomics, a...
This paper proposes a concept of a global currency and introduces a global currency pricing specification into a standard N-country open economy macroeconomic model. A global currency is defined as a virtual unit of account that is exclusively used for international trade invoicing and is formed as...
Author(s) - Zhengyang Jiang
Chinas rising presence in international finance, which has long lagged behind its prominence in international trade, is now reshaping global financial dynamics. Using a large sample of developing countries, this paper documents that countries more reliant on Chinas lending are less exposed to the...
March 1, 2025 - Article
Since the global financial crisis of 2008, policymakers have increasingly turned to unconventional stabilization policies when confronting large macroeconomic shocks. When the COVID-19 shock hit in 2020 and capital flows retrenched, such tools took center stage, especially across emerging markets...
This paper examines the long-run economic consequences of Western sanctions on Russia. Using a new framework for balanced growth path analysis, we find that the long-run declines in consumption are significantly larger when capital stocks are allowed to adjust --- 1.4 times larger for Russia and 2.2...
What are the long-run effects of permanent changes to the economy? We characterize long-run comparative statics for a broad class of models in terms of expenditure shares, substitution elasticities, and capital supply elasticities. Our key insight is that long-run analysis can be performed using an...
We study cost-price dynamics in normal times and during inflation surges. Using microdata on firms prices and production costs we construct an empirical measure of price gapsthe deviation between a firms listed and optimal price. We then examine the mapping between gaps and price changes in the...
Chinas stock market greatly outperformed other national markets during the first several months of the COVID-19 pandemic, and it did so even before it became evident that early containment efforts would flounder in the United States and many other countries. As to why, one view holds that aggressive...
Author(s) - Yushi Yoshida, Takatoshi Ito, Junko Shimizu, Kiyotaka Sato, Taiyo Yoshimi & Uraku Yoshimoto
We examine the determinants and the dynamics of the exchange rate pass-through of the Japanese exporters, utilizing the official Customs declaration data. We first estimated the invoicing currency exchange rate pass-through and found that export prices invoiced in producer currency are the most...
Emerging markets face large and persistent fluctuations in sovereign spreads. To what extent are these fluctuations driven by local shocks versus financial conditions in advanced economies? To answer this question, we develop a neoclassical business cycle model of a world economy with an advanced...
This paper develops a theory of preemptive controls on capital outflows by residents as a second-best tool to mitigate boom-bust cycles in domestic asset markets and prevent wealth transfers from uninformed traders to pump-and-dump speculators, or financial looters, as in Akerlof and Romer (1993)....
By improving the pledgeability of returns to financiers, financial development enhances a producers ability to raise capital to fund long term complex investments. Consequently, it should increase output and welfare. However, a general equilibrium analysis suggests this is not always so. We consider...
Author(s) - Douglas A. Irwin
The decision by developing countries to open up their economies to foreign trade and investment in the 1980s and 1990s was a momentous event in world history. How and why did this trade policy revolution take place? Most accounts of trade politics stress domestic interest groups or trade agreements...
February 1, 2025 - Article
Author(s) - Leonardo D'Amico, Edward L. Glaeser, Joseph Gyourko, William R. Kerr & Giacomo A.M. Ponzetto
Local land use and state and federal environmental regulations proliferated in the early 1970s. About this time, US residential construction productivity began to decline; today, it is close to the level of the 1930s. In contrast, manufacturing productivity has risen for many decades. In the auto...
This paper uses barcode-level price data for 16 advanced and emerging market countries over the period 20052022 to investigate the role of individual firms and product categories in aggregate inflation. We decompose inflation into the component due to macroeconomic shocks and the granular residuals...
We partner with a large US payment-processing company to run a 5-year, 10 wave panel survey of incentivized quarterly sales forecasts on over 6,000 firms. We match firm predictions to proprietary revenue data to assess accuracy. We find firms forecast poorly, with issues of inaccuracy, over-optimism...
Drawing on the experiences of the historical Eurodollar market and recent Chinese dollar bond issuances traded outside U.S. jurisdiction at negative spreads to Treasurys, we examine the conditions under which a parallel offshore dollar financial system that circumvents Western sanctions may emerge....
Author(s) - Olivier Jeanne
Financial repression can be used to avoid a government default when fiscal policy is constrained. We present a model showing that optimal financial repression progresses through successive stages with increasing levels of distortion. Data from advanced economies suggest that the initial stage of...
This paper shows that unilateral decarbonization pays for itself in large economies. We estimate economic damages from global temperature shocks and combine them with a climate-economy model to construct Domestic Costs of Carbon: $226 per ton for the United States and $216 per ton for the European...
Author(s) - José Andrée Camarena, Juan Pablo Medina, Daniel Riera-Crichton, Carlos A. Vegh & Guillermo Vuletin
In the aftermath of the 1997-98 Asian crises, many emerging markets self-insured by accumulating international reserves (i.e., non-contingent assets) in excess of what many models predicted, while relying relatively little on state-contingent assets. This apparent over-reliance on self-insurance has...
Great powers are increasingly using their economic and financial strength for geopolitical aims. This rise of "geoeconomics" has the potential to reshape the international trade and financial system. This paper examines the role of domestic political economy forces in determining a government's...
January 1, 2025 - Article
Foreign investors demand for US dollar (USD) denominated securities and their currency hedging activities are important for analyzing international capital flows, exchange rates, and the dollars global dominance. In Dollar Asset Holdings and Hedging Around the Globe (NBER Working Paper 32453),...
Hegemonic powers, like the United States and China, exert influence on other countries by threatening the suspension or alteration of financial and trade relationships. Mechanisms that generate gains from integration, such as external economies of scale and specialization, also increase the hegemons...
The Great Depression is the canonical case of a widespread currency war, with more than 70 countries devaluing their currencies relative to gold between 1929 and 1936. What were the currency wars effects on trade flows? We use newly-compiled, high-frequency bilateral trade data and gravity models...
This paper reviews the debt service ratio (DSR) as a theoretically well-grounded indicator of systemic risk. The DSR has the desirable feature that it fluctuates around a stable level which makes its early warning signals easy to understand and communicate. In contrast, current early warning...
We study the uneven effects of a commodity boom, documenting its impact across workers based on their skill and on the region where they live. To this end, we develop a dynamic quantitative model of an economy with many regions connected through interregional trade and migration. Empirically, we...
Using comprehensive administrative data on Chilean firms, we examine whether credit lines and government-backed credit guarantees mitigated the impact of the large sudden stop event during the pandemicthe abrupt withdrawal of international capital. Our analysis employs a regression discontinuity...
This paper studies a form of liquidity risk that we call Liquidity After Solvency Hedging or LASH risk. Financial institutions take LASH risk when they hedge against solvency risk, using strategies that require liquidity when the solvency of the institution improves. We focus on LASH risk relating...
Author(s) - Lars E.O. Svensson
Swedish authorities and international organizations that monitor and comment on Swedish economic policy have argued that Swedish household debt is too high and a threat to financial and macroeconomic stability (FMS). But household debt may become a threat to FMS under essentially three conditions:...
Author(s) - Joseph E. Stiglitz
Capitalism since its inception has been marked by large fluctuations. The resulting episodic unemployment has been very costly. This paper provides an overview of alternative theories. Standard models (such as DSGE) have not provided insights into the causes of the fluctuations and the shocks...
We assess the efficacy of systemic risk measures that rely on U.S. financial firms stock return co-movements with market- or sector-wide returns under stress from 1927 to 2023. We ascertain stress episodes based on widening of corporate bond spreads and narrative dating. Systemic risk measures...
We present new long-run samples of r-g series over centuries for key economies in the international financial system. Across a wide variety of econometric approaches, and including duration-matched constructions, we demonstrate strong evidence of trend stationarity in these series. Although we...
Author(s) - Leonardo D'Amico, Edward L. Glaeser, Joseph Gyourko, William R. Kerr & Giacomo A.M. Ponzetto
We document a Kuznets curve for construction productivity in 20th-century America. Homes built per construction worker remained stagnant between 1900 and 1940, boomed after World War II, and then plummeted after 1970. The productivity boom from 1940 to 1970 shows that nothing makes technological...
This paper is a case study of the exchange rate adjustments during the first week following the swapping US election results. We compute three measures of exchange rate depreciation: the maximum depreciation during the 1st trading day after November 6 UTC 0:00 to capture the reaction on the FOREX...
Author(s) - Tarek Alexander Hassan, Stephan Hollander, Aakash Kalyani, Laurence van Lent, Markus Schwedeler & Ahmed Tahoun
This article applies simple methods from computational linguistics to analyze unstructured corporate texts for economic surveillance. We apply text-as-data approaches to earnings conference call transcripts, patent texts, and job postings to uncover unique insights into how markets and firms respond...
We provide the first empirical evidence on how media-driven narratives influence cross-border institutional investment flows. Applying natural language processing techniques to one-and-a-half million newspaper articles, we document substantial cross-country variation in sentiment and risk indices...
Monetary and fiscal policies require coordination to achieve desired macroeconomic outcomes. The literature since Leeper (1991) has focused on two regimes: monetary dominance and fiscal dominance. In both cases, one policy is active while the other is passive and accommodates the former. We study...
Using a newly digitized database encompassing the universe of tariff lines across five US trade policy regimes between 1900 and 1940, we show that price dynamics combine with industry reliance on specific tariffs to generate large swings in average tariff levels. Intra-policy variation in tariffs is...
Over the last 200 years, economies have accumulated significant experience in managing capital flows in the face of globalization. This study examines management of capital flows since the 1800s with an eye towards providing historical lessons for Southeast Asia today. We start with the global...
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