Nominal Stability and Financial Globalization

Michael B. Devereux; Ozge Senay; Alan Sutherland

doi:10.1111/jmcb.12127

Nominal Stability and Financial Globalization

Michael B. Devereux^*, Ozge Senay, Alan Sutherland

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

Abstract

Over the past four decades, there has been a substantial increase in financial globalization, that is, rapid growth in gross external portfolio positions. There has also been a substantial fall in the variability of inflation. Many economists have conjectured that financial globalization contributed to the improved inflation performance. This paper explores the causal link running in the opposite direction. Using an open economy model with endogenous portfolio choice, it is shown that a monetary rule that reduces inflation variability tends to increase the size of gross external asset positions. This result appears to be robust across different modeling specifications.

Original language	English
Pages (from-to)	921-959
Number of pages	39
Journal	Journal of Money, Credit and Banking
Volume	46
Issue number	5
Early online date	24 Jul 2014
DOIs	https://doi.org/10.1111/jmcb.12127
Publication status	Published - Aug 2014

Keywords

Nominal stability
Financial globalization
Country portfolios
Bayesian DSGE approach
Monetary-policy rules
Business cycles
External wealth
Foreign-assets
Dynamics
Shocks
Liabilities
Portfolios
Frictions

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10.1111/jmcb.12127

devereux-senay-sutherland-journal-of-money-credit-and-banking
© 2014. The Ohio State University. This is the accepted version of the following article: Nominal Stability and Financial Globalization Devereux, M. B., Senay, O. & Sutherland, A. Aug 2014 In : Journal of Money, Credit and Banking. 46, 5, p. 921-959, which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/jmcb.12127/abstract
Accepted author manuscript, 371 KB

The Macroeconomics of Financial: The Macroeconomics of Financial Globalisation
Sutherland, A. (PI)
Economic & Social Research Council
1/07/11 → 31/12/15
Project: Standard

Alan Sutherland
- ajs10st-andrews.acuk
- Economics (Business School) - Professor
Person: Academic

Cite this

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title = "Nominal Stability and Financial Globalization",

abstract = "Over the past four decades, there has been a substantial increase in financial globalization, that is, rapid growth in gross external portfolio positions. There has also been a substantial fall in the variability of inflation. Many economists have conjectured that financial globalization contributed to the improved inflation performance. This paper explores the causal link running in the opposite direction. Using an open economy model with endogenous portfolio choice, it is shown that a monetary rule that reduces inflation variability tends to increase the size of gross external asset positions. This result appears to be robust across different modeling specifications.",

keywords = "Nominal stability, Financial globalization, Country portfolios, Bayesian DSGE approach, Monetary-policy rules, Business cycles, External wealth, Foreign-assets, Dynamics, Shocks, Liabilities, Portfolios, Frictions",

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AU - Senay, Ozge

AU - Sutherland, Alan

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KW - Nominal stability

KW - Financial globalization

KW - Country portfolios

KW - Bayesian DSGE approach

KW - Monetary-policy rules

KW - Business cycles

KW - External wealth

KW - Foreign-assets

KW - Dynamics

KW - Shocks

KW - Liabilities

KW - Portfolios

KW - Frictions

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Nominal Stability and Financial Globalization

Abstract

Keywords

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Projects

The Macroeconomics of Financial: The Macroeconomics of Financial Globalisation

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Alan Sutherland

Cite this