Handbook of Safeguarding Global Financial Stability

Chapter 18

International Macro-Finance

A. Pavlova* and R. Rigobon^†

^*London Business School and CEPR, London, UK

^†Sloan School of Management, MIT and NBER, Cambridge, MA, USA

Outline

Introduction

The Workhorse Model

Log-Linear Preferences

Log-Linear Preferences with Demand Shocks

Next Steps

References

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. This chapter ...