International Financial Markets, Cross-Border Transmission of Shocks and Risk-Sharing

Defense date: 25/06/2010Examining Board: Prof. Árpád Ábrahám, EUI Prof. Giancarlo Corsetti, EUI, Supervisor Prof. Charles Engel, University of Wisconsin Prof. Fabrizio Perri, University of MinnesotaOne of the most relevant events of the last decades has been the fast integration of international financial markets. As most restrictions to cross-border asset trade were removed, the volume of activity in international financial markets increased dramatically, and so did the cross-country flows of resources due to external borrowing and portfolio returns. Many of the macroeconomic consequences of these stronger financial linkages still have to be fully evaluated. This thesis investigates two facets of the strengthening of cross-border financial linkages. First, have developments in international financial markets raised global insurance against national income fluctuations? Second, what would be the macroeconomic effects of changes in the portfolio preferences of big international investors? Chapters 1 to 3 deal with the first issue, the insurance role of international financial markets, both from a theoretical and an empirical perspective. Chapter 4 is focused on the second topic, and is devoted to studying the macroeconomic implications of the growth of large international investors, Sovereign Wealth Funds