Persistent interest rate differentials account for much of the currency carry trade profitability.“
Commodity currencies” offer high interest rates on average, while countries that export …

I analytically characterize the long-run behavior of an economy with two types of agents who
differ in their beliefs and are endowed with homothetic recursive preferences. Agents with …

Households with familiarity biases tilt their portfolios toward a few risky assets. The resulting
mean-variance loss from portfolio underdiversification is equivalent to only a modest …

I characterize the global solution to the international portfolio problem in a general setup, a
longstanding open issue in international finance. The framework replicates a number of …

This paper shows that belief differences have strong effects on asset prices in consumption-
based asset-pricing models with long-run risks. Belief heterogeneity leads to time-varying …

This paper shows that introducing recursive preferences in a standard two-country business
cycle model implies a real exchange rate as volatile as in the data. With recursive …

In models with recursive preferences, endogenous variation in Pareto weights would be
interpreted as wedges from the perspective of a frictionless model with additive preferences …

We characterize the equilibrium of a two-country, two-good economy in which agents have
opposite preference bias toward one of the two consumption goods and fear model …

Real exchange rate fluctuations have important implications for our understanding of the
sources and transmission of international business cycles, and the degree of international …

This dissertation explores the global ramifications of US fiscal policy. In particular, I tie the
US fiscal condition to key puzzling phenomena in international finance, namely …