Within and across countries heterogeneity in International finance

Financial globalization has led to a surge in cross-border capital flows, a large increase in countries gross foreign asset and liability positions, together with increasing global imbalances. Understanding how private investors structure their international portfolios and how such financial decisions interact with the real side of the economy has recently become a critical macro policy issue. This is especially true in the context of the recent financial crisis where policy makers and academics have even been advocating the understanding of international capital flows and current account imbalances in the US and within European countries as a necessary step to analyze the roots of the crisis and its international transmission. Another important recent evolution is the larger role played by large and fast growing emerging markets in the global economy. The world is getting more asymmetric as these countries feature very different characteristics (institutional, demographics, or in terms of policies conducted to name a few) compared to developed countries.

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