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Capital Flows, International Financial Markets and Financial Crises

November 13–14, 2009 Federal Reserve Bank of Dallas

Sponsored by Federal Reserve Bank of Dallas and Bank of Canada

The recent turmoil in financial markets has led to a reevaluation of the relationship between financial globalization, financial stability and financial crises. The global fallout following the U.S. subprime mortgage crisis was unexpected in its severity and has pointed towards new and little-understood magnification effects of financial market shocks, operating at both domestic and international levels.

While standard theory suggests that financial globalization helps spread risk and enhances international economic and financial stability, the crisis seems to have uncovered new channels of financial propagation, including instability associated with sharp currency movements. Academics and policymakers are struggling to understand these new channels and their lessons for policymaking. In addition, the crisis has brought new urgency to the understanding of global imbalances and the direction and stability of international capital flows.

Topics considered include:

  • Financial Globalization and Monetary Policy
  • International Financial Propagation
  • International Monetary Policy Cooperation
  • Stability of International Financial Markets
  • Global Imbalances and Financial Stability
  • Procyclical Capital Flows and Asset Prices

Organizing committee

  • Mark Wynne, Federal Reserve Bank of Dallas
  • Larry Schembri, Bank of Canada
  • Michael Devereux, University of British Columbia
  • Ananth Ramanarayanan, Federal Reserve Bank of Dallas
  • Ali Dib, Bank of Canada

Note: Attendance is by invitation only.

Program Agenda

Friday, November 13
7:30 a.m.   Registration and Continental Breakfast
8:20 a.m.   Welcome
Richard Fisher, Federal Reserve Bank of Dallas
Lawrence Schembri, Bank of Canada

Session 1

8:30 a.m.   How Did a Domestic Housing Slump Turn into a Global Financial Crisis
Steve Kamin* and Laurie Pounder, Federal Reserve Board
    Discussant: Larry Schembri, Bank of Canada
9:30 a.m.   The Composition Matters: Capital Inflows and Liquidity Crunch During a Global Economic Crisis
Hui Tong*, IMF and Shang-Jin Wei, Columbia University
    Discussant: Philipp Maier, Bank of Canada
10:30 a.m.   Break
10:45 a.m.   Financial Integration and Business Cycle Synchronization
Sebnem Kalemli-Ozcan*, University of Houston; Elias Papaioannou, Dartmouth College; and José Luis Peydró, European Central Bank
    Discussant: Frank Warnock, University of Virginia;
11:45 a.m.   Leverage Constraints and the International Transmission of Shocks
Michael B. Devereux*, University of British Columbia and James Yetman, Bank for International Settlements, Hong Kong
    Discussant: Alessandro Rebucci, Inter-American Development Bank
12.45 p.m.   Lunch

Session 2

2 p.m.   Banks, Credit Market Frictions, and Business Cycles
Ali Dib, Bank of Canada
    Discussant: Federico Mandelman, Federal Reserve Bank of Atlanta
3 p.m.   Limited Asset Market Participation and the Consumption-Real Exchange Rate Anomaly
Robert Kollmann, Université Libre de Bruxelles
    Discussant: Simona Cociuba, Federal Reserve Bank of Dallas
4 p.m.   Break
4:30 p.m.   What Happened to the Good Old Days? The Role of Expenditure Switching in the Global Imbalance Adjustment
Wei Dong, Bank of Canada
    Discussant: Viktoria Hnatkovska, University of British Columbia;
5:30   Reception and Dinner
Saturday November 14
7:30 a.m.   Continental Breakfast

Session 3

8:30 a.m.   Managing Credit Booms and Busts: A Pigouvian Taxation Approach
Olivier Jeanne, Johns Hopkins University; and Anton Korinek*, University of Maryland
    Discussant: David Cook, Hong Kong University of Science and Technology
9:30 a.m.   Sovereign Default and Banking
Igor Livshits*, University of Western Ontario; and Koen Schoors, University of Ghent
    Discussant: Ananth Ramanarayanan, Federal Reserve Bank of Dallas
10:30 a.m.   Break
10.45 a.m.   Sudden Stops, Financial Crises and Leverage
Enrique Mendoza, University of Maryland
    Discussant: Cristina Arellano, Federal Reserve Bank of Minneapolis
11:45 a.m.   Why Do Emerging Economies Import Direct Investment and Export Savings? A Story of Financial Underdevelopment
Diego Valderrama*, Federal Reserve Bank of San Francisco; and Katherine A. Smith, U.S. Naval Academy
    Discussant: Ron Alquist, Bank of Canada
12:45 p.m.   Lunch
1:30 p.m.   Conference Adjourns
*Denotes presenter on mulitple-author paper.