International Macroeconomics With Imperfect Financial Markets

A review of recent advances in open economy analysis under segmented international financial markets. A set of modeling tools that have been used to understand ?financialcrises, the ensuing policy response (e.g., Quantitative Easing and FX intervention), deviations from arbitrage (CIP deviations), and more generally the impact of capital flows on exchange rates. This modeling approach has also sheds a different light onclassic topics such as the exchange rate disconnect, international risk sharing, UIPfailures, and the carry trade.

Exchange Rate Disconnect Puzzle: A Review of Literature

<p><span lang="EN-GB">The exchange rate disconnect puzzle has been haunting economists for over four decades now. That the volatility in the movement of both real and nominal exchange rates has no linkage with macroeconomic fundamentals is a mystery. This paper selectively reviews the literature on attempts to resolve this puzzle.</span></p>