This thesis consists of four empirical articles that look at how different types of imbalances and financial liberalization affect macrofinancial outcomes such as exchange rate sensitivity, consumption and financial development. The first study looks at how the composition of net foreign assets affects the exchange rate sensitivity to global financial market uncertainty. The empirical results show that reliance on debt financing increases the exchange rate vulnerability to financial turbulence, whereas equity financing reduces it. The second article uses an unobserved component approach to study the long run relationship between consumption and asset and housing wealth in the US. The results suggest that there is a non-stationary latent component present in the consumption equation, which is closely related to US financial liberalization. The third study looks at how financial liberalization and hand-to-mouth consumers affect international consumption risk sharing. Financial liberalization and integration have a significantly positive impact on international consumption risk sharing in poorer developing countries, but a high share of low income individuals reduces consumption smoothing in both advanced and less developed economies. The last article looks at the relationship between dollarization and financial development, and shows that deposit dollarization has a negative impact on financial deepening in less developed countries.

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C.G. de Vries (Casper) , L.C.G. Pozzi (Lorenzo)
Erasmus University Rotterdam
Tinbergen Instituut Research Series
Erasmus School of Economics

Gardberg, M. (2018, December 6). Financial Integration and Global Imbalances (No. 729). Tinbergen Instituut Research Series. Retrieved from