Securitized Markets, International Capital Flows, and Global Welfare

By 2015, my job market paper got rejected multiple times, and although I received an R&R from Theoretical Economics, I was sick of it and never revised. (One day, if I have time and energy, I might revise it.) About the same time, Gregory Phelan, with whom I overlapped at Yale (he was also one of John’s students) and who does research in macro, finance, and international finance, approached me to work on something together and suggested we write a two-country version of my JMP. The main result is that upon financial integration, the interest rate in the more efficient (higher leverage and higher risk-sharing) country declines, which reduces risk sharing and welfare. I thought the model cool because it was consistent with the onset of the global financial crisis, but unfortunately the paper got rejected from many journals and ended up at JFE.