Abstract: The U.S. fiscal condition is the single most important fiscal determinant of any risky asset price, anywhere around the world. Even for their own risky asset markets, foreign fiscal conditions play a limited role in price determination once the U.S. fiscal condition is appropriately controlled for. To explain these results, I develop a general‐equilibrium model in which the U.S. security umbrella—its global defense network and enforcement capacity—anchors the world’s discount rate by stabilizing sovereign solvency and safe‐asset demand. Quantitatively, the model reproduces the observed co-movement between U.S. fiscal condition, the dollar convenience yield, and global asset valuations. The results reveal that the global financial cycle rests not only on U.S. monetary dominance, but on the deeper fiscal and geopolitical foundations of the US military hegemony or Pax Americana.

Abstract:  I develop a general-equilibrium model that links the persistent global imbalances of the modern financial system to U.S. military hegemony. By lowering geopolitical risk and strengthening contract enforcement, the U.S. security umbrella allows allies to reallocate spending from defense toward social transfers and investment, reducing fiscal cyclicality, inequality, and global risk premia—especially during global stress. The same enforcement network underwrites the safety and liquidity of dollar assets, generating a security-based convenience yield that expands U.S. fiscal capacity and sustains the dollar’s reserve-currency role. In equilibrium, the United States runs persistent trade deficits and negative net foreign assets, while global stress episodes appreciate the dollar, depress risky-asset prices, and raise U.S. global wealth shares. The model interprets the exorbitant privilege as an equilibrium rent on global security provision and shows that U.S. retrenchment would erode dollar safety and amplify global macro-financial volatility.

Abstract:  This paper develops a unified theory linking U.S. military power, fiscal capacity, and global macro-financial dynamics. In the model, U.S. security provision acts as a non-rival global public good that stabilizes volatility, compresses inequality and risk premia, and sustains dollar dominance by guaranteeing contract enforcement within its security umbrella. The resulting insurance mechanism—where the hegemon expands security when global risk rises—constitutes a second-best but self-stabilizing equilibrium. When the fixed political or resource costs of engagement exceed the liquidity rent from dollar safety, the unipolar equilibrium collapses: the U.S. retrenches, risk premia and dollar convenience yields surge, and the global discount rate rises. Beyond this threshold, enforcement fragments into regional systems, producing a multipolar world with higher volatility, wider spreads, and weaker global comovement. U.S. military hegemony thus emerges as the most stable fiscal–financial equilibrium and maintaining it is beneficial for both the US and her allies.

Abstract:  This paper develops a theory linking the global financial cycle to U.S. military hegemony. The U.S. security umbrella provides fiscal insurance: by underwriting allied defense commitments, it allows governments to reallocate spending toward transfers and public investment during global stress, smoothing fiscal cyclicality, inequality, and risk premia. When the U.S. fiscal position deteriorates, the credibility of this insurance weakens, tightening global fiscal conditions and amplifying default risk and risk premia worldwide. A calibrated version of the model quantitatively matches the empirical link between U.S. fiscal conditions, dollar convenience yields, and global risky-asset valuations, and replicates the predictive power of U.S. fiscal shocks for future global returns. It also captures the cross-country pattern that nations more dependent on U.S. security exhibit stronger fiscal exposure to the United States. Quantitative counterfactuals show that U.S. retrenchment raises global risk, while multipolar enforcement fragments the global financial cycle into regional blocks. The results highlight that the global financial cycle rests not only on U.S. monetary dominance but also on the fiscal and security architecture provided by U.S. military hegemony.

Abstract:  This paper develops a granular theory of the global financial cycle. I build a multi-country general equilibrium model in which large U.S. multinationals transmit idiosyncratic shocks internationally through foreign affiliates and preset nominal prices. These shocks aggregate into a “granular U.S. factor’’ that drives global co-movement in consumption, interest rates, credit spreads, and risky asset returns. Countries more exposed to U.S. MNC activity display stronger synchronization in equities, bonds, and exchange rates. Structurally estimating the model yields a highly granular world economy that reproduces average equity premia of 2–4%, real short rates near 1%, and cross-country asset correlations of 0.8–0.9, consistent with post-1980 data. A policy counterfactual inspired by recent U.S. antitrust proposals shows that reducing firm concentration by 25–50% lowers global risk premia by roughly 15–30%, compresses volatility of premia by 40%, and reduces cross-country financial synchronization by 6–10 percentage points, generating welfare gains of 5–30 basis points per year—largest in highly exposed economies. The results highlight how industrial concentration endogenously shapes both the origin and amplitude of global financial cycles.

Abstract:  This paper develops a granular theory of currency risk premia, linking the structure of global financial returns to the industrial concentration of the United States.I build a tractable multi-country model in which idiosyncratic shocks to large U.S. multinationals aggregate into a common “granular’’ U.S. factor and propagate internationally through foreign affiliates. The strength of this transmission depends on each country’s exposure to U.S. MNC production, which acts as a sufficient statistic for global risk. Countries more integrated into U.S. production networks face greater global consumption volatility, lower interest rates, and currencies that appreciate in global downturns, making them hedge currencies with lower premia. Structurally estimating the model shows that it can quantitatively reproduce key moments of currency markets, including the magnitude and cross-sectional pattern of carry-trade premia. Overall, the analysis implies that U.S. industrial concentration is a fundamental determinant of the global structure of risk premia.

Abstract:  US fiscal policy has a global footprint: deterioriations in the US fiscal condition i) depress local risky asset prices and ii) predict higher future global equity returns moving forward. Contrary to traditional international trade theories, these patterns are not driven by distance: Canadian and Mexican asset prices are actually less exposed to US fiscal shocks than the asset prices of more distant countries. Rather, I find that these patterns are more pronounced for countries that have deeper US multinational (MNC) presence. To explain these striking results, I build a quantitative multi-country endogenous growth model that incorporates multinational production and rich fiscal policy dynamics. The model qualitatively and quantitatively accounts for my empirical findings with the key testable predictions verified in the data.

Abstract:  This paper develops a positive theory of the financial consequences of political sovereignty, using the United Kingdom as a natural experiment. The 2016 Brexit referendum is modelled as a sovereignty shock—a fall in the country’s fiscal and financial integration with the European core—while the 2022 “Truss mini-budget’’ represents a fiscal shock under reduced integration. In a continuous-time international asset-pricing model with incomplete risk sharing and an endogenous fiscal constraint, lower integration tightens fiscal capacity, raises gilt risk premia, and reduces their convenience yield as safe assets. These channels widen the gilt–Bund spread, increase the EUR/GBP currency risk premium, and depreciate sterling through a modified uncovered-interest-parity condition. Calibrated to event-study data, the model reproduces the observed 10–15 bp rise in spreads, 40 bp increase in currency risk premia, 6–10 percent pound depreciation after Brexit, and the 2022 gilt yield spike. The results quantify the financial price of sovereignty: autonomy amplifies market discipline but reduces fiscal space.

Abstract:  This paper develops a continuous-time asset-pricing model in which the credibility of European Central Bank (ECB) backstops acts as a priced state variable governing financial integration in the euro area. A stronger fiscal umbrella raises collateral quality and risk sharing, compressing sovereign spreads and redenomination premia, while weaker credibility has the opposite effect. But the umbrella also relaxes fiscal constraints and can induce additional debt issuance, creating a moral-hazard force that pushes default premia upward. The model identifies the conditions under which insurance dominates moral hazard and vice versa. Calibrated to high-frequency data, the framework replicates the spread and risk-premium compression following the 2012 OMT announcement, the shorter-lived stabilization under the 2020 PEPP program, and the persistent fragmentation that would have occurred during COVID without ECB support. ECB credibility therefore functions as a priced fiscal asset: its valuation anchors integration and determines whether fiscal shocks generate stabilization or self reinforcing fragmentation within the monetary union.

Abstract: I build a continuous-time macro-finance model to study how U.S. immigration policy shapes innovation, long-run growth, asset prices, and welfare. Immigration affects the economy through two margins: the composition of inflows (skilled versus unskilled) and their scale. Skilled immigration expands research capacity and accelerates technological progress, while low-skill inflows reduce manual wages and weaken incentives to automate. These forces generate a sharp growth–asset price nexus: policies that raise expected growth also increase long-horizon uncertainty and risk premia, whereas restrictive policies reduce both. Welfare analysis shows that temporary immigration shocks have modest effects, but permanent reforms have large and lasting consequences because they shift the economy’s long-run growth path. Skilled-immigration tightening is strongly welfare-reducing, enforcement of undocumented labor delivers only small welfare gains, and liberal immigration reform—combining higher skilled admissions with legalization of low-skill labor—produces substantial welfare improvements. Immigration policy is therefore a central determinant of U.S. long-run macroeconomic and financial stability.

Abstract: This paper investigates the empirical joint dynamics between long run consumption risks (LRRs), currency excess returns, currency risk premia and global currency risk factors. Using a novel identification strategy to identify country level LRRs, we uncover three main results. Firstly, currency excess returns and relative LRRs are negatively correlated: the currencies of countries that suffer bad relative long run shocks vis-a-vis the US appreciate against the dollar on average. Secondly, currency risk premia and relative LRRs are positively correlated: over the long run such currencies depreciate against the dollar, resulting in lower expected currency returns moving forward. Thirdly well known global currency risk factors such as the High-Minus-Low (HML) carry trade sorted on interest rate differentials and the HML dollar beta portfolio sorted on time varying dollar exposures are highly correlated with appropriately constructed global and US LRR factors respectively. An international LRR model where two LRR factors - US and global - drive common sources of risk in the world economy can quantitatively explain these empirical findings.

Abstract: We uncover several empirical facts regarding the cyclical properties of dollarisation in emerging market (EME) countries. During times of global stress when the dollar premium is high, EME sovereigns increase their dollar borrowing share whereas the corporate sector lowers their dollar borrowing shares. This dichotomy is largely driven by the EME non-financial corporate sectors. These results are unique to EME countries and are far more pronounced for EME countries whose corporate sector has a higher degree of currency mismatch on their corporate balance sheets. We interpret these empirical findings as the result of risk-sharing between EME sovereign and corporate sectors. Rises in the dollar premium lower the relative cost of dollar debt vis-a-vis local currency debt, making it optimal for EME sovereigns to insure the corporate sector by borrowing more dollar debt during times of global stress. Conversely, binding financial frictions force EME corporates to retreat from dollar funding markets during these global episodes.