Essays on International Economics

The three chapters of my dissertation study the macroeconomics and firm dynamics under financial frictions and institutional frictions. They contain both theoretical and empirical analysis with a special emphasis on the scope of the open economy and the implications on policy. Chapter 1 presents a theoretical framework to study the debt portfolio choice and optimal capital control policy in an open economy with financial frictions. I extend the model of international borrowing with collateral constraint to allow for multiple debt maturities. As in the single-maturity version of the model, the equilibrium exhibits overborrowing because, due to a pecuniary externality, private agents undervalue the cost of financial liabilities that demand repayment in future constrained states. I show that in the multiple-maturity model overborrowing in short-term debt is especially severe because the repayment of short-term liabilities is larger than that of long-term liabilities in future constrained states, resulting in greater cost undervaluation of short-term financial obligations. To counteract these inefficiencies, the model justifies a set of maturity-dependent capital controls. The model pr