How did you come to choose your research topic?

Economic and financial crises have been in my interests since the first years of my undergraduate studies in economics. During those years, I extensively studied the pre-crisis conditions, crisis reasons, crisis dynamics and resolution phases across different cases, some of which are the Global Financial Crisis in 2008–2009, the Asian Crisis in 1997 or the Latin American crises in the 1980s. As I acquired more technical skills during my master’s and then PhD studies, I was able to delve deeper into theoretical aspects of the topic and explore the cutting-edge literature. The more I learned about the crises, the more passionate I became. At the same time, I have always been very interested in the normative perspective of economics, that is to say, how policymakers can deploy their arsenal to avoid or dampen the intensity of a crisis. Hence, the idea of researching how different macroeconomic stability tools can help to cope with the economic and financial turmoil, and improve economic welfare, was a very natural step for my PhD research. It was an issue that I was always enormously curious about, and I had a wonderful opportunity to study and contribute to this question during my PhD years.

Can you describe each of the three chapters of your thesis?

The first chapter is titled “Macroprudential Foreign Exchange Interventions” and, as the name suggests, it is about foreign exchange interventions (FXIs). I empirically study a panel of emerging markets to explore whether FXIs reduce the probability and severity of a sudden stop, and if so, what channels are at work. I show that (1) FX reserve accumulation during episodes of capital inflow surges reduces the probability and severity of a sudden stop — revealing the ex-ante role of FXIs — and (2) decumulation of FX reserves during a sudden stop dampens the severity of a recession and supports the recovery of output — illustrating the ex-post role. In other words, the macroeconomic effect of FXIs includes a macroprudential element and extends well beyond the exchange rate. The results suggest that FX interventions can “get in all the cracks” of the economy and that central banks can complement macroprudential measures with FXIs when the effectiveness of the former is constrained or subject to regulatory leakage.

The second chapter, “Optimal Macro-Financial Policy under Regulatory Arbitrage”, is a theoretical chapter in which I analyse a quantitative, so-called DSGE (dynamic stochastic general equilibrium) model of optimal monetary and macroprudential policy design, where a significant part of financial agents is outside the macroprudential regulatory perimeter and generates financial stability risks. I illustrate that in this environment, optimal macroprudential policy becomes more restrictive, while monetary policy deviates from the objective of macroeconomic stabilisation and actively responds to financial vulnerabilities. However, monetary policy faces a trade-off: while optimal policy reduces the severity of a financial crisis, the moral hazard it creates increases the frequency of crises. I also show the complementarity between monetary and macroprudential tools.

The third chapter, coauthored with Maria-Angels Oliva (International Monetary Fund), is called “Managing Remittance Inflows with FX Interventions: Looking into the Implications for the Banking Sector”. We explore the cost of FXIs on financial development. Using empirical techniques, we show that they are quick, temporary solutions that hinder the development of the recipient country’s financial sector over the medium term. While remittances tend to improve financial depth, FXIs tend to attenuate this positive effect for the financial sector. This cost adds to other direct FXI-related costs already identified in the literature.

What could be the social and/or political implications of your findings?

My PhD dissertation delves into normative questions. I hope that findings on the optimal use of foreign exchange interventions, monetary policy and macroprudential policy will help central banks and financial regulators to better manage crisis episodes, and thus contribute to enhancing economic well-being.

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On 13 March 2025, Nika Khinashvili defended his PhD thesis in International Economics, titled “Essays in International Macro-Finance and Monetary Economics”. Professor Nathan Sussman (second from the right) presided over the committee, which included Professor Cédric Tille (second from the left), Thesis Co-Supervisor, Professor Beatrice Weder di Mauro (left), Thesis Co-Supervisor, and Professor Gianluca Benigno (right), Department of Economics, University of Lausanne.

Citation of the PhD thesis: 
Khinashvili, Nika. “Essays in International Macro-Finance and Monetary Economics.” PhD thesis, Graduate Institute of International and Development Studies, Geneva, 2025.
Members of the Geneva Graduate Institute can access the thesis via this page of the Institute’s repository. Other interested individuals can contact Dr Khinashvili.

Banner image: COSPV/Shutterstock.
Interview by Nathalie Tanner, Research Office.