In this paper we concentrate on the potential consequences for the European stock market of a correction of the US stock market. We conduct our analysis by explicitly considering the distinction between interdependence and contagion. By considering a Vector Error Correction Model, in which stock...

Estimating the effect of trade on capital flows is difficult given the inherent identification problem. We use fluctuations in rainfall to capture the exogenous variation in trade between Germany, France, the U.K., and the Ottoman Empire during 1859-1913. The provisionistic policy of the Ottoman...

We develop a theoretical model of international trade pricing in which individual exporters and importers bargain over the transaction price and exposure to exchange rate fluctuations. We find that the choice of price and invoicing currency reflects the full market structure, including the...

This Paper analyses the issues raised by EMU for the relationships between the Euro area and the international financial system. The depreciation of the Euro exchange rate since the beginning of EMU has attracted most attention. The Paper argues that theory and the data support none of the...

This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for commodity-exporting countries. We show that the introduction of hedging instruments such as futures and options enhances domestic welfare through two channels. First, by...

In this Paper, I present direct micro-econometric evidence of the relation between individual wages of French workers and the import behaviour of their employing firms. First, a model shows that the impact of firms’ imports on workers’ wages not only comes from movements in the quasi-rent...

This paper applies a full-information technique to test for the presence of contagion across the money markets of ERM members. We show that whenever it is possible to estimate a model for interdependence, a test for contagion based o a full information technique is more powerful. We test for the...

This Paper builds a baseline two-country model of real and monetary transmission in the presence of optimal international price discrimination by firms. Distributing traded goods to consumers requires non-tradables, intensive in local labour. Because of distributive trade the price elasticity of...

This Paper analyses the effects of pegged and floating exchange rates using a two-country dynamic general equilibrium model that is calibrated to the US and a European aggregate. The model assumes shocks to money, productivity and the interest parity condition. It captures the fact that the...

This Paper analyses the welfare effects of monetary policy rules in a quantitative business cycle model of a two-country world. The model features staggered price setting, and shocks to productivity and to the uncovered interest rate parity (UIP) condition. UIP shocks have a sizable negative...