Faced with income fluctuations, countries smooth their consumption by raising savings when income is high, and vice versa. How much of these savings do countries invest at home and abroad? In other words, what are the effects of fluctuations in savings on domestic investment and the current...

How do countries hold their financial wealth? We construct a new database of countries' claims on capital located at home and abroad, and international borrowing and lending, covering 68 countries from 1966-97. We find that a small amount of capital flows from rich countries to poor countries....

Over the past decade the US has experienced widening current account deficits and a steady deterioration of its net foreign asset position. During the second half of the 1990s, this deterioration was fuelled by foreign investment in a booming US stock market. During the first half of the 2000s,...

Business cycles are both less volatile and more synchronized with the world cycle in rich countries than in poor ones. We develop two alternative explanations based on the idea that comparative advantage causes rich countries to specialize in industries that use new technologies operated by...

It is well known that business cycles in OECD countries exhibit a remarkable degree of synchronization. Much less known is that the peak of the OECD cycle is associated with high prices of labour-intensive products and low prices of capital-intensive ones. We document this cyclical behaviour of...

The current accounts data of industrial countries exhibits some strong patterns that are inconsistent with the intertemporal approach to the current account. This is the basic model that international economists have been using for more than two decades to think about current account issues....

We show that even in the absence of diminishing returns in production and technological spillovers, international trade leads to a stable world income distribution. This is because specialization and trade introduce de facto diminishing returns – countries that accumulate capital faster than...

This paper integrates in a unified and tractable framework some of the key insights of the field of international trade and economic growth. It examines a sequence of theoretical models that share a common description of technology and preferences but differ on their assumptions about trade...

There is a large and growing literature that studies the effects of weak enforcement institutions on economic performance. This literature has focused almost exclusively on primary markets, in which assets are issued and traded to improve the allocation of investment and consumption. The general...

We develop a stylized model of economic growth with bubbles. In this model, financial frictions lead to equilibrium dispersion in the rates of return to investment. During bubbly episodes, relatively inefficient investors demand bubbles while relatively efficient investors supply them. Because...