Estimates of the elasticity of substitution between domestic and foreign varieties are small in macroeconomic data, and substantially larger in disaggregated studies. This may be an artifact of heterogeneity. We use disaggregated multilateral trade data to structurally identify elasticities of...

This paper develops a quantitative, dynamic, open-economy model which endogenously generates high exchange rate volatility, whereas a low degree of exchange rate pass-through (ERPT) stems from both nominal rigidities (in the form of local currency pricing) and price discrimination. We model real...

Abstract. We use a quantitative equilibrium model with houses, collateralized debt and foreign borrowing to study the impact of global imbalances on the U.S. economy in the 2000s. Our results suggest that the dynamics of foreign capital flows account for between one fourth and one third of the...

Most analyses of the macroeconomic adjustment required to correct global imbalances ignore net exports of new varieties of goods and services and do not account for firms' net entry in the product market. In this paper we revisit the macroeconomics of trade adjustment in the context of the...

In the recent decade, capital outflows from emerging economies, in the form of a demand for liquid assets, have played a key role in the context of global imbalances. In this paper, we model the demand for liquid assets by firms in a dynamic open-economy macroeconomic model. We find that the...

In this paper, we examine theoretically how corporate saving in emerging markets is contributing to global rebalancing. We consider a two-country dynamic general equilibrium model, based on Bacchetta and Benhima (2014), with a Developed and an Emerging country. Firms need to save in liquid...

The rapid growth of international reserves|a development concentrated in the emerging markets|remains a puzzle. In this paper we suggest that a model based on financial stability and financial openness goes far toward explaining reserve holdings in the modern era of globalized capital markets....

This paper analyzes current stresses in the two key areas that concerned the architects of the original Bretton Woods system: international liquidity and exchange rate management. Despite radical changes since World War II in the market context for liquidity and exchange rate concerns, they...

This paper examines the exchange rate predictability stemming from the equilibrium model of international financial adjustment developed by Gourinchas and Rey (2007). Using predictive variables that measure cyclical external imbalances for country pairs, we assess the ability of this model to...

This paper makes a case that the global imbalances of the 2000s and the recent global financial crisis are intimately connected. Both have their origins in economic policies followed in a number of countries in the 2000s and in distortions that influenced the transmission of these policies...