Accounting for the pervasive evidence of limited international risk sharing is an important hurdle for open-economy models, especially when these are adopted in the analysis of policy trade-offs likely to be affected by imperfections in financial markets. Key to the literature is the evidence,...

This paper derives optimal trade and domestic taxes for a small open economy containing a monopolistically competitive (MC) sector in which firms may have heterogeneous productivity levels. Domestic protection brings gains from expanding the number of product varieties on offer, but these gains...

This paper documents how poorer and less educated US households hold a smaller fraction of foreign assets in their financial portfolio. This average home bias of the poor is partly due to a lower probability of participating in foreign asset markets, often attributed to fixed costs of market...

Natural resources account for 20% of world trade, and dominate the exports of many countries. Policy is used to manipulate both international and domestic prices of resources, yet this policy is largely outside the disciplines of the WTO. The instruments used include export taxes, price...

This paper examines implications of the terms-of-trade theory for the determinants of outcomes arising under the enforcement provisions of international agreements. Like original trade agreement negotiations, we model formal trade dispute negotiations as potentially addressing the terms-of-trade...

The welfare effects of PTAs are most directly linked to changes in trade prices, i.e., the terms of trade. This paper employs a simple strategic pricing game in segmented markets to measure the effects of MERCOSUR on the pricing of 'non-member' exports to the region. Working with detailed data...

We study the comovement among stock prices and among exchange rates in a three-good three-country Centre-Periphery dynamic equilibrium model in which the Centre’s agents face portfolio constraints. We characterize equilibrium in closed form for a broad class of portfolio constraints, solving...

Do plans for a monetary union in Europe call for limits on the freedom of the member countries to use fiscal policy? To provide a tentative answer, we simulate the IMF model MULTIMOD, given various shocks, in the case of a European Monetary Union consisting only of France and Germany. The...

A North-South growth model is presented which focuses on i) the complementarity of Southern output (consumption goods) and Northern output (capital goods) and ii) the terms of trade as a mechanism linking the growth rates of the two regions. This Kaldorian model is different from recent...

We use a model with full intertemporal optimization and short-run rigidities in the real wage of the Fischer-Gray type to demonstrate the effects of deficit spending in different employment regimes. We allow for prices to exhibit upward flexibility, although once set at the beginning of one...