Existing methods for constructing confidence bands for multivariate impulse response functions depend on auxiliary assumptions on the order of integration of the variables. Thus, they may have poor coverage at long lead times when variables are highly persistent. Solutions that have been...

By fixing the exchange rate, a country rules out the possibility of using the exchange rate to adjust to aggregate demand shocks. But adjustment may be enhanced if internal prices are more flexible. This paper asks whether this increase in price flexibility is likely to take place endogenously...

We introduce technological differences in a Heckscher-Ohlin model and study how the technology and endowment differences interact to determine the effects of trade on factor prices. When the endowment effect is dominant in determining the autarky relative factor prices, the relative factor...

This paper presents a theory of location choice that draws on insights from the incomplete contracts and investment flexibility (real option) literatures. We provide conditions under which human capital is more efficiently created and better utilized within industrial clusters that contain...

Trade and growth theories predict a mutual causation of innovation and exports. We test empirically whether innovation causes exports using a uniquely rich German micro dataset. To overcome the potential endogeneity, we need to identify variations in innovations that are exogenous to export...

This paper studies empirically the relationship between trade policy and individual income risk and uses the empirical estimates of this relationship to asses the welfare costs of changes in trade policy. The empirical analysis proceeds in two steps. First, longitudinal data on income of Mexican...

We use data on wages and rents in different U.S. cities to assess the amenity effects on production and consumption of cultural diversity as measured by diversity of countries of birth of city residents. We show that US-born citizens living in metropolitan areas where the share of foreign-born...

This paper studies optimal monetary policy in a small open economy under flexible prices. The paper’s key innovation is to analyze this question in the context of environments where only a fraction of agents participate in asset market transactions (i.e., asset markets are segmented). In...

The purpose of this paper is to investigate the impact of exchange rate volatility on exports among 14 Asia Pacific countries, where various measures to raise the intra-region trade are being implemented. The empirical tests using annual data for the period from 1980 to 2002 detect a significant...

The organization of production within the multinational corporation (MNC) depends on the relative factor abundance of the home country and the destination country. This proposition is at the heart of the theory of the multinational corporation (MNCs) that Helpman (1984, 1985) and Helpman and...