This paper traces the evolution of the Federal Reserve and its engagement with the global economy over the last three decades of the 20th century: 1970 to 2000. The paper examines the Federal Reserve’s role in international economic and financial policy and analysis covering four areas: the...

During the Bretton Woods era, balance-of-payments developments, gold losses, and exchange-rate concerns had little influence on Federal Reserve monetary policy, even after 1958 when such issues became critical. The Federal Reserve could largely disregard international considerations because the...

The role of direct flights in trade costs is investigated by introducing and using a micro price data set on 49 goods across 433 international cities covering 114 countries. It is shown that having at least one direct flight reduces trade costs by about 1,400 miles in distance equivalent terms,...

Using US micro price data at the city level, we provide evidence that both the volatility and the persistence of deviations from the law of one price (LOP) are rising in the distance between US cities. A standard, two-city, stochastic equilibrium model with trade costs can predict the...

We investigate intra-safe haven currency behavior during the recent global financial crisis. The currencies we consider are the USD, the JPY, the CHF, the EUR, the GBP, the SEK, and the CAD. We first assess which safe haven currency appreciates the most as market uncertainty increases, i.e. we...

We investigate the link between real exchange rates and sectoral total factor productivity measures for countries in the Eurozone. Real exchange rate patterns closely accord with an amended Balassa-Samuelson interpretation, both in cross-section and time series. We construct a sticky price...

This paper explores whether interest rate factors, derived from the yield curve, can explain exchange rate fluctuations at different horizons. Using a dynamic term structure model under no-arbitrage, exchange rates are modeled as the ratio of two countries’ stochastic discount factors. Key to...

Standard macro models cannot explain why real exchange rates are volatile and disconnected from macro aggregates. Recent research argues that models with persistent growth rate shocks and recursive preferences can solve that puzzle. I show that this result is highly sensitive to the structure of...

This paper re-examines Japan's experience of the quantitative easing policy in light of the policy responses against the current financial and economic crisis. Central banks use various unconventional measures in the range of financial assets being purchased and in the scale of such purchases....

This paper presents a two-country DSGE model with state-dependent pricing as in Dotsey, King, and Wolman (1999) in which firms price-discriminate across countries by setting prices in local currency. In this model, a domestic monetary expansion has greater spillover effects to foreign prices and...