On the eve of a major change in the world monetary system, the adoption of a single currency in Europe, our theoretical understanding of the implications of the exchange rate regime for trade and capital flows is still limited. We argue that two key model ingredients are essential to address...

There is extensive evidence that the degree of risksharing accomplished by international financial markets is low. Some have argued that this is the result of small potential benefits from risksharing. The gains from riskpooling that have been reported in the literature range from negligible to...

The sharp increase in both gross and net international capital flows over the past two decades has prompted renewed interest in their determinants. Most existing theories of international capital flows are based on one-asset models, which have implications only for net capital flows, not for...

We document that business cycles of U.S. Census regions are substantially more synchronized than those of European Union countries, both over the past four decades and the past two decades. Data from regions within the four largest European countries confirm the presence of a European border...

We document aggregate income growth uncertainty at the state level, and the extent to which this uncertainty is reduced by risksharing through financial markets and federal fiscal policy. A methodology is adopted that is closely connected to the empirical growth literature. It does not rely on...

We propose a new methodology to evaluate the gains from global risksharing that is closely connected to the empirical growth literature. We obtain estimates of residual risk (growth uncertainty) at various horizons from regressions of country-specific deviations from world growth on a wide set...