Interpretations of the home bias puzzle in international finance have fre- quently focused on the role of fluctuations in domestic nontraded output, through their effects on the marginal utility of tradables consumption. This paper assesses the empirical evidence of this aproach, by deriving an...

In this paper we characterize empirically the comovements of macro variables typically observed in middle income countries, as well as the boom-bust cycle' that has been observed during the last two decades. We find that many countries that have liberalized their financial markets, have...

While there has been significant research to explore the determinants (and frictions) of foreign direct investment (FDI), past literature primarily focuses on country-wide FDI patterns with little examination of sectoral heterogeneity in FDI. Anecdotally, there is substantial sectoral...

We investigate the link between stochastic properties of exchange rates and differences in capital-output ratios across industrialized countries. To this end, we endogenize capital accumulation within a standard model of exchange rate determination with nontraded goods. The model predicts that...

We examine a model of a small open economy in which there is free international mobility of financial capital, investment in capital goods and a non-traded good. Such an environment is rich enough to explain several phenomena that are inexplicable in more barren models. We suggest an explanation...

We study the quarterly bilateral real exchange rate and the relative price of non-traded to traded goods for 1225 country pairs over 1980-2005. We show that the two variables are positively correlated, but that movements in the relative price measure are smaller than those in the real exchange...

The existence of a natural resource curse has been a longstanding theme in the economic literature and in policy discussions. We propose an alternative mechanism and study its policy implications. The mechanism is based on the interaction between two building blocks: specialization in...

This paper presents an empirical study of real exchange rate movements from a consumer's perspective. Trade between two countries creates a link between real exchange rate and terms of trade. It is the private consumption of non-traded goods that induces an equilibrium relationship between real...

This paper examines changes in national price levels and prices of tradables and nontradables and relates them to changes in variables found earlier to be associated with price level differences among countries. Across countries, national price levels increase systematically with the level of a...