A currency union’s ability to increase international trade is one of the most debated questions in international macroeconomics. This paper studies the dynamics of these trade effects. As empirical motivation, we find that the extensive margin of trade (entry of new firms or goods) in the...

Open economy macroeconomics typically takes as exogenously given important aspects of the pattern of international trade. This paper shows how heterogeneity in trade costs and heterogeneity in productivities work together to jointly determine features of the pattern of international trade and...

We document sizeable changes over time and across countries in the comovement of output and unemployment over the business cycle. To a large extent, these changes reflect the evolving cyclical behavior of labor productivity (output per hour worked). For the typical country, productivity shifted...

This paper studies the role of credit in the business cycle, with a focus on private credit overhang. Based on a study of the universe of over 200 recession episodes in 14 advanced countries between 1870 and 2008, we document two key facts of the modern business cycle: financial-crisis...