This paper studies the effect of foreign direct investment (FDI) on the transmission of international business cycles. I document for the G7 countries between 1991 and 2006 that increases in bilateral FDI linkages are associated with more synchronized investment cycles. I also find that the...

This paper proposes a new perspective on international capital flows and countries' long-run external asset position. Cross-sectional evidence for 84 developing countries shows that over the last three decades countries that have had on average higher volatility of output growth: (1) accumulated...

The massive decline in international trade in 2008/09 is often attributed to the global deterioration in financial conditions after the bankruptcy of a US investment bank, Lehman Brothers. This paper examines the association between external finance and firm activity in Germany in more detail....

We offer a new explanation as to why international trade is so volatile in response to economic shocks. Our approach combines the uncertainty shock idea of Bloom (2009) with a model of trade, extending the idea to the open economy. Firms import intermediate inputs from home or foreign suppliers,...

In recent years, the increase in international trade has sparked a debate about the impact of international trade on population health. To date, however, there has been very little econometric research on the relationship between these two variables. This paper examines the long-run relationship...

This paper provides an explanation for the observed decline of exchange rate pass-through into import prices by modeling the effects of financial market integration on the optimal choice of the pricing currency in the context of rigid nominal goods prices. Contrary to previous literature, the...

The majority of general equilibrium models of international portfolio holdings differ substantially in their modeling procedures but typically feature a term that captures the relationship between real exchange rate changes and relative, i.e. home vs. foreign, equity market returns. However,...

We analyse the link between income distribution and the current account for the period 1972-2007. We find that rising (top-end) personal inequality leads to a decrease of the current account, ceteris paribus. This result is consistent with consumption externalities resulting from upward-looking...

We develop a dynamic stochastic full equilibrium New Keynesian model of two open economies based on stochastic differential equations to analyse the interdependence between monetary policy and financial markets in the context of the recent financial crisis. The effect of bubbles on stock and...

The paper examines the stabilizing properties of fiscal policy for current account imbalances under alternative exchange rate regimes. Using a small open economy DSGE model with fiscal feedback rules, we investigate the dynamic responses of different shocks to macroeconomic variables and their...