Is increased competition in international financial markets desirable? On the one hand, reductions in mnopoly power can be efficiency improving. On the other, increased competition may make it hard to coordinate in disciplining debtors in default. This paper presents a model that formalizes this...

This paper presents a stylized model of international trade and asset price bubbles. Its central insight is that bubbles tend to appear and expand in countries where productivity is low relative to the rest of the world. These bubbles absorb local savings, eliminating inefficient investments and...

This paper investigates the relationship of the ``unemployment gap'' between the United States and Europe to the opening of international capital markets. The unemployment gap widened dramatically in the mid-1980's, a time period characterized also by significant increases in international...

We use the neoclassical growth framework to model international capital flows in a world with exogenous demographic change. We compare model implications and actual current account data and find that the model explains a small but significant fraction of capital flows between OECD countries, in...

We examine the role of dierent explanations for the lack of flows of capital from rich to poor countries−the Lucas paradox−in an empirical framework. Broadly speaking, the theoretical explanations for this paradox include dierences in fundamentals aecting the production structure...