The relationship between international payments and the real exchange rate - the ‘transfer problem’ - is one of the classic questions in international economics. In this paper we use cross-country data on real exchange rates and a newly constructed data set on countries’ net external...

In mid-2008, the real effective exchange rate of the dollar was close to its minimum level for the past 4 decades. At the same time, however, the U.S. trade and current account deficits remain large and, absent a significant correction in coming years, would contribute to a further accumulation...

We study the comovement among stock prices and among exchange rates in a three-good three-country Centre-Periphery dynamic equilibrium model in which the Centre’s agents face portfolio constraints. We characterize equilibrium in closed form for a broad class of portfolio constraints, solving...

We evaluate the quantitative effects of introducing costs of transporation into an international trade model. We model these costs through the introduction of international transportation services sector. Costs of transportation have substantial long-run effects on welfare and may impact on the...

We examine the link between the net foreign asset position, the trade balance and the real exchange rate. In particular, we decompose the impact of a country’s net foreign asset position (‘external wealth’) on its long-run real exchange rate into two mechanisms: the relation between...

One of the reasons for governments to use capital controls is to obtain some degree of monetary independence. This paper investigates the link between capital controls and interest differentials/ forward premia. This to test whether they can indeed give governments the power to drive exchange...

The rapid growth of international reserves|a development concentrated in the emerging markets|remains a puzzle. In this paper we suggest that a model based on financial stability and financial openness goes far toward explaining reserve holdings in the modern era of globalized capital markets....

The paper analyses global trends in foreign direct investment (FDI) and the interlinkages between FDI, trade and competitiveness in host developing countries. The rapid rate of growth and the recent changes in the global patterns of FDI are attributed to both macroeconomic and microeconomic...

The literature on the benefits and costs of financial globalization for developing countries has exploded in recent years, but along many disparate channels with a variety of apparently conflicting results. We attempt to provide a unified conceptual framework for organizing this vast and growing...