Although Europe in the aggregate is a not a major contributor to global current account imbalances, its trade and … alternative scenarios, emphasizing both trade and financial channels. Finally, we consider heterogeneous exposure across …

subject to random shocks affecting endowments, the terms of trade, and the real interest rate. Equilibrium stochastic … mimics the Harberger-Laursen-Metzler effect, but cannot account for a countercyclical trade balance, the variability of the … real exchange rate, and the income elasticity of imports. The results also show that the correlation between the trade …