This chapter focuses on two puzzles related to international financial markets. The first puzzle concerns explanations for deviations from uncovered interest parity or, equivalently, excess returns on foreign relative to domestic deposits. The chapter considers various explanations for the...

This chapter discusses the salient features of international trade and business cycles and summarizes the contributions of a particular branch of the literature on open economy macroeconomics. Becasue many macroeconomic time series are nonstationary, the computation of moments requires that the...

This chapter presents a critical survey and an interpretation of recent exchange rate research. It focuses on empirical results for exchange rates among major industrialized countries. The expectations of future exchange rate changes are a key determinant of asset demands, and therefore of the...

This chapter presents an overview of the long-run determinants of purchasing power parity (PPP). It reviews the huge time series literature testing simple PPP. This area has proven fruitful ground for applying modern methods for dealing with nonstationary and near-nonstationary time series. The...

This chapter describes the basic structure of international trade agreements as they exist in practice, explores theoretically the normative consequences of actual and alternative trade agreements, and offers some theoretically-based explanation for the structure of trade agreements....