This paper explores the connection between the much-debated global current account imbalances of the past decade and the U.S. financial collapse. It argues that the connection is an intimate one, although nothing so simple as cause and effect. Instead, the imbalances were a primary symptom of...

This paper revisits the sticky-price pricing-to-market model of Devereux and Engel [Devereux, M.B., Engel, C., 2003. Monetary policy in the open economy revisited: price setting and exchange-rate flexibility. Review of Economic Studies 70(4), 765-783], in which fixed exchange rates are optimal...