The motives of a small country for borrowing to purchase capital equipment on international markets are studied. The country produces tradable capital and a nontradable consumption good and borrows or lends capital to achieve higher levels of welfare. A shift in time-preference favoring future...

We find evidence that the law of one price (LOOP) holds more nearly for country pairs that are within geographic regions than for country pairs that are not. These findings are established using disaggregated consumer price data from 23 countries (including data from eight North American...