This paper develops a stochastic equilibrium model of an open economy incorporating speculation in the forward exchange market. The model is used to examine two issues. The first is the role of speculation in stabilizing the economy against stochastic disturbances. Much risk averse speculation...

Since the move to generalized floating in1973, exchange rates between major currencies have displayed large fluctuations. This turbulence of foreign exchange rates is an important concern of government policy and its explanation is a challenge for theories of foreign exchange market behavior. In...

This paper studies predictability of currency returns over the period 1971-2006. To assess the economic significance of currency predictability, we construct an upper bound on the explanatory power of predictive regressions. The upper bound is motivated by quot;no good-dealquot; restrictions...

We document the consequences of real exchange rate movements for the employment, hours, and hourly earnings of workers in manufacturing industries across individual states. Exchange rates have statistically significant wage and employment implications in these local labor markets. The importance...

The majority of enterprises in developing countries have no paid workers. Is this optimal, or the result of frictions in labor markets? We conduct an experiment providing wage subsidies to randomly chosen microenterprises in Sri Lanka. In the presence of frictions, a short-term subsidy could...

The world's poor are seeing a rapid expansion in access to formal savings accounts. What is the source of savings when households are connected to a formal account? We combine a high-frequency panel survey spanning two and a half years with an experiment in which a Sri Lankan bank used mobile...

In developing economies, mobile-linked services have the potential to significantly reduce transaction costs and provide a truly new conduit that could be used to facilitate the flow of savings into banks. We test this premise by introducing a product that permits Sri Lankan households to...

We conduct a field experiment in Sri Lanka providing informal firms incentives to formalize. Information about the registration process and reimbursement of direct costs has no effect. Payments equivalent to one-half to one month (alternatively, 2 months) of the median firm's profits leads to...

Sri Lanka has a significant chronic unemployment problem. Depending on time period and the definition of unemployment it varies from the low teens to over twenty percent. Nearly all of this unemployment is concentrated among young people who are looking for their first job. Unemployment duration...

Management has a large effect on the productivity of large firms. But does management matter in micro and small firms, where the majority of the labor force in developing countries works? We develop 26 questions that measure business practices in marketing, stock-keeping, record-keeping, and...