The U.S. Bureau of Economic Analysis (BEA) estimates the return on investments of foreign subsidiaries of U.S. multinational companies over the period 1982?2006 averaged 9.4 percent annually after taxes; U.S. subsidiaries of foreign multinationals averaged only 3.2 percent. Two factors distort...

This paper studies the relation between the United States? bilateral real exchange rate and the associated bilateral relative price of nontraded goods for five of its most important trade relationships. Traditional theory attributes fluctuations in real exchange rates to changes in the relative...

This paper presents a two-country overlapping generations model in which financial intermediation arises endogenously as an incentive-compatible means of economizing on monitoring costs. Because of the existence of transactions costs, money markets in the two countries are segmented and...

Recent empirical work on financial crises documents that crises tend to occur when macroeconomic fundamentals are weak, but that even after conditioning on an exhaustive list of fundamentals, a sizable random component to crises and associated capital flows remains. We develop a model of herd...

On March 18, 1994, the Eastern Economic Association sponsored a roundtable discussion at the Federal Reserve Bank of Boston, to examine the future of the international monetary system in light of the aims of the Bretton Woods agreement of 1944. The title of the roundtable captured the central...

When the Federal Reserve Bank of Boston chose "Rethinking the International Monetary System" as the topic for its 43rd Economic Conference, it was clear that the worst international financial crisis in decades had caused tremors within the economics profession and the policymaking establishment....

The recent spate of severe financial crises has provoked an interest in international monetary reform not seen since the breakdown of the fixed exchange rate system 30 years ago. Indeed, the crises have forced both academic economists and policymakers to question some of their most basic...

Appendix A provides details for the computation of our model's equilibrium paths, the construction of model national and international accounts, and the sensitivity of our main findings to alternative parameterizations of the model. We demonstrate that the main finding of our paper - namely,...

An intensely debated issue in international economics concerns the extent to which investors exploit the benefits from international trade in financial assets. Such benefits have long been acknowledged in theory but, despite the continuing process of financial integration and globalization, it...