We find that real interest rates paid on government debt depend significantly upon current and expected future levels of debt, in Europe as in the US. But this result only emerges when we condition on foreign interest rates, illustrating financial international integration. The previously strong...

Openness to trade is one factor that has been identified as determining whether a country is prone to sudden stops in capital inflows, crashes in currencies, or severe recessions. Some believe that openness raises vulnerability to foreign shocks, while others believe that it makes adjustment to...