The empirical relationship between the average growth rate and volatility of growth rates, both over time and across countries, has important policy implications, which depend critically on the sign of the relationship. Following Ramey and Ramey (1995) a wide consensus has been building that, in...

We characterize the equilibrium for a small economy in a dynamic Heckscher-Ohlin model with uncertainty. We show that when trade is balanced period-by-period, the per capita output and consumption of a small open economy converge to an invariant distribution that is independent of the initial...