We study the behavior of real exchange rates in a two-country dynamic equilibrium model. In this model, consumers can only consume domestic goods but can invest costlessly in capital stocks of both countries. Nevertheless, transporting goods between the two countries is costly and, hence, the...

We study the behavior of real exchange rates in a two­country dynamic equilibrium model. In this model, consumers can only consume domestic goods but can invest costlessly in capital stocks of both countries. Nevertheless, transporting goods between the two countries is costly and, hence, the...

Manufacturers selling in foreign markets often do not completely pass on the effects of fluctuations in exchange rates to the prices of their products. Our paper addresses this puzzle and studies the effects of the international distribution channel on exchange rate pass-through. We develop an...

The interest rate swap market has grown rapidly. Since the inception of the swap market in 1981, the outstanding notional principal of interest rate swaps has reached a level of $12.81 trillion in 1995. Recent surveys indicate that interest rate swaps are the most commonly used interest rate...

The implications of the costs of doing business in foreign countries for the resulting capital market equilibrium are studied. When transferring capital goods across national boundaries, the costs incurred are quasi-fixed in a one-good, two-country, intertemporal model with complete financial...

I analyze a model in a simple representative-agent economy with one risky and one riskless asset, populated by habit-forming consumer-investors. These consumer-investors exhibit nonaddictive habit formation in the sense that the current consumption rate of the consumer-investors can fall below...