Why do investors trade a lot in foreign assets and hold so little of them in their portfolios? This paper shows that both observations can arise naturally in the presence of nondiversifiable nontraded consumption risk when each country specializes in production, preferences exhibit consumption...

The authors study the empirical, cross-country relationship between macroeconomic volatility and long-run economic growth. They address four central questions: 1) Does the volatility-growth link depend on country and policy characteristics, such as the level of development or trade openness? 2)...

Why do investors trade a lot in foreign assets and hold so little of them in their portfolios? This paper shows that both observations can arise naturally in the presence of nondiversifiable nontraded consumption risk when each country specializes in production, preferences exhibit consumption...

What is the relationship between interest rates and the exchange rate? The empirical literature in this area has been inconclusive. We use an optimizing model of a small open economy to rationalize the mixed empirical findings. The model has three key margins. First, higher domestic interest...

We examine the relative fortunes of the historically disadvantaged scheduled castes and tribes (SC/ST) in India in terms of their education attainment, occupation choices, consumption and wages. We study the period 1983-2005 using household survey data from successive rounds of the National...

The past three decades have seen a sharp macroeconomic takeoff in India. How have these aggregate changes affected the economic disparity between the different social groups? We examine this issue by studying the time series evolution of the economic disparities between scheduled castes and...

This paper proposes several testing procedures for comparison of misspecified calibrated models. The proposed tests are of the Vuong-type (Vuong, 1989; Rivers and Vuong, 2002). In our framework, the econometrician selects values for model’s parameters in order to match some characteristics of data...

This paper presents a numerical method for solving stochastic general equilibrium models with dynamic portfolio choice. The method can be applied to models with heterogeneous agents, time-varying investment opportunity sets, and incomplete asset markets. We illustrate the method using a...

This paper documents some previously neglected features of sectoral shares at business cycle frequencies in OECD economies. We find that the non-traded output share is as volatile as aggregate GDP and for most countries is countercyclical. While the standard international real business cycle...

In this paper, we argue that limited asset market participation (LAMP) plays an important role in explaining international business cycles. We show that when LAMP is introduced into an otherwise standard model of international business cycles, the performance of the model improves significantly,...