This paper argues that the theoretical foundations for the gravity equation are general, while the empirical performance of the gravity equation is specific to the type of goods examined. Most existing theory for the gravity equation depends on the assumption of differentiated goods. We show...

This paper applies the Meese-Rogoff (1983a) methodology to the stock market. We compare the out-of-sample forecasting accuracy of various time-series and fundamentals-based models of aggregate stock prices. We stick as close as possible to the original Meese-Rogoff sample and methodology. Just...

Currency crises tend to be regional; they affect countries in geographic proximity. This suggests that patterns of international trade are important in understanding how currency crises spread, above and beyond any macroeconomic phenomena. We provide empirical support for this hypothesis. Using...

This Paper develops a simple new methodology to test for asset integration and applies it within and between American stock markets. Our technique is tightly based on a general intertemporal asset-pricing model, and relies on estimating and comparing expected risk-free rates across assets....

A stable international monetary system has emerged since the early 1990s. A large number of industrial and a growing number of developing countries now have domestic inflation targets administered by independent and transparent central banks. These countries place few restrictions on capital...

We provide the first empirical tests for financial protectionism, defined as a nationalistic change in banks’ lending behaviour, as the result of public intervention, which leads domestic banks either to lend less or at higher interest rates to foreigners. We use a bank-level panel data set...

In contrast to earlier recessions, the monetary regimes of many small economies have not changed in the aftermath of the global financial crisis. This is due in part to the fact that many small economies continue to use hard exchange rate fixes, a reasonably durable regime. However, most of the...

This paper uses a panel of data from 22 countries between 1967 and 1992 to explore the trade-off between the `Holy Trinity' of fixed exchange rates, independent monetary policy, and capital mobility. I use: flexible- and sticky-price monetary exchange rate models to parameterize monetary...

This Paper characterizes the integration patterns of international currency unions (such as the CFA Franc zone and the East Caribbean Currency Area). We empirically explore different features of currency unions, and compare them both to countries with sovereign monies, and to regions within...

A gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade. The panel data set used includes bilateral observations for five years spanning 1970 through 1990 for 186 countries. In this data set, there are over one hundred...