This paper advocates a new way of thinking about goods trade in an open economy macro model. It develops a simple method for analyzing trade costs that are heterogeneous among a continuum of goods, and it explores how these costs determine the endogenous decision by a seller of whether to trade...

Long-run cross-country price data exhibit a puzzle. Today, richer countries exhibit higher price levels than poorer countries, a stylized fact usually attributed to the Balassa- Samuelson effect. But looking back fifty years, this effect virtually disappears from the data. What is often assumed...

This paper develops a two-country macro model with endogenous tradability to study features of international economic integration. Recent episodes of integration in Europe and North America suggest some surprising observations: while quantities of trade have increased significantly, especially...

Long half-lives of real exchange rates are often used as evidence against monetary sticky price models. In this study we show how exchange rate regimes alter the long-run dynamics and half-life of the real exchange rate, and we recast the classic defense of such models by Mussa (1986) from an...

Long-run cross-country price data exhibit a puzzle. Today, richer countries exhibit higher price levels than poorer countries, a stylized fact usually attributed to the “Balassa-Samuelson” effect. But looking back fifty years, or more, this effect virtually disappears from the data. What is...

Open economy macroeconomics typically takes as exogenously given important aspects of the pattern of international trade. This paper shows how heterogeneity in trade costs and heterogeneity in productivities work together to jointly determine features of the pattern of international trade and...

This paper develops a two-country macro model with endogenous tradability to study features of international economic integration. Recent episodes of integration in Europe and North America suggest some surprising observations: while quantities of trade have increased significantly, especially...

International macroeconomic models long have had difficulty explaining the surprisingly low volatility of the relative price between traded and nontraded goods compared to real exchange rates. This apparent puzzle may reflect a restrictive way of thinking about the nature of nontraded goods....

Long-run cross-country price data exhibit a puzzle. Today, richer countries exhibit higher price levels than poorer countries, a stylized fact usually attributed to the “Balassa-Samuelson” effect. But looking back fifty years, or more, this effect virtually disappears from the data. What is...

Long-run cross-country price data exhibit a puzzle. Today, richer countries exhibit higher price levels than poorer countries, a stylized fact usually attributed to the Balassa- Samuelson' effect. But looking back fifty years, or more, this effect virtually disappears from the data. What is...