This paper extends the study of current account reversals by considering the implications for the composition of output and employment. It is shown that decreases in current account deficits imply increases in tradable relative to nontradable output and/or declines in investment. The impact of...

This paper uses a unique new monthly US-UK real exchange rate series for the January 1794 – December 2009 period to reexamine the academic debate over purchasing power parity (PPP). The consensus view described by Rogoff (1996) is that PPP holds in the long-run, but short run deviations are...

This paper incorporates a search-and-matching model of the labor market into a “New Open Economy Macroeconomics” framework. This allows for an examination of the behavior of tradable and nontradable sector unemployment rates under alternative monetary rules. An examination of dynamics in...

This paper employs structural vector autoregression methods to examine the contribution of real and nominal shocks to real exchange rate movements using two hundred and seventeen years of data from Britain and the United States. Shocks are identified with long-run restrictions. The long time...

This paper examines the compositional changes that occur in economies experiencing current account reversals using sectoral-level data on output and employment growth around 55 reversal episodes. The experiences of developing and industrialized countries are compared, and the role of currency...