This paper analyzes the impact of fiscal spending shocks in a multi-country model with international production networks. In contrast to standard results suggesting that production network linkages are unimportant for the aggregate response to macro shocks in a closed economy, we show that...

A central aspect of the recent debate on global imbalances and the US current account deficit is the role of the exchange rate peg being followed by China and other Asian economies. While one view has stressed the need for Asian currency appreciation, another focuses on the importance of fiscal...

A classic argument for flexible exchange rates is that the exchange rate plays a 'shock-absorber' role in an open economy vulnerable to country-specific shocks. This paper presents a sharp counter-example to this argument within a very conventional open economy model. Countries are subject to...

We study the classic transfer problem of predicting the effects of an international transfer on the terms of trade and the current account. A two-country model with debt and capital allows for realistic features of historical transfers: they follow wartime increases in government spending and...

Most theoretical analysis of flexible vs. fixed exchange rates take the degree of nominal rigidity to be independent of the exchange rate regime choice itself. But informal policy discussion often suggests that a credible exchange rate peg may increase internal price flexibility. This paper...

This paper empirically explores how fiscal policy (represented by increases in government spending) has asymmetric effects on economic activity at different levels of real interest rates. It suggests that the effect of fiscal policy depends on the level of real rates, since the Ricardian effect...