The opening of equity markets to foreign investment appears to generate an enormously large positive growth effect (see Bekaert, Harvey, and Lundblad, 2005) in spite of a relatively small role of such markets for financing investment in most economies. We propose a possible spillover channel...

We propose a theory of endogenous composition of capital flows that highlights two asymmetries between international equity and debt financing. In our model, poor institutional quality leads to an inefficiently low share of equity financing as well as an inefficiently high volume of total...

According to the existing open-economy macroeconomics literature, a current account surplus is associated with a welfare loss only when distortions exist in either savings or investment, and bilateral imbalances do not matter when holding a country's overall imbalance constant. We propose a new...

This paper investigates whether "natural" trade barriers of a country due to geography and other factors outside the country's control stimulate more or less policy barriers such as tariffs. Our theory predicts that the politician's relative weight on private benefits over social welfare in a...

Though the real exchange rate is a key price for most economies, our understanding of its determinants is still incomplete. This paper studies the implications of status competition in the marriage market for the real exchange rate. In theory, a rise in the sex ratio (increasing relative surplus...

China's high corporate savings rate is commonly claimed to be a key driver for the country's large current account surplus. The mainstream explanation for high corporate savings is a combination of windfall profits in state-owned firms, especially in resource sectors, and mis-governance of...

This paper provides both a conceptual framework for decomposing a country's gross exports into value-added components by source and a new bilateral database on value-added trade. Our parsimonious framework integrates all previous measures of vertical specialization and value-added trade in the...

While openness to trade is a well-recognized hallmark of many successful emerging market economies known as "growth miracles," another component of the growth model is a leapfrogging strategy - the use of policies to guide the industrial structural transformation ahead of a country's factor...

Large savings and current account surpluses by China and other countries are said to be a contributor to the global current account imbalances and possibly to the recent global financial crisis. This paper proposes a theory of excess savings based on a major, albeit insufficiently recognized by...

We provide systematic evidence that intermediaries play an important role in facilitating trade using a firm-level the census of China's exports. Intermediaries account for around 20% of China's exports in 2005. This implies that many firms engage in trade without directly exporting products. We...