The paper provides a general-equilibrium model where incomplete international financial markets lead to insufficient industrial specialization and low international trade. As international portfolio diversification is limited and productivity is uncertain, investors wish to maintain a...

We examine the causal relationship between US monetary policy shocks, exchange rates and currency excess returns for a sample of eight advanced countries over the period 1980M1 to 2022M11. We find that the dynamics of the US dollar exchange rate is the main driver of currency excess returns. The...