In this essay, we argue that key assumptions in international macroeconomic theory, though useful for understanding the economic relationships among developed countries, have been pushed beyond their competence to include relationships between developed economies and emerging markets. The...

We generalize endogenous growth models, which often assume a closed-economy, toallow for international borrowing and lending. We incorporate a prominent feature of globalfinancial markets, that the marginal cost of borrowing facing a small open economy is dependent on the "country risk" as...