This paper develops an open-economy version of the Bernanke-Blinder model which indicates that sterilization efforts through increases in reserve requirements will have limited impact if viable financial alternatives to the commercial banking sector exists. We then examine the capital inflow...

According to classical Ricardian trade theory, overall productivity differences between countries are manifested as differences in real labor incomes (absolute advantage), while the sectoral pattern of productivity differences determines trade patterns (comparative advantage). This paper...