This paper provides a critical review of the literature on the macroeconomic effects of public infrastructure investment associated with the main underlying transmission channels. Typically, this type of stimulus fosters economic activity in the medium-to-long run because the public capital...

A central puzzle in international finance is that real exchange rates are volatile and, in stark contradiction to effcient risk-sharing, negatively correlated with cross-country consumption ratios. This paper shows that incomplete asset markets and a low price elasticity of tradables can account...