We analyse the consequences of US real interest rate rises on the real exchange rate (RER) in a two-good overlapping generations model of a semi-small open economy. The equilibrium RER depreciates (appreciates) when the world interest rate increases in a debtor (creditor) country. We then study...

We revisit the debate on the sustainability of the current account dynamics in the US. Using the concept of sustainability as the ability to meet the long run intertemporal budget constraint, we test for unit roots in the US current account for the 1960-2004 period. We argue that there are...

Several empirical studies report the existence of declining terms of trade between commodities and manufactures, supporting the Prebisch-Singer hypothesis. As globalization leads to greater integration of markets, we ask if in a fully integrated economy the terms of trade will display the same...