Empirical studies show that tradable consumption goods are more expensive in rich countries. This paper proposes a simple yet novel explanation for this apparent failure of the law of one price: Consumers’ utility from tradable goods depends on their consumption of complementary goods and...

Remarks before the Bolsa Mexicana de Valores, Mexico City, February 29, 2012 ; "Mexico’s rapid recovery in all dimensions of its macroeconomy and financial sector is proof positive that the gain from reform is worth the pain. I would go so far as to say there are lessons to be learned here,...

Merchanting is goods trade that does not cross the border of the firm's resident country. Merchanting grew strongly in the last decade in select small open economies and has become an important driver of these countries' current account. Because merchanting firms reinvest their earnings abroad...

This paper theoretically explores how exchange rate pass-through depends on firm heterogeneity in productivity and product differentiation in quality. Using an extended version of the Melitz and Ottaviano (2008) model, I show that exporting firms absorb exchange rate changes by adjusting both...

This paper studies the multi-product firms with two factors of production: unskilled and skilled labor (talent). Creating new products is skill intensive while production is less skill intensive. By introducing these two tasks a firm operates which act as two seemingly sectors, we show here a...