This paper extends the model of Engler et al. (2007) on the adjustment of the US current account to a three-country world economy. This allows an analysis of the differential impact of a reversal of the US current account on Europe and Asia. In particular, the outcomes under different exchange...

With heterogeneous productivity and sticky prices in the short run, exchange rate changes can generate real effects on agents in the economy; the result is that the currency regime becomes a policy variable amenable to political competition. This paper discusses how special interests and...

I examine the transmission of expansionary U.S. monetary policy in case where developing countries -- including China -- peg their currencies to the dollar. I evaluate the value of the dollar peg as a fraction of consumption that households would be willing to pay for the dollar peg to remain as...