Does trade openness systematically imply bigger governments, as proposed by Rodrik (1998)? This paper presents a novel and more refined explanation for when and why international trade may enlarge the public sector. We propose that trade openness is associated with bigger governments if (i) the...

From a theoretical point of view, greater trade openness affects firm-level volatility by changing the exposure and the reaction of firms to macroeconomic shocks. The net effect is ambiguous, though. This paper provides firm-level evidence on the link between openness and volatility. Using two...

We build a new empirical model to estimate the global impact of an increase in the volatility of US monetary policy shocks. Specifically, we admit time-varying variances of local structural shocks from a stochastic volatility specification. By allowing for rich dynamic interaction between the...