We test the relationship between the size of regional trade agreements (RTA) and openness by using a gravity equation with multilateral trade factors. Our sample includes eleven RTAs, seven with constant membership and four with expanding membership. Regional trade bias declines with the size of...

In this paper, we test the hypothesis that higher economic development is associated with lower trade costs. Using exports from 103 Italian provinces to 188 countries over the period 1995-2004, we estimate distance elasticity, our measure of trade costs, through a gravity equation model of...

Due to their ties with elected leaders, central bankers may pursue policies that are not in society's best interests. Consequently, the relationship between the public and the central bank can be characterized as a principal-agent problem. An inflation and stabilization bias arise as a result of...

In the gravity equation of international trade, bilateral trade flows are regressed on trading partners’ income and the distance that separates them along with other variables. This widely used equation is traditionally estimated by the ordinary least squares method. We employ an alternative...

This chapter offers a selective survey of the gravity equation (GE) in international trade. This equation started in the Sixties as a purely empirical proposition to explain bilateral trade flows, without little or no theoretical underpinnings. At the end of the Seventies, the GE was...

There is a broad consensus that the current, large U.S. current-account deficits financed with foreign capital inflows at low interest rates cannot continue forever; there is much less consensus on when the system is likely to end and how badly it will end. The paper resurrects the basic...

This paper examines government policies aimed at rescuing banks from the effects of the great financial crisis of 2007-2009. To delimit the scope of the analysis, we concentrate on the fiscal side of interventions and ignore, by design, the monetary policy reaction to the crisis. The policy...