From 1960 to 2009, the U.S. current account balance has tended to decline during expansions and improve in recessions. We argue that shocks to the trend growth rate of productivity can help explain the countercyclical U.S. current account. Our framework is a twocountry, twogood business cycle...

In an open-economy faced with model uncertainty, this paper uses distribution forecasts to investigate the impact of alternative inflation targeting policies on macroeconomic volatility and their potential implications on financial stability. Theoretically, Domestic Inflation Targeting (DIT)...

Using PESSOA, a DSGE model for a small euro area economy, we analyze the size of fiscal multipliers associated with a large fiscal consolidation in "normal times" and in "crisis times." The crisis times scenario embodies a temporary increase in nominal rigidities and in financial frictions,...

Global imbalances and financial market (de)regulation both feature prominently among the potential causes of the global financial crisis, but they have been generally discussed separately. In this paper, we take a different angle and investigate the relationship between financial market...

We estimate a two-country open economy version of the New Keynesian DSGE model for the U.S. and the Euro area, using Bayesian techniques that allow for both determinacy and indeterminacy of the equilibrium. Our empirical analysis shows that the worldwide equilibrium is indeterminate due to a...

In this paper, we empirically investigate the Mundell-Fleming theoretical concept of an “impossible trinity” (trilemma) for Turkey, following the Aizenman, Chinn and Ito approach. However, we also introduce alternative empirical techniques in order to deal with possible misspecification...

The Uruguayan economy has undergone over the past two decades an important growth process, together with a real appreciation of the domestic currency. This implied that the Real Exchange Rate (RER), calculated as TP/NTP, experienced important changes. From this phenomenon, this paper examines...

This paper analyzes the relationship between exports and real exchange rate (RER) of six Uruguayan export products: beef, leather, dairy, chemical, metallurgical and plastics, selected for their importance in total exports during 1993-2011. We considered the sectoral RER and used the Johansen...

Here we analyze the relationship between the Uruguayan exports: beef, dairy, chemicals and plastics, and the sectorial real exchange rate (TCRES), from January-93 to December-09 studying the possible cointegration between the variables. The results differ across sectors analyzed. International...

Which countries find it optimal to form an economic union? We emphasize the risk-sharing benefits of economic integration. Consider an endowment world economy model, where international financial markets are incomplete and contracts not enforceable. A union solves both frictions among member...