This paper shows that the "price wars during booms" logic of Rotemberg and Saloner (1986) provides an explanation of contagious currency crises. The idea is as follows. When a group of countries relies on exports to a common foreign market, pressures for competitive devaluations arise. In...

This paper uses Kennan's (1988) model to separately identify supply-side and demand-side dynamics in US import data. Dynamics arise from both autocorrelated shocks to supply- and demand-side fundamentals, and from lagged adjustment to these shocks. The model consists of a pair of partial...

This paper develops a dynamic asset pricing model with persistent heterogeneous beliefs. The model features competitive traders who receive idiosyncratic signals about an underlying fundamentals process. We adapt Futia’s (1981) frequency domain methods to derive conditions on the fundamentals...