This paper studies the dynamics of the U.S. external position for the past 35 years, and examines alternative paths for future external adjustment. We develop a new present value expression for the external position that embeds the restrictions of international solvency and can be easily...

Micro-based exchange-rate research examines the determination and behavior of spot exchange rates in an environment that replicates the key features of trading in the foreign exchange (FX) market. Traditional macro exchange-rate models play little attention to how trading in the FX market...

This paper presents a new numerical method for solving general equilibrium models with many assets. The method can be applied to models where there are heterogeneous agents, time-varying investment opportunity sets, and incomplete markets. It also can be used to study models where the...

This paper presents a new model for studying international capital flows and debt dynamics that emphasizes the role played by expectations concerning future trade flows and returns. I use the model to estimate the drivers of the U.S. external position and capital flows between 1973 and 2008. The...

This paper presents a new model for studying international capital flows and debt dynamics. The model emphasizes the role of expectations concerning future trade flows and returns as the determinants of a country's foreign asset and liability positions, and how revisions in these expectations...

Dark matter accounts for 83 percent of the matter in the universe and plays a central role in cosmology modeling. This paper argues that an analogous form of dark matter plays a similarly important role in international macroeconomics. Exchange-rate dark matter is invisible, but its existence...

This paper describes a new analytical framework for the quantitative assessment of international external positions. The framework links each country's current net foreign asset position to its current trade flows, forecasts of future trade flows, and expectations concerning future returns on...

Macroeconomic models of nominal exchange rates perform poorly. In sample, R2 statistics as high as 10 percent are rare. Out of sample, these models are typically out-forecast by a na‹ve random walk. This paper presents a model of a new kind. Instead of relying exclusively on macroeconomic...

We examine how medium-term movements in real exchange rates and GDP vary with international financial conditions. For this purpose, we study the international transmission of productivity shocks across a variety of IRBC models that incorporate different assumptions about the persistence of...

We study the efficacy of sterilized foreign exchange intervention in a model where exchange rates are pushed away from their fundamental level by a rational bubble. The bubble is sustained by uncertainty about the post-crash price and about the market absorption capacity. We show that the bubble...