Recent macroeconomic experience has drawn attention to the importance of interdependence among countries through financial markets and institutions, independently of traditional trade linkages. This paper develops a model of the international transmission of shocks due to interdependent...

Recent macroeconomic experience has drawn attention to the importance of interdependence among countries through financial markets and institutions, independently of traditional trade linkages. This paper develops a model of the international transmission of shocks due to interdependent...

Between 2002 and 2008, the Canadian dollar appreciated in real terms against the US dollar by 60 percent. This large change in real exchange rates between such major trading partners as Canada and the US is almost unprecedented. This paper explores the historical background to the movement of...

The global financial crisis has undermined many economists' views about the benefits of open financial markets. Anecdotal evidence seems to indicate that financial linkages may propagate shocks during crises. This paper develops a simple two-country model in which financial liberalisation across...

We construct a model of the international transmission of 'liquidity trap' shocks, and examine the case for international coordination of fiscal policy to respond to the liquidity trap. Integrated financial markets tend to propagate liquidity traps. In a global environment, fiscal policy may be...

Models of risk-sharing predict that relative consumption growth rates across locations should be positively related to real exchange rate growth rates across the same areas. We investigate this hypothesis using a new multi-country and multi-regional data set. Within countries, we find evidence...

Standard models of international risk sharing with complete asset markets predict a positive association between relative consumption growth and real exchange-rate depreciations across countries. The striking lack of evidence for this link — the consumption/real-exchange-rate anomaly or...

In this paper we examine how monetary policy should respond to nominal exchange rates in a New Keynesian open economy model that allows for a non-trivial role for sterilised intervention. The paper develops the argument against the backdrop of the evolving policy-making environment of Asian...

Recent macroeconomic experience has drawn attention to the importance of interdependence among countries through financial markets and institutions, independently of traditional trade linkages. This paper develops a model of the international transmission of shocks due to interdependent...