A number of recent studies have found intranational trade to be excessive compared to international trade, based on a gravity specification. The preferred explanation for this finding has been the presence of formal and informal trade barriers, with associated welfare consequences. If such...

The presence of purchasing power parity is often attributed to the exploitation of arbitrage opportunities in goods markets. We examine this presumption for a 1960-1996 monthly panel of bilateral exchange rates and trade for the G7 countries. The data exhibit strong mean reversion. However,...

An authoritative analysis that employs economic theory, cross-country empirical comparison, and case studies to analyze the effect of currency boards on inflation, output growth and macroeconomic performance.

We provide a model with sector-specific debt-collateral constraints to analyze how asymmetric financing conditions across sectors affect the aggregate investment, credit and output composition. In our model, investments in the construction sector allow for higher leverage than investments in the...