A basic tenet of lognormal asset pricing models is that a risky currency is associated with a low pricing kernel volatility. Empirical evidence implies that a risky currency is associated with a relatively high interest rate. Taken together, these two statements associate high-interest-rate...

The international financial crises and deepening world-wide recession remind us that the economic fates of nations are tightly linked. How do different models perform in explaining correlated business cycles? This paper compares the performance of two types of international real business cycle...