Existing models of offshoring are not equipped to explain how global production sharing affects the volatility of economic activity. This paper develops a trade model that can account for why offshoring industries in low wage countries such as Mexico experience fluctuations in employment that...

The response of trade to a monetary union is a dynamic process. An empirical study of the European monetary union finds that the extensive margin of trade in new goods responded several years ahead of EMU implementation and ahead of overall trade volume. A dynamic rational expectations trade...

Risky arbitraging based on interest rate differentials between two countries is typically referred to as a carry trade. Up until the recent global financial crisis, these trades generated years of persistent positive returns, which were hard to reconcile with standard pricing kernels. In 2008...