It is often argued that many economies are affected by conditions in foreign countries. This paper explores the connection between interest rates in major industrial countries and annual real output growth in other countries. The results show that high foreign interest rates have a...

The impermanence of fixed exchange rates has become a stylized fact in international finance. The combination of the "mirage" view that pegs do not really peg with the "fear of floating" view that floats do not really float generates the conclusion that exchange rate regimes are, in practice,...

A major focus of the recent literature on the determination of optimal portfolios in open-economy macroeconomic models has been on the role of currency movements in determining portfolio returns that may hedge various macroeconomic shocks. However, there is little empirical evidence on the...

Does capital flow from rich to poor countries? We revisit the Lucas paradox to account for the role of capital account openness. We find that, when accounting for such openness, the prediction of the neoclassical theory is empirically confirmed: among financially open economies, less developed...

This paper presents a simultaneous assessment of the relationship between economic performance and three groups of economic reforms: domestic finance, trade, and the capital account. Domestic financial reforms and trade reforms are robustly associated with economic growth, but only in...