The Asia crisis was originally expected to affect the U.S. economy adversely, mainly through reduced exports to, and increased imports from, the crisis countries. However, U.S. GDP growth in 1998, at 4.3 percent, was surprisingly strong. This article examines the effect of the crisis on the U.S....

Dramatic changes are occurring in the nature of international trade. Production processes increasingly involve a sequential, vertical trading chain stretching across many countries, with each country specializing in particular stages of a good's production sequence. We document a key aspect of...

The key feature of endogenous growth models is that they imply that permanent changes in government policy can have permanent effects on growth rates. In this paper, we develop and implement an empirical framework to test this implication. In a regression of growth rates on current and lagged...

Language is a fundamental tool for communication of ideas between people, and so is an essential input into production and trade. In general, a society will possess more production and consumption opportunities when all its members share a common language. Neighboring societies and communities...

We examine the importance of world real interest rate shocks in explaining business-cycle fluctuations in open economies using a stochastic dynamic model of a small open economy. We argue that a good proxy of the world real interest rate is not available. Moreover, the world interest rate...

It is widely accepted that international trade is an important force transmitting business cycles from one country to another. Metaphors such as "when the U.S. sneezes, Europe catches a cold" are often invoked to illustrate the importance of these linkages. Recent empirical research has...