Firms differ in the extent to which they "pass-through" changes in exchange rates into the prices they charge in foreign markets. They also differ in their "exposure" to exchange rates--the responsiveness of their profits to changes in exchange rates. Because pricing directly affects...

In an integrated world capital market, the same pricing kernel is applicable to all securities. We apply this idea to the stock returns of different countries. We investigate the underlying determinants of cross-country stock return correlations. First, we determine, for a given, measured degree...

Based on basic financial models and reports in the business press, exchange rate movements are generally believed to affect the value of nonfinancial firms. In contrast, the empirical research on nonfinancial firms typically produces fewer significant exposures estimates than researchers...

This paper presents a multi-country general equilibrium model driven by productivity shocks, where labor supply and consumption are chosen endogenously. Weuse this framework to study the effect of labor supply for optimal international diversification. We find that the model's ability to help...