We document that at business cycle frequency, nominal variables, such as aggregate price levels and nominal interest rates, are more correlated across countries than real output. Since national central banks control the domestic money supply and their objective has been to keep the nominal...

We document that, at business cycle frequencies, fluctuations in nominal variables, such as aggregate price levels and nominal interest rates, are substantially more synchronized across countries than fluctuations in real output. To the extent that domestic nominal variables are determined by...

Fluctuations in nominal variables—aggregate price levels and nominal interest rates—are documented to be substantially more synchronized across countries at business cycle frequencies than fluctuations in real output. A transparent mechanism accounting for this striking feature of the...

Cyclical fluctuations in nominal variables--aggregate price levels and nominal interest rates--are documented to be substantially more synchronized across countries than cyclical fluctuations in real output. A transparent mechanism that can account for this striking feature of the nominal...

We introduce financial frictions in a two sector model of international trade with heterogeneous agents. The level of specialization in the economy (economic development) depends on the quality of financial institutions. Underdeveloped financial markets prohibit an economy to specialize in...

Over the U.S. business cycle, fluctuations in residential investment systematically lead fluctuations in real GDP. Evidently, these dynamics are specific to the U.S. and Canada. In other developed economies residential investment tends to be coincident with the cycle. On the other hand, in all...

Over the U.S. business cycle, fluctuations in residential investment are well known to systematically lead GDP. These dynamics are documented here to be specific to the U.S. and Canada. In other developed economies residential investment is broadly coincident with GDP. Nonresidential investment...

This paper addresses the classic question: what are the welfare costs of inflation. We employ a model in which the ratios of currency to deposits and currency to reserves are endogenously determined. The model distinguishes quantitatively between three sources of welfare cost of inflation, and...

Mortgage loans are a striking example of a persistent nominal rigidity. As a result, under incomplete markets, monetary policy affects decisions through the cost of new mortgage borrowing and the value of payments on outstanding debt. Observed debt levels and payment to income ratios suggest the...