Conventional two-country RBC models interpret countercyclical net exports as reflecting, in large part, the dynamics of capital. I show that, quantitatively, theoretical economies rely on counterfactual terms of trade effects: trade fluctuations, on the contrary, are driven primarily by...

Since the extensive work by Burns and Mitchell (1947), many economists have interpreted economic fluctuations in terms of business cycle phases. Given this, we argue that in addition to usual model selection criteria currently used in the profession, the adequacy of a univariate macroeconomic...

We construct a two-country DSGE model with multiple stages of processing and local currency staggered price-setting to study cross-country quantity correlations driven by monetary shocks. The model embodies a mechanism that propagates a monetary surprise in the home country to lower the foreign...

We employ intranational data for the United States from 1978-1991 to re-explore two discrepancies between international real business cycle models and data (so called 'anomalies') that have been highlighted by Backus, Kehoe and Kydland (1993). The benefit to our approach is that the analysis of...

Recent work by Hamilton, Waggoner and Zha (2004) has demonstrated the importance of identification and normalization in econometric models. In this paper, we use the popular class of two-state Markov switching models to illustrate the consequences of alternative identification schemes for...

This paper tries to grasp banks' motivation for entering derivative markets. The motivation question is interesting for the following reason: if banks' main motivation for using derivatives is speculation, derivatives are likely to increase the risk to banks' capital and thus increase the cost...