This paper develops a general framework to analyze the welfare consequences of monetary and fiscal shocks in an open economy, focusing on the role of the degree of substitutability between goods produced in different countries. We find that an expansionary shock that would be beneficial in a...

We develop a new theory of international capital flows based on dispersed information across individual investors. There is extensive evidence of information heterogeneity within and across countries, which has proven critical to understanding asset price behavior. We introduce information...