Political business cycle theories predict that the occurrence and outcome of elections affect the timing of business cycle turning points. Opportunistic political business cycle theory predicts that a contraction is more likely to end soon after an election than at other times. Rational partisan...

This paper shows that the effect of capital account liberalization on growth depends upon the environment in which that policy occurs. A theoretical model demonstrates the possibility of an inverted-U shaped relationship between the responsiveness of growth to capital account liberalization and...

Recent experience with exchange rate management has rekindled interest in the efficacy of foreign exchange intervention. While there is broad evidence that sterilized intervention has no effect on the exchange rate through a portfolio balance channel, less evidence exists on the signalling role...

This paper develops a method of testing levels of economic integration based upon consumption smoothing, and tests it using data on trade balances across Canadian provinces. The results indicate the provinces are highly integrated within Canada, but integration between Canada and the rest of the...

This paper is a theoretical and empirical investigation into the duration of exchange-rate pegs. The theoretical model considers a policy-maker who must trade off the economic costs of real exchange- rate misalignment against the political cost of realignment. The optimal time to spend on a peg...

The impermanence of fixed exchange rates has become a stylized fact in international finance. The combination of a view that pegs do not really peg with the "fear of floating" view that floats do not really float generates the conclusion that exchange rate regimes are, in practice, unimportant...

Standard international economic models with life cycle/permanent income consumption behavior predict that international portfolio diversification leads to high bilateral consumption correlations. Thus international consumption correlations have been empirically estimated as a test of...

The relative wealth hypothesis of Froot and Stein (1991), motivated by the aggregate correlation between real exchange rates and foreign direct investment (FDI) observed in the 1980s, cannot explain one of the major shifts in FDI in the 1990s: the continued decline in Japanese FDI during a...

We show a statistically significant and economically relevant effect of open capital accounts on financial deepness and economic growth in a cross-section of countries over the period 1986 to 1995. Countries with open capital accounts over some or all of this period had a significantly greater...