We investigate whether the adoption of the euro was accompanied by an increase in prices in member countries, and whether it promoted goods market arbitrage in the form of faster convergence to a common price. By comparing the experience of eurozone countries to non-euro European countries in a...

When a sovereign faces the risk of debt default, it may be tempted to expropriate the private sector. This may be one reason why international investment in private companies has to take into account the sovereign risk. But the likelihood of sovereign risk transferring to corporates and...

The real exchange rate is said to be the single most important price in an economy. While we used to think that we knew what explained its movements (e.g., the Balassa-Samuelson effect), the recent much-cited result by Engel (1999) proposes a serious reinterpretation - i.e., nearly 100% of the...

While openness to trade is a well-recognized hallmark of the Asian growth model, another component of the model is a leapfrogging strategy—the use of policies to guide industrial structural transformation ahead of a country's factor endowment. Does the leapfrogging strategy work? Opinions vary...

Why do some economies grow faster than others? Do economies in the middle-income range face especially difficult challenges producing consistent growth? Using a transition matrix analysis on decade-level growth rates, we find that the data clearly reject the idea that middle-income economies...

This paper studies how status competition for marriage partners can generate surprising effects on the real exchange rate (RER). In theory, a rise in the sex ratio (increasing relative surplus of men) can generate a decline in the RER. The effect can be quantitatively large if the biological...

This short essay surveys recent literature on the competitive saving motive and its broader economic implications. The competitive saving motive is defined as saving to improve one's status relative to other competitors for dating and marriage partners. Here are some of the key results of the...

The real effective exchange rate (REER) is one of the most cited statistical constructs in open-economy macroeconomics. We show that the models used to compute these numbers are not rich enough to allow for the rising importance of global value chains. Moreover, because different sectors within...

This paper seeks to draw lessons for developing countries based on a survey of the recent literature on financial globalization. First, while capital account openness holds promises (by potentially generating a lower cost of capital, better risk sharing, and stronger disciplines on policies),...

China's exports have become increasingly sophisticated. This has generated anxiety in developed countries as the competitive pressure may be increasingly felt outside labor-intensive industries. Using product-level data on exports from different cities within China, this paper investigates the...