This paper exploits a three-dimensional panel data set of prices on 27 traded goods, over 88 quarters, across 96 cities in the U.S. and Japan. We show that a simple average of good-level real exchange rates tracks the nominal exchange rate well, suggesting strong evidence of sticky prices....

Bureaucratic quality in terms of the level of corruption varies widely across countries, and is in general slow to evolve relative to the speed with which many economic polices can be implemented such as the imposition of capital controls. In this paper, we study the possibility that quality of...

The 1997-99 financial crises in the emerging markets have brought to the foreground the concern about offshore investment funds and their possible role in exacerbating volatility in the markets they invest in. Offshore investment funds are alleged to engage in trading behaviors that are...

In an environment in which bureaucratic burden and delay are exogenous, an individual firm may find bribes helpful to reduce the effective red tape it faces. The efficient grease' hypothesis asserts therefore that corruption can improve economic efficiency and that fighting bribery would be...

Different categories of foreign portfolio investors in Korea have differences as well as similarities in their trading behavior before and during a currency crisis. First, non-resident institutional investors are always positive feedback traders, whereas resident investors were negative feedback...

This paper studies whether there exists private information in the foreign exchange market, and whether speculation reduces or exacerbates volatility. It makes use of a recent data set on foreign currency positions by large market participants that include positions on options and other...

Recent empirical work has made headway in exploring the non-linear dynamics of deviations from the law of one price and" purchasing power parity that are apt to arise from transaction costs. However, there are two important facets of this work that need improvement. First, the choice of...

Using a panel of 51 prices from 48 cities in the United States we provide an upper bound estimate of the rate of convergence to Purchasing Power Parity. We find convergence rates substantially higher than typically found in cross-country data. We investigate some potentially serious biases...

This paper summarizes recent research by the authors on the effects of free trade areas (FTAs). Within our model, which emphasizes inter-continental transport costs, several conclusions arise. (1) FTAs are likely to be detrimental over a moderate range of parameter values, even if drawn along...

Continental trade blocs are emerging in many parts of the world almost in tandem. If trade blocs are required to satisfy the McMillan criterion of not lowering their trade volume with outside countries, they have to engage in a dramatic reduction of trade barriers against non-member countries....