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Journal Article
Eclipse of visual education
Journal Article
The changing nature of the U.S. balance of payments
Earnings on cross-border investments figure only marginally in net estimates of the U.S. current account, but they represent an increasingly large share of gross flows between the United States and other nations. Because these earnings fluctuate much more sharply than trade flows, they can be expected to create permanently higher current account volatility. Such increased volatility is not necessarily grounds for concern, however; it reflects an international sharing of risk that provides a buffer against domestic economic uncertainty.
Report
The determinants of international flows of U.S. currency
This paper examines the determinants of cross-border flows of U.S. dollar banknotes, using a new panel data set of bilateral flows between the United States and 103 countries from 1990 to 2007. We show that a gravity model explains international flows of currency as well as it explains international flows of goods and financial assets. We find important roles for market size and transaction costs, consistent with the traditional gravity framework, as well as roles for financial depth, the behavior of the nominal exchange rate, the size of the informal sector, the amount of remittance credits, ...
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Global bond risk premiums
This paper examines time-varying measures of term premiums across ten developed economies. It shows that a single factor accounts for most of the variation in expected excess returns over time, across the maturity spectrum, and across countries. I construct a global return forecasting factor that is a GDP-weighted average of each country?s local return forecasting factor and show that it has information not spanned by the traditional level, slope, curvature factors of the term structure, or by the local return forecasting factors. Including the global forecasting factor in the model produces ...
Journal Article
Are we investing too little?
One of the most disappointing features of U.S. economic performance over the past 20 years has been the slowing of growth in productivity and, as a result, in real incomes. For many, the explanation can be found in the low U.S. saving rate. Since the mid 1980s, national saving has averaged just over 15 percent of GDP, compared to more than 20 percent during the 1970s. Thus, one plausible explanation for slow productivity growth, at least in recent years, could be that our low saving rate is constraining investment and thereby depriving the nation of both the tools and the technologies that ...
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What do drug monopolies cost consumers in developing countries?
This paper quantifies the effects of drug monopolies and low per-capita income on pharmaceutical prices in developing economies using the example of the antiretroviral drugs (ARVs) used to treat HIV.
Journal Article
Have U.S. import prices become less responsive to changes in the dollar?
The failure of the dollar's depreciation to narrow the U.S. trade deficit has driven recent research showing that the transmission of exchange rate changes to import prices has declined sharply in industrial countries. Estimates presented in this study, however, suggest that "pass-through" to U.S. import prices has fallen only modestly, if at all, in the last decade. The authors argue that methodological changes in the collection of import data and the inclusion of commodity prices in pass-through models may have contributed to earlier findings of low pass-through rates.
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A framework for identifying the sources of local currency price stability with an empirical application
The inertia of traded goods' local currency prices in the face of exchange rate changes is a well-documented phenomenon in the field of international economics. This paper develops a framework for identifying the sources of local currency price stability. The empirical approach exploits manufacturers' and retailers' first-order conditions, in conjunction with detailed information on the frequency of price adjustments in response to exchange rate changes, to quantify the relative importance of fixed costs of repricing, local-cost nontraded components, and markup adjustment by manufacturers and ...
Report
Arm's-length transactions as a source of incomplete cross-border transmission: the case of autos
A growing share of international trade occurs through intra-firm transactions-those between domestic and foreign subsidiaries of a multinational firm. The difficulties associated with writing and enforcing a vertical contract compound when a product must cross a national border, and may explain the high rate of multinational trade across such borders. We show that this common cross-border organization of the firm may have implications for the well-documented incomplete transmission of shocks across borders. We present new evidence of a positive relationship between an industry's share of ...
Report
How rigid are producer prices?
Conventional wisdom suggests that producer prices are more rigid than consumer prices and therefore play less of a role in the allocation of goods and services. Analyzing 1987-2008 microdata collected by the U.S. Bureau of Labor Statistics for the producer price index, we find that producer prices for finished goods and services in fact exhibit roughly the same rigidity as consumer prices that include sales and substantially less rigidity than consumer prices that exclude them. Moreover, large firms change prices two to three times more frequently than small firms do, and by smaller amounts, ...