The Six Major Puzzles in International Macroeconomics: Is there a Common Cause?

Maurice Obstfeld, Kenneth Rogoff, Ben Bernanke and Kenneth Rogoff
Authors registered in the RePEc Author Service: Kenneth S Rogoff

Working Paper from Harvard University OpenScholar

Abstract: The central claim in this paper is that by explicitly introducing costs of international trade (narrowly, transport costs but more broadly, tariffs, nontariff barriers and other trade costs), one can go far toward explaining a great number of the main empirical puzzles that international macroeconomists have struggled with over twenty-five years. Our approach elucidates J. McCallum's home bias in trade puzzle, the Feldstein-Horioka saving-investment puzzle, the French-Poterba equity home bias puzzle, and the Backus-Kehoe- Kydland consumption correlations puzzle. That one simple alteration to an otherwise canonical international macroeconomic model can help substantially to explain such a broad arrange of empirical puzzles, including some that previously seemed intractable, suggests a rich area for future research. We also address a variety of international pricing puzzles, including the purchasing power parity puzzle emphasized by Rogoff, and what we term the exchange-rate disconnect puzzle.' The latter category of riddles includes both the Meese-Rogoff exchange rate forecasting puzzle and the Baxter-Stockman neutrality of exchange rate regime puzzle. Here although many elements need to be added to our extremely simple model, we can still show that trade costs play an essential role.

New Economics Papers: this item is included in nep-int, nep-mac, nep-mon, nep-opm and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1636)

Downloads: (external link)
http://scholar.harvard.edu/rogoff/node/32326
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://scholar.harvard.edu/rogoff/node/32326 [301 Moved Permanently]--> https://rogoff.scholars.harvard.edu//node/32326)

Related works:
Chapter: The Six Major Puzzles in International Macroeconomics: Is There a Common Cause? (2001)
Working Paper: The Six Major Puzzles in International Macroeconomics: Is There a Common Cause? (2001)
Working Paper: The Six Major Puzzles in International Macroeconomics: Is There a Common Cause? (2000)
Working Paper: The Six Major Puzzles in International Macroeconomics: Is There a Common Cause? (2000)
Working Paper: The Six Major Puzzles in International Macroeconomics: Is There a Common Cause? (2000)
Working Paper: The Six Major Puzzles in International Macroeconomics: Is There a Common Cause? (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:qsh:wpaper:32326

Access Statistics for this paper

More papers in Working Paper from Harvard University OpenScholar Contact information at EDIRC.
Bibliographic data for series maintained by Richard Brandon (rbrandon@iq.harvard.edu this e-mail address is bad, please contact repec@repec.org).