International Macroeconomic Interdependence

The following sections are included:

• About the Author
• Contents

The following sections are included:

• Introduction
• Empirical Motivation
• A Framework to Organize Concepts
• Simulation Results
• Contributions of Chapters in This Volume
• References

This chapter addresses the question of what promotes international macroeconomic spillovers by studying the particular case of Mexico, where recessions arising in the US seem to be transmitted with amplification. This particularly strong positive comovement is associated with the rise of offshoring production, the arrangement whereby firms carry out particular stages of production abroad. Comparing employment in the offshoring sectors across countries, shocks arising in the US generate fluctuations in Mexico twice as large as in the US.

The following sections are included:

• Introduction
• Theoretical Model
• Analytical Results
• Numerical Experiment
• Empirical Evidence Regarding the Offshoring Margin
• Conclusions
• Appendix
• Acknowledgment
• References

The following sections are included:

• Introduction
• The Model
• Empirical Methods
• Results
• Conclusion
• Appendix
• Acknowledgment
• References

The following sections are included:

• Introduction
• The Model
• Empirical Methods
• Results
• Conclusions
• Appendices
• References

The following sections are included:

• Introduction
• The Model
• Analytical Results
• Model Simulations
• Conclusion
• Appendix
• Acknowledgment
• References

The following sections are included:

• Introduction
• Empirical Motivation
• Model and Analytical Results
• Calibration Exercise
• Conclusions
• Appendix
• References

The following sections are included:

• Introduction and Conventional Wisdom
• Stylized “Facts” and a Simple Model
• A Puzzle
• A More General Model
• Numerical Simulations
• Conclusion
• Appendix
• Acknowledgment
• References

The following sections are included:

• Introduction
• Model Specification
• Analytical Results and Discussion
• Numerical Results
• Empirical Implications
• Conclusion
• Appendix
• References

The relaxation of restrictions on international capital flows over the last several decades has greatly increased international integration in asset markets. One indication of this integration is the rise in capital flows used to finance current account deficits, and the resulting accumulation of substantial financial imbalances. Whether such imbalances are a matter of concern depends on the theoretical framework one uses to explain and interpret them. The intertemporal approach to the current account, in its simplest form, focuses on the optimal saving decision of a representative household as it smooths consumption. For example, considering a small open economy experiencing a temporary fall in output, the country would be expected to smooth consumption by borrowing in world capital markets and thereby run a current account deficit. This basic intertemporal model has been extended in many directions in the theoretical literature, to include investment, variable interest rates, nontraded goods, and even monetary policy.

The following sections are included:

• Introduction
• What Recent Data Have to Say
• A Simple Fixed Cost Portfolio Allocation Model
• Deriving Benchmark Results
• Alternative Parameters and Cost Specifications
• Conclusion
• Data Appendix
• Acknowledgments
• References

The following sections are included:

• Introduction
• The Model
• Fiscal Solvency and Household Transversality
• Some Examples
• Conclusion
• Appendix
• Acknowledgment
• References

The following sections are included:

• Introduction
• The Model
• Results
• Conclusions
• Acknowledgment
• References

The following sections are included:

• Introduction
• Pitfalls of Interest-Rate Dynamic Correlations
• A Novel Data Set on Policy Rate Targets
• Measuring Monetary Policy Interdependence
• Results
• Implications
• Acknowledgments
• References

The following section is included:

• Index