@workingpaper {16269,
	title = {Efficient Expropriation: Sustainable Fiscal Policy in a Small Open Economy},
	year = {2006},
	abstract = {We study a small open economy characterized by two empirically important frictions {\textendash} incomplete financial markets and an inability of the government to commit to\&nbsp;policy. We characterize the best sustainable fiscal policy and show that it can amplify\&nbsp;and prolong shocks to output. In particular, even when the government is completely\&nbsp;benevolent, the government{\textquoteright}s credibility not to expropriate capital endogenously varies\&nbsp;with the state of the economy and may be {\textquotedblleft}scarcest{\textquotedblright} during recessions. This increased\&nbsp;threat of expropriation depresses investment, prolonging downturns. It is the incompleteness of financial markets and lack of commitment that generate investment cycles\&nbsp;even in an environment where first best capital stock is constant.},
	author = {Mark Aguiar and Manuel Amador and Gita Gopinath}
}
@article {16262,
	title = {Book Review: C. Fred Bergsten and John Williamson, eds., Dollar Adjustment: How Far? Against Whom? (2004) Peterson Institute, Washington, DC},
	journal = {Journal of Economic Literature},
	volume = {44},
	number = {1},
	year = {2006},
	pages = {155-156},
	abstract = {In today{\textquoteright}s times, the single most debated question in international policy circles is the fate of the\&nbsp;U.S. dollar and the U.S current account. This book\&nbsp;is a collection of essays on this debate. The papers\&nbsp;were presented at a conference in Washington,\&nbsp;D.C., on May 25, 2004, organized by the Institute\&nbsp;for International Economics. The main questions\&nbsp;that were asked at the time of the conference were\&nbsp;the following: (1) How much further does the dollar need to depreciate? (2) Against which currencies does it need to depreciate? The general\&nbsp;consensus among the authors is that there is a serious misalignment of key national currencies in the\&nbsp;world. The main conclusion is that the dollar\&nbsp;needs to decline by an additional 15 percent or so\&nbsp;and most of this adjustment needs to take place\&nbsp;against Asian currencies. This will require China\&nbsp;to revalue its exchange rate against the dollar by\&nbsp;around 20 percent.},
	url = {http://dx.doi.org/10.1257/002205106776162708},
	author = {Gita Gopinath}
}
@article {16258,
	title = {Defaultable Debt, Interest Rates and the Current Account},
	journal = {Journal of International Economics},
	volume = {69},
	number = {1},
	year = {2006},
	note = {Matlab code for programs attached.},
	pages = {64-83},
	abstract = {World capital markets have experienced large scale sovereign defaults on a number of occasions. In this paper we develop a quantitative model of debt and default in a small open\&nbsp;economy. We use this model to match four empirical regularities regarding emerging markets:\&nbsp;defaults occur in equilibrium, interest rates are countercyclical, net exports are countercyclical,\&nbsp;and interest rates and the current account are positively correlated. We highlight the role of the\&nbsp;stochastic trend in emerging markets, in an otherwise standard model with endogenous default,\&nbsp;to match these facts.},
	url = {http://dx.doi.org/10.1016/j.jinteco.2005.05.005},
	author = {Mark Aguiar and Gita Gopinath}
}
@conference {16257,
	title = {Emerging Market Fluctuations: The Role of Interest Rates and Productivity Shocks},
	booktitle = {Tenth Annual Conference on the Central Bank of Chile, "Current Account and External Financing"},
	year = {2006},
	note = {Bibtex},
	month = {9-10 Nov 2006},
	publisher = {Central Bank of Chile},
	organization = {Central Bank of Chile},
	address = {Santiago, Chile},
	abstract = {In this paper we use a quantitative model to explore the potential frictions that\&nbsp;distinguish emerging market business cycles from developed small open economies. Following Aguiar and Gopinath (2007) we allow total factor productivity (TFP) to have a\&nbsp;stationary and an integrated component. We also allow for shocks to the consumption\&nbsp;and investment Euler Equations that operate through the interest rate. These {\textquotedblleft}wedges{\textquotedblright}\&nbsp;represent changes in the intertemporal marginal rate of transformation, which may be\&nbsp;due to changes in observed interest rates, unobserved borrowing constraints, or other\&nbsp;financial frictions. We estimate the model using data from Mexico and Canada. We\&nbsp;show that interest rate shocks orthogonal to domestic TFP fail to explain the behavior of emerging markets. We then allow for interest rates to respond to/co-vary with\&nbsp;productivity shocks. We find that emerging market business cycles appear to be driven\&nbsp;by large shocks to trend income combined with relatively small transitory shocks that\&nbsp;co-vary with the interest rate.},
	author = {Mark Aguiar and Gita Gopinath}
}
