Essays on international economics and macroeconomics

This thesis investigates topics in international economics and macroeconomics.;Chapter 2 is a literature review of the benchmark international real business cycle model. This essay reviews the two main puzzles in this literature: the quantity and price puzzles. We also review the substitutability puzzle, which has to do with the discrepancy between the implications of the effect of short and long term movements in relative prices on trade flows for the elasticity of substitution of goods produced in different countries. This chapter also reviews several papers which examined the extent to which nontraded goods can help to resolve these puzzles.;Chapter 3 asks whether the distribution sector is important for understanding international business cycles? To answer this question, we introduce a distribution sector into an international business cycle model with sector specific capital and convex adjustment costs. Final goods are produced using traded intermediate goods and non-traded distribution services. We find that the distribution sector limits cross-country consumption smoothing. For reasonable parameter values, the cross country consumption and output correlations predicted by the model are similar. The relative volatility of the real exchange rate, the terms of trade and net exports are similar to those observed in the data. However, the absolute volatility of these variables is substantially less than that observed in the data.;Chapter 4 is a quantitative comparison of alternative consumer bankruptcy rules. American consumer bankruptcy provides for a Fresh Start through the discharge of a household's debt. Until recently, many European countries specified a No Fresh Start policy of life-long liability for debt. The policy trade-off is that while Fresh Start provides insurance across states, it drives up interest rates and thereby makes life-cycle smoothing more difficult. This paper quantitatively compares these bankruptcy rules using a life-cycle model with incomplete markets calibrated to the U.S. and Germany. A key innovation is that households face idiosyncratic uncertainty about their net asset holdings (expense shocks) and labor income. We find that expense uncertainty plays a key role in evaluating consumer bankruptcy laws.