Three essays in international macroeconomics

International macroeconomists have been facing some challenging new issues posed by the increasing integration of the world economy. This dissertation studies three of them: the impact of valuation effects on the sustainability of foreign debt, the behavior of international portfolio decisions and valuation effects in general equilibrium, and the impact of globalization on the relation between foreign output gap and domestic inflation.;In the first chapter, I claim that the valuation channel, emphasized by Gourinchas and Rey (07), can be important for the stabilization of the foreign debt position of a country, but it is unimportant for its sustainability. First, I show that the theoretical predictability of the excess returns on the net international portfolio is justified only in a linearized model; when risk is fully embedded in the model, the intertemporal budget constraint implies that only the traditional trade channel matters for sustainability. Then, I use the data set provided by Gourinchas and Rey to empirically assess the sustainability of the US net foreign debt position and to check the different theoretical predictions of the model in levels versus the linearized one. I reach three main conclusions: First, The US debt was not following a sustainable path over the period 1989--2004. Second, the impulse response functions of the excess returns to the debt shocks in a Bayesian VAR are significant only when the data are de-trended, but not when the variables are kept in levels. Third, I exclude non-Ricardian regimes for the real exchange rate. My results downplay the importance of the valuation channel for the sustainability of the foreign debt and restore the traditional primary role of the trade channel.;The second chapter presents an international real business cycle model in the spirit of Backus, Kehoe, and Kydland (92) with endogenously determined portfolio allocations under incomplete markets. It jointly studies the properties of the portfolio side of the economy, which includes the valuation effects, asset returns and portfolio allocations, along with the more typical international macro variables. The model generates a substantial portfolio home bias, which is dependent on the combination of the consumption home bias parameter and the elasticity of substitution between domestic and foreign traded goods. A higher level of consumption bias determines a higher level of portfolio bias, but the elasticity of substitution must be small in order for the result to hold. The home asset is a good hedge against movements of international prices, which make home physical capital lose value in response to productivity shocks. Using productivity and demand shocks, the model generates also an adequate amount of assets' valuations, which drives the distinction between accounting current account and changes in the net foreign asset position of a country, but does not resolve the Backus-Smith puzzle for standard parameterizations.;Finally, the third chapter, which is a coauthored work with Francesco Bianchi, studies the relation between globalization and national inflation rates, contributing to the recent debate about the effects of the increasing integration of the world economy on national inflation processes which sees the thesis of Borio and Filardo (07) opposed to that of Ihrig et al. (07). We construct a new dataset, comparable to the one used in Ihrig et al., for a large sample of eighteen countries and we estimate a time varying coefficients VAR for each of them. From the reduced form estimates of the VAR, we find evidence supporting the view against the Globalization Hypothesis. However, the results from the structural version of the VAR depict a more interesting and elaborate picture. Globalization has had a significant role in determining the dynamics of inflation for many countries since the 70's. These deeper relations could not emerge from the simple univariate Phillips Curve regressions. Nevertheless, the actual modest increase in openness of the last three decades did not determine any particular time evolution of the structural relations. Finally, a comparison across countries relates the importance of the role of globalization positively to the degree of openness of a country and to the degree of idiosyncrasy of its business cycle.