International finance and macroeconomics.

• Position: Bureau News - National Bureau of Economic Research's Program on International Finance and Macroeconomics meeting - Brief Article

Members and guests of the NBER's Program on International Finance and Macroeconomics met in Cambridge on October 26 Charles M. Engel, NBER and University of Wisconsin, and Linda Tesar, NBER and University of Michigan, organized this program:

Daron Acemoglu and Jaume Ventura, NBER and MIT, "The World Income Distribution" (NBER Working Paper No. 8083)

Discussants: Pierre-Oliver Gourinchas, NBER and Princeton University, and Ricardo Hausmann, Harvard University

Sergio Rebelo, NBER and Northwestern University, and Carlos, A. Vegh, NBER and University of California, Los Angeles, "When is it Optimal to Abandon a Fixed Exchange Rate?"

Discussant: Robert Flood, International Monetary Fund, and Michael W. Klein, NBER and Tufts University

Torben G. Andersen, NBER and Northwestern University; Tim Bollerslev, NBER and Duke University of Pennsylvania; and Clara Vega, University of Pennsylvania, "Micro Effects of Macro Announcements: Real Time Price Discovery in Foreign Exchange"

Discussants: Kathryn M. Dominguez, NBER and University of Michigan, and Nelson Mark, NBER and Ohion State University

Michael W. Brandt, NBER and University of Pennsylvania; John H. Cochrane, NBER and University of Chicago; and Pedro Santa-Clara, University of California, Los Angeles, "International Risk Sharing is Better Than You Think (or Exchange Rates are Much Too Smooth)" (NBER Working paper No. 8480)

Discussants: Helene Rey, NBER and Princeton University, and Roberto Rigobon, NBER and MIT

Rui Albuquerque, University of Rochester, "The Composition of International Capital Flows: Risk Sharing through FDI"

Discussant: Robert E. Lipsey, NBER and City University of New York, and Jonathan Eaton, NBER and Boston University

Acemoglu and Ventura show that, even in the absence of diminishing returns in production and technological spillovers, international trade leads to a stable world income distribution. This is because specialization and trade introduce de facto diminishing returns: countries that accumulate capital faster than average experience declining export prices, depressing the rate of return to capital and discouraging further accumulation. The dispersion of the world income distribution is determined by the forces that shape the strength of the terms-of-trade effects: the degree of openness to international trade and the extent of specialization. Finally, the authors show that countries accumulating capital faster experience a worsening in their terms of trade. The...