This dissertation is a collection of essays on challenges in international trade and international finance, which apply econometric methods to diverse data sets and relate them to economic policy questions. In times of crises, the question, whether individual countries have the ability to pursue idiosyncratic monetary policy, is important. The degree of integration and comovement between financial markets, for instance, is critical to better assess the real threat facing a country in a crisis. Also, from a macroeconomic modeling perspective, there has recently been a renewed interest in the cyclical and long-run comovement of interest rates. Hence, in a first essay, we reinvestigate the long- and short-run comovements in the G7-countries by conducting tests for cointegration, common serial correlation and codependence with nominal and real interest rates. Overall, we only find little evidence of comovements: common trends are occasionally observed, but the majority of interest rates are not cointegrated. Although some evidence for codependence of higher order can be found in the pre-Euro area sample, common cycles appear to exist only in rare cases. We argue that some earlier, more positive findings in the literature are difficult to reconcile due to differing assumptions about the underlying stochastic properties of interest rates. Hence, we conclude that they cannot be generalized for all interest rates, time periods, and reasonable alternative estimation procedures. This finding indicates that scope for individual countries to pursue stabilization policy does still exist in a globalized world. Emerging economies, in general, are much more exposed and vulnerable to crises than industrialized countries. Accordingly, stabilization policy is especially important in these countries and the selection of the best monetary regime is essential. This is why, in a second essay, we contrast two different views in the debate on official dollarization: the Mundell (1961) framework of optimum currency areas and a model on boom-bust cycles by Schneider and Tornell (2004), who take account of credit market imperfections prevalent in middle income countries. We highlight the strikingly different role of the exchange rate in the two models. While in the Mundell framework the exchange rate is expected to smooth the business cycle, the second model predicts the exchange rate to play an amplifying role. We empirically evaluate both models for eight highly dollarized Central American economies. We document the existence of credit market imperfections and find that shocks from the exchange rate indeed amplify business cycles in these countries. Using a new method proposed by Cubadda (1999 and 2007), we furthermore test for cyclical comovement and reject the hypothesis that the selected countries form an optimum currency area with the United States according to the Mundell definition. In the context of the recent global crisis, globalization and vertical integration in particular were often blamed for being the cause for the severe trade crisis. For that reason, in the essay that contributes to the trade literature, we analyze the role of international supply chains in explaining the long-run trade elasticity and its short-term volatility in the context of the recent trade collapse. We adopt an empirical strategy based on two steps: first, stylized facts on long- and short-term trade elasticity are derived from exploratory analysis and formal modeling on a large and diversified sample of countries. Then, we derive observations of interrelated input-output matrices for a demonstrative sub-set of countries. We find evidence for two supply chain related factors to explain the overshooting of trade elasticity during the 2008-2009 trade collapse: the composition and the bullwhip effect. However, evidence for a magnification effect could not be found. Overall, we do not accept the hypothesis that international supply chains explain all by themselves the changes in trade-income elasticity.

Questa tesi esamina l’interazione tra aspettative eterogenee e il rapporto creditore-debitore. In letteratura, non è ancora chiara la natura dell’interazione tra cicli del credito e aspettative individuali. Per questo motivo ho capito che sarebbe stato importante iniziare dai lavori seminali in entrambi i campi, ovvero Kiyotaki & Moore (1997) e Brock & Hommes (1997). Il mio principale obbiettivo è stato quello di studiare più nel dettaglio il funzionamento del vincolo di garanzia. Il fil rouge dell’intera tesi, infatti, è l’analisi del ruolo delle frizioni finanziarie nell’andamento del prezzo di un asset collateralizzato. In particolare, presento un modello dove l’ipotesi di aspettative razionali viene abbandonata. I risultati del primo capitolo rivelano che le aspettative individuali sono una fonte importante di instabilità, anche se la configurazione iniziale risulta stabile. L’elemento che provoca questa instabilità è la bancarotta causata dalla divergenza tra le aspettative di creditori e debitori sul prezzo dell’asset collateralizzato. Poi, nel secondo capitolo, effettuo un esperimento di learning-to-forecast. Fondato sul modello del primo capitolo, ha come obbiettivo quello di testare se e come la volatilità è legata alle percezioni di rischio dei creditori. Ciò che emerge è che ridurre il credito in risposta ad un aumento delle insolvenze in realtà conduce a scenari addirittura peggiori dove il benessere totale si deteriora e il numero delle bancarotte aumenta. / This thesis examines the interaction between heterogeneous expectations and the borrower-lender relationship. In the literature, the nature of the interaction between credit cycle and individual expectations is still unclear. Therefore I realized it was important to start from the seminal works in both fields, that is Kiyotaki & Moore (1997) and Brock & Hommes (1997). My main concern has been to gain insights into the collateral constraint. The common thread of the whole thesis, indeed, is to analyse the role of financial frictions in the price development of a collateralized asset. In particular, I introduce a model where rational expectations are dropped. The results of the first chapter reveal that even in a simple and stable setting, individual beliefs are an important source of instability. The driver of this instability is the bankruptcy caused by the divergence between borrowers' and lenders' price expectations on a collateralized asset. Then, I conduct an online learning-to-forecast experiment. Founded on the model of the first chapter, it tests whether and how volatility is related to lender-level risk perceptions. What emerges is that to shrink credit in response to an increase in defaults actually leads to worse scenarios where total welfare deteriorates and the number of bankruptcies increases.