Obstfeld and Rogoff (2001) propose that trade frictions lie behind key puzzles in international macroeconomics. We take a dynamic multicountry model of international trade, production, and investment to data from 19 countries to assess this proposition quantitatively. Using the framework developed in Eaton, Kortum, Neiman, and Romalis (2016), we revisit the puzzles in a counterfactual world wit...

This paper analyzes the relationship between capital ‡ows and returns during the “golden era”of international ‡ows from 1880 –1913 and the interwar period from 1918 –1938. We construct two measures of returns in a country based on, alternatively, the marginal product of capital, and on consumption growth. Our main …nding is that ‡ows during the golden era are indeed consistent with standard the...