This essay is to appear as a chapter in the Handbook of International Economics, vol. 4 (Elsevier), edited by Gita Gopinath, Elhanan Helpman, and Kenneth Rogoff. I thank Philippe Bacchetta and Fabio Ghironi, as well as Gita Gopinath and Ken Rogoff for helpful comments. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.