TEXTBOOK:
Maurice Obstfeld and Kenneth Rogoff "Foundations of International Macroeconomics", MIT Press, 1996.
REFERENCE BOOKS:
Graduate Level Books:
(JK) Jones, R. and P. Kenen (eds.), Handbook of International Economics, Vol.II, Amsterdam: North Holland, 1985.
(GR) Grossman, G. and K. Rogoff (eds.), Handbook of International Economics, Vol.III, Amsterdam: North Holland, 1996.
(VP) Van Der Ploeg, F. (ed.) The Handbook of International Macroeconomics, Cambridge Ma: Basil Blackwell, 1994.
(FR) Frenkel, J. and A. Razin, Fiscal Policies in the World Economy: An Intertemporal Approach, Boston: MIT Press, third edition, 1996.
(KO) Krueger, T. and J. Ostry, Exercises in Intertemporal Open Economy Macroeconomics, Boston: MIT Press, 1996.
(D) Dornbusch, R., Open Economy Macroeconomics, New York, Basic Books, 1980.
(BF) Blanchard, O. and S. Fischer, Lectures on Macroeconomics, MIT Press, 1989.
(RO) Romer, D. Advanced Macroeconomics, McGraw Hill, 1996.
Intermediate Level Books:
Krugman, P. and M. Obstfeld, International Economics: Theory and Policy, Boston, Little Brown and Co., 1997, 4th edition.
Sachs, J. and F. Larrain, Macroeconomics in the Global Economy,
Prentice Hall, 1992.
WEB LINKS:
My MBA level (intermediate) course in Open Economy Macroeconomics (with lecture notes and materials)
Homepage on the Asian Economic and Currency Crisis
Links to Research
papers on Currency Crises
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1. PRELIMINARIES: BALANCE OF PAYMENTS ACCOUNTS AND HISTORICAL ISSUES
Krugman-Obstfeld, Chapters 12-13.
Dornbusch, (D), Chapter 2.
Sachs-Larrain, Chapter 6.
Eichengreen, B. (1994) "History of the International Monetary System: Implications for Research in International Macroeconomics and Finance", Chapter 6 of (VP) volume.
2. INTERNATIONAL TRADE OVER TIME: INTERTEMPORAL MODELS OF THE CURRENT ACCOUNT
A. One good infinite horizon models. The role of output and government spending shocks
* Obstfeld and Rogoff (OR) Chapters 1-2.
Frenkel and Razin (FR) Chapter 4.
Sachs, J. (1982) "The Current Account in the Macroeconomic Adjustment Process", Scandinavian Journal of Economics.
Sachs and Larrain, Chapter 6.
* Barro, R. and X. Sala-i-Martin, Appendix on Mathematical Methods Section 1.3, Economic Growth, McGraw Hill, 1995.
B. Capital accumulation, investment and the current account
* Obstfeld and Rogoff (OR) Chapters 1-2.
Sheffrin, S., Chapter 3: Further Topics in Macroeconomics, Rational Expectations, Cambridge University Press, 1996 (reading on saddle-path stability).
* Barro, R. and X. Sala-i-Martin, Appendix on Mathematical Methods Section 1.1, 1.4, Economic Growth, McGraw Hill, 1995.
Begg, D., Chapter 3: The Rational Expectation Hypothesis, The Rational Expectation Revolution in Macroeconomics, Johns Hopkins University Press, 1982 (reading on saddle path stability).
Blanchard and Fischer (BF) Chapter 2.
Romer (RO) Chapter 8: Investment.
Frenkel and Razin (FR) Chapter 4.
Sachs, J. (1981) "The Current Account and Macroeconomic Adjustment in the 1970s", Brookings Papers on Economic Activity, Vol.12, 201-268.
Drazen, A. and G. Calvo (1993) "Uncertain Duration of Reform: Dynamic Implications", mimeo, University of Maryland, May.
Tornell. A. and P. Lane (1994) "A Windfalls a Curse ? A Non-Representative Agent Model of the Current Account and Fiscal Policy", NBER W.P. No.4839, August.
C. OLG and finite lifetime models
* Obstfeld and Rogoff (OR) Chapter 3.
Buiter, W. (1981), "Time Preference, and Intergenerational Lending
and Borrowing in an Overlapping Generations Model", Journal of Political
Economy, 89, 4, 768-797.
3. REAL EXCHANGE RATES, TERMS OF TRADE, TAXATION AND THE CURRENT ACCOUNT
A. Real exchange rates and terms of trade
* Obstfeld and Rogoff (OR) Chapter 4.
* Frenkel, J. and A. Razin (FR) Chapter 6.
* Stockman, A. (1987) "The Equilibrium Approach to Exchange Rates", Richmond Federal Reserve Bank Economic Review.
* Backus, D. P. Kehoe and F. Kydland (1992) "Relative Price Movements in Dynamic General Equilibrium Models of International Trade", Chapter 3 of (VP) volume.
Sen, P. "Savings, Investment, and the Current Account", Chapter 15 of (VP) volume.
Backus, D. P. Kehoe and F. Kydland (1994) "Dynamics of the Trade Balance and the Terms of Trade: The S-Curve", American Economic Review.
B. Taxation issues in open economies
Razin, A. and E. Sadka (1994) "International Fiscal Policy Coordination and Competition", Chapter 4 of (VP) volume.
Bovenberg, A.L. (1994) "Capital Taxation in the World Economy", Chapter 5 of (VP) volume.
Frenkel, J., A. Razin and E. Sadka (1991) International Taxation in An Integrated World, Cambridge MA: MIT Press.
Slemrod, L. (1988) "Effects of Taxation with International Capital Mobility", in H. Aaron, H. Galper and J. Pechman (eds.) Uneasy Compromise: Problems of a Hybrid Income-Consumption Tax, Washington: Brookings Institution.
4. EMPIRICAL EVIDENCE ON INTERTEMPORAL CURRENT ACCOUNT MODELS
A. Empirical approaches to tests of intertemporal models
* Obstfeld and Rogoff (OR) Chapters 1-3.
Obstfeld, M. and K. Rogoff (1994) "The Intertemporal Approach to the Current Account" NBER W.P. No. 4893, October.
* Glick, R. and K. Rogoff (1995) "Global versus Country-Specific Productivity Shocks and the Current Account", Journal of Monetary Economics.
Taylor, A. (1996) "International Capital in History: The Savings-Investment Relationship", NBER W.P. No.5743, September.
Sachs, J. (1983) "Aspects of the Current Account Behavior of OECD Economies", in E. Classen and P. Salin, eds., Recent Issues in the Theory of Flexible Exchange Rates, Amsterdam, North Holland.
Ahmed, S. (1986), "Temporary and Permanent Government Spending in an Open Economy", Journal of Monetary Economics, 17, 197-224.
__________ (1987) "Government Spending, The Trade Balance and the Terms of Trade in British History", Journal of Monetary Economics, 20, 195-220.
Barro, R. and X. Sala-i-Martin (1990) "World Real Interest Rates", NBER WP No.3317; also in NBER Macroeconomics Annual, 1990.
B. The Feldstein-Horioka puzzle: Why are savings and investment highly correlated in open economies?
* Obstfeld, M. (1994) "International Capital Mobility in the 1990s", CEPR Discussion Paper No. 902, February; also in P. Kenen (ed.) Understanding Interdependence: The Macroeconomics of the Open Economy, Princeton University Press, 1995.
Frankel, J. (1992) "Measuring International Capital Mobility: A Review", American Economic Review, Papers and Proceedings, May.
Feldstein, M. and C. Horioka (1980), "Domestic Saving and International Capital Flows", Economic Journal.
Roubini, N. (1989) "Current Account and Budget Deficits in an Intertemporal Model of Consumption and Taxation Smoothing: A Solution to the Feldstein-Horioka Puzzle ?", mimeo, Yale University.
C. Recent empirical approaches
* Backus, D.K., P. Kehoe and F. Kydland (1993) "International Business Cycles: Theory and Evidence", NBER W.P. 4493, October.
Backus, D.K., P. Kehoe and F. Kydland (1992) "International Real Business Cycles", Journal of Political Economy, August.
Finn, M. (1989) "An Econometric Analysis of the Intertemporal General Equilibrium Approach to Exchange Rate and Current Account Determination", Journal of International Money and Finance, No.8, 1989.
Baxter, M. and M. Crucini (1991) "Explaining Saving-Investment Correlations", December, American Economic Review.
Mendoza, E. (1991) "Real Business Cycles in a Small Open Economy", American Economic Review, September.
Cardia, E. (1991) "The Dynamics of a Small Open Economy in Response to Monetary, Fiscal, and Productivity Shocks", Journal of Monetary Economics, December 1991.
5. FLEXIBLE EXCHANGE RATES AND EXCHANGE RATE DYNAMICS
A. Flexible prices. The equilibrium approach or monetary model
* Obstfeld and Rogoff (OR) Chapter 8 (sections 2.7, 3, 4 and Appendix 8A).
* Stockman, A. (1987) "The Equilibrium Approach to Exchange Rates", Richmond Federal Reserve Bank Economic Review.
* Stockman, A. and M. Obstfeld (1985) "Exchange Rate Dynamics", Chapter 18 of (JK) volume.
* Taylor, M. (1995) "Exchange Rate Behavior", Journal of Economic Literature, March.
Lucas, R.E. (1982) "Interest Rates and Currency Prices in a Two-Country World", Journal of Monetary Economics, 10, November.
Stockman, A. (1980) "A Theory of Exchange Rate Determination", Journal of Political Economy, Vol.88, No.41.
Stockman, A. and L. Svensson (1987) "Capital Flows, Investment and Exchange Rates", Journal of Monetary Economics, vol.19, no.2, 171-201.
Svensson, L. (1985) "Currency Prices, Terms of Trade and Interest Rates", Journal of International Economics, No.18.
B. Sticky prices. The Mundell-Flemming model or asset approach
* Obstfeld and Rogoff (OR) Chapter 9 (sections 1-4).
* Stockman, A. and M. Obstfeld (1985) "Exchange Rate Dynamics", Chapter 18 of (JK) volume.
* Marston, R. "Stabilization Policies in Open Economies", Chapter 17 of (JK) volume.
Dornbusch (D) Chapters 11-12.
Dornbusch, R. (1976) "Expectations and Exchange Rate Dynamics", Journal of Political Economy.
Bryant, R.C., D.W. Henderson, G. Holtham, P. Hooper and S.A. Symansky (1990) Empirical Macroeconomics for Interdependent Economies, The Brookings Institution, Chapters 2,3.
C. Sticky prices models with microfoundations
Obstfeld and Rogoff (OR) Chapter 10.
Corsetti, G. and P. Pesenti "Welfare and Macroeconomic Interdependence", NBER Working Paper No. 6307, December.
Chari V.V., P. Kehoe and E. McGrattan (1997) "Monetary Shocks and Real Exchange Rates in Sticky Price Models of International Business Cycles", NBER Working Paper No. 5876, Janaury.
Chari V.V., P. Kehoe and E. McGrattan (1996) "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?", NBER Working Paper No. 5809, October.
C. Betts and M. Devereux, M. (1997) "The International Transmission of Monetary Policy: A Model of Real Exchange Rate Adjustment under Pricing-To-Market", unpublished, March.
D. The portfolio balance approach
Branson, W. and D. Henderson (1985) "The Specification and Influence of Asset Markets", Chapter 15 of (JK) volume.
E. The liquidity approach
* Grilli and Roubini (1995) "Liquidity and Exchange Rates: Theory and Empirical Evidence", NBER W.P. No.5313, October.
Grilli, V. and N. Roubini (1992) "Liquidity and Exchange Rates", Journal of International Economics, No.32 .
Grilli, V. and N. Roubini (1993) "Financial Integration, Capital Controls and Exchange Rates", Journal of International Money and Finance, 1993.
Christiano, L. and M. Eichenbaum (1995) "Liquidity Effects, Monetary Policy and the Business Cycle", Journal of Money, Credit and Banking.
6. INTERNATIONAL TRADE ACROSS STATES OF NATURE:
TRADE IN RISKY ASSETS AND PORTFOLIO CHOICE IN OPEN ECONOMIES
* Branson, W. and D. Henderson (1985) "The Specification and Influence of Asset Markets", Chapter 15 of (JK) volume.
* Obstfeld and Rogoff (OR) Chapter 8 (section 7 and Appendix 8A); Chapter 5 (sections 3-4).
* Dumas, B. "Partial versus General Equilibrium Models of the International Capital Market", NBER W.P. No.4446, September; also Chapter 10 of (VP) volume.
* Lucas, R.E. (1982) "Interest Rates and Currency Prices in a Two-Country World", Journal of Monetary Economics, 10, November.
Adler, M. and B. Dumas (1983) "International Portfolio Choice and Corporation Finance: A Survey", Journal of Finance, June.
Sibert, A. (1989) "The Risk Premium in the Foreign Exchange Market" Journal of Money Credit and Banking, No.21.
Svensson, L.E.O. (1988) "Trade in Risky Assets", American Economic Review, June.
Svensson, L.E.O. (1989) "Trade in Nominal Assets", Journal of International Economics, January/February.
Neumeyer, P.A. (1998) "Currencies and the Allocation of Risk: The
Welfare Effects of a Monetary Union" forthcoming, American Economic
Review.
7. EVIDENCE ON INTERNATIONAL PORTFOLIO DIVERSIFICATION AND INTERNATIONAL CORRELATION OF MACROECONOMIC VARIABLES
The international portfolio diversification puzzle
Obstfeld and Rogoff (OR) Chapter 5.
* Cole, H. and M. Obstfeld (1991) "Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter ?", Journal of Monetary Economics, August. *
Stockman, A. and L. Tesar (1995) "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements", American Economic Review, March.
* Lewis, K. (1994), Section 2 of "Puzzles in International Financial Markets" NBER W.P. No. 4951, December; also Chapter in (GR) volume, 1996.
Lewis, K. (1995) "What Can Explain the Apparent Lack of International Consumption Risk Sharing?", NBER W.P. No, 5203, August.
Obstfeld, M. (1994) "International Capital Mobility in the 1990s", CEPR Discussion Paper No. 902, February; also in P. Kenen (ed.) Understanding Interdependence: The Macroeconomics of the Open Economy, Princeton University Press, 1995.
Tesar, L. and I. Werner (1992) "Home Bias and the Globalization of Securities Markets", NBER W.P. No.4218, November.
Obstfeld, M. (1993) "Are Industrial Country Consumption Risks Globally Diversified ?", NBER W. P. No. 4308, March; also in L. Leiderman and A. Razin (eds.) Capital Mobility, Cambridge University Press, 1994.
R. Shiller and S. Athanasoulis "World Income Components: Measuring and Exploiting International Risk Sharing Opportunities", NBER W.P. No. 5095, April.
Stockman, A. (1988) "Sectoral and National Aggregate Disturbances to Industrial Output in Seven European Countries", Journal of Monetary Economics, March/May.
Grilli, V. and N. Roubini (1993) "Capital Mobility, Vehicle Currencies and Exchange Rate Asymmetries in the EMS", in V. Conti and R. Hamaui (eds.) Financial Markets' Liberalization and the Role of Banks, Cambridge University Press.
B. International business cycles
* Stockman, A. and L. Tesar (1995) "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements", American Economic Review March.
* Baxter, M. (1995) "International Trade and Business Cycles", NBER W.P. No. 5025, February; also Chapter in (GR) volume, 1996.
Baxter, M. and M. Crucini (1994) "Business Cycles and the Asset Structure of Foreign Trade", NBER W.P. No. 4975, December.
Backus, D. and P. Kehoe (1992) "International Evidence on the Historical Properties of Business Cycles" American Economic Review, September.
Backus, D., P. Kehoe and F. Kydland (1993) "International Business Cycles: Theory and Evidence", NBER W.P. No.4493, October.
Backus, D.K., P. Kehoe and F. Kydland (1992) "International Real Business Cycles", Journal of Political Economy, August.
Backus, D. P. Kehoe and F. Kydland (1992) "Relative Price Movements in Dynamic General Equilibrium Models of International Trade", NBER W.P. No. 4243, December; also Chapter 3 of (VP) volume.
Mendoza, E. and L. Tesar (1995) "Supply Side Economics in a Global Economy" NBER W.P. No. 5086, April.
8. EMPIRICAL EVIDENCE ON THE DETERMINANTS OF EXCHANGE RATES AND TESTS OF EXCHANGE RATE MARKET EFFICIENCY
A. Basic surveys
* Frankel, J. and A. Rose (1994) "A Survey of Empirical Research on Nominal Exchange Rates", NBER W.P. No.4865, September; also Chapter in (GR) volume, 1996.
* Froot, K. and R.H. Thaler (1990) "Anomalies: Foreign Exchange", Journal of Economic Perspectives, Summer.
* Taylor, M. (1995) "Exchange Rate Behavior", Journal of Economic Literature, March.
Levich, R. (1985) "Empirical Studies of Exchange Rates: Price Behavior, Rate Determination and Market Efficiency", Chapter 19 of (JK) volume.
* Meese, R. (1990) "Currency Fluctuations in the Post-Bretton Woods Era", Journal of Economic Perspectives, Winter.
MacDonald, R. and M. Taylor (1992) "Exchange Rate Economics: A Survey", IMF Staff Papers, 39, 1, 1-57.
De Vries, C. (1994) "Stylized Facts of Nominal Exchange Rate Returns", Chapter 11 of (VP) volume.
B. Evidence on the PPP and long-run behavior of real exchange rates
* Obstfeld and Rogoff (OR) Chapter 4 (sections 1 and 2).
* K. Froot and K. Rogoff (1995) "Perspectives on PPP and Long-Run Real Exchange Rates", NBER W.P. No. 4952, December; also Chapter in (GR) volume, 1996.
Levich, R. (1985) "Empirical Studies of Exchange Rates: Price Behavior, Rate Determination and Market Efficiency", Chapter 19 of (JK) volume.
K. Froot, M. Kim and K. Rogoff (1995) "The Law of One Price over 700 Years", NBER W.P. No. 5132, May 1995.
Dornbusch, R. (1988) "Real Exchange Rates and Macroeconomics: A Selective Survey", NBER WP No.2775, November.
C. Risk premia
* Lewis, K. (1994), Section 1 of "Puzzles in International Financial Markets" NBER W.P. No. 4951, December; also Chapter in (GR) volume, 1996.
Engel, C. (1995) "The Forward Discount Anomaly and the Risk Premium ? A Survey of Recent Evidence", NBER W.P. No. 5312, October.
Backus, D., S. Foresi and C. Telmer (1996) "Affine Models of Currency Pricing", NBER W.P. No.5623, June.
Hodrick, R. (1987) The Empirical Evidence on the Efficiency of Forward and Futures Foreign Exchange Markets, Harwood Academic Publishers.
Marston, R. (1994) "Tests of Three Parity Conditions: Distinguishing Risk Premiums and Systematic Forecast Errors", mimeo, University of Pennsylvania, September.
Froot, K. and J.A. Frankel (1989) "Forward Discount Bias: Is it an Exchange Rate Premium ?", Quarterly Journal of Economics, No.104.
Evans, M. and K. Lewis (1993) "Trends in Expected Returns in Currency and Bond Markets", European Economic Review, 37, 1005-1020.
Bekaert, G. and R. Hodrick (1993) "On Biases in the Measurement of Foreign Exchange Risk Premiums", Journal of International Money and Finance, 12, 115-138.
D. Empirical studies of exchange rate determination
* Obstfeld and Rogoff (OR) Chapter 9 (sections 1-3).
* Frankel, J. and A. Rose (1994) "A Survey of Empirical Research on Nominal Exchange Rates", NBER W.P. No.4865, September; also Chapter in (GR) volume, 1996.
* Froot, K. and R.H. Thaler (1990) "Anomalies: Foreign Exchange", Journal of Economic Perspectives, Summer.
* Taylor, M. (1995) "Exchange Rate Behavior", Journal of Economic Literature, March.
Meese, R. and K. Rogoff (1983) "The Out-of-Sample Failure of Empirical Exchange Rate Models: Sampling Errors or Mispecification ?", in J. Frenkel (ed.) Exchange Rates and International Economics, University of Chicago Press.
E. Exchange rate passthrough
Goldberg, P.K. and M. Knetter (1996) "Goods Prices and Exchange Rates: What Have We Learned?", NBER W.P. No. 5862, December.
Campa, J. and L. Goldberg (1995) "Investment in Manufacturing, Exchange Rates and External Exposure", Journal of International Economics, Vol. 38, No. 3/4, May, 297-320.
Campa, J. (1993) "Entry by foreign firms under exchange rate uncertainty", The Review of Economics and Statistics, Vol. 75, No. 4, November, 614-622.
F. VAR evidence on liquidity effects
Eichenbaum, M. and C. Evans (1995) "Some Empirical Evidence on the Effects of Monetary Policy Shocks on Exchange Rates", Quarterly Journal of Economics.
Grilli, V. and N. Roubini (1995) "Liquidity and Exchange Rates: Puzzling Evidence from the G-7 Countries", mimeo, February.* Kim, S. and N. Roubini (1995) "Liquidity and Exchange Rate: Evidence from Identified VARs", mimeo, February.
Clarida, R. and J. Gali (1994) "Sources of Real Exchange Rate Fluctuations: How Important Are Nominal Shocks", NBER W.P. No.4658, February; also in Carnegie Rochester Series on Public Policy.
G. Peso problems and expectational error arguments
Evans, M. (1996) "Peso Problems: Their Theoretical and Empirical Implications", unpublished, New York University, March; in C.R. Rao (ed.) Handbook of Statistics: Statistical Methods in Finance, North Holland.
Gourinchas, P.O. and A. Tornell (1996) "Exchange Rate Dynamics and Learning", NBER W.P. No.5530, April.
Froot, K. and J.A. Frankel (1987) "Using Survey Data to Test Standard Propositions on Exchange Rate Expectations", American Economic Review, March.Chinn, M. and J. Frankel (1994) "Patterns of Exchange Rate Forecasts for 25 Currencies", Journal of Money Credit and Banking, 26.
Chinn, M. and J. Frankel (1991) "Exchange Rate Expectations and Risk Premium: Tests for a Cross-Section of 175 Currencies", NBER WP. No. 3806, August.
H. The microstructure of foreign exchange markets
Lyons, R. (1994) "Foreign Exchange Volume: Sound and Fury Signifying Nothing ? ", mimeo, UC Berkeley, September.
Lyons, R. (1993) "Tests of Microstructural Hypotheses in the Foreign Exchange Market", Journal of Financial Economics.
9. PROPERTIES OF ALTERNATIVE EXCHANGE RATE SYSTEMS.
A. Welfare properties of alternative exchange rate regimes
* Obstfeld and Rogoff (OR) Chapters 8 (section 4), 9 (section 4), 10 (section 1).
E. Helpman (1981) "An Exploration in the Theory of Exchange Rate Regimes", Journal of Political Economy, October, 865-890.
Helpman, E. and A. Razin (1979) "Towards a Consistent Comparison of Alternative Exchange Rate Systems", Canadian Journal of Economics.
Aschauer, J. and J. Greenwood (1983) "A Further Exploration in the Theory of Exchange Rate Regimes", Journal of Political Economy.
Helpman, E. and A. Razin (1982) "A Comparison of Exchange Rate Regimes in the Presence of Imperfect Capital Markets", International Economic Review.
B. Empirical properties of nominal and real exchange rates and alternative exchange rate regimes
Levich, R. (1985) "Empirical Studies of Exchange Rates: Price Behavior, Rate Determination and Market Efficiency" Chapter 19 in (JK) volume.
Mussa, M. (1987) "Nominal Exchange Rate Regimes and the Behavior of the Real Exchange Rates", Carnegie-Rochester Conference Series on Public Policy, No.25.
Baxter, M. and A. Stockman (1989) "Business Cycles and the Exchange Rate System", Journal of Monetary Economics, 23, 377-400.
Flood, R. and A. Rose (1993) "Fixing Exchange Rates: A Virtual Quest for Fundamentals", NBER W.P. No.4503, October.
10. MODELS OF FIXED EXCHANGE RATES AND SPECULATIVE ATTACKS ON FIXED EXCHANGE RATE REGIMES.
A. Basic theoretical models and empirical approaches
* Agenor, P.R., J. Bhandari and R. Flood (1992) "Speculative Attacks and Models of Balance of Payments Crises", NBER WP. No. 3919, November; also in IMF Staff Papers, 39, 367-394.
* Agenor, P.R. and R. Flood (1994) "Macroeconomic Policy, Speculative Attacks, and Balance of Payments Crises", Chapter 8 of (VP) volume.
* Garber, P. and L. Svensson (1994) "The Operation and Collapse of Fixed Exchange Rate Regimes", NBER W.P. 4971, December; also Chapter in (GR), 1996.
* Obstfeld and Rogoff (OR) Chapter 8 (section 6).
Krugman, P. (1979) "A Model of Balance of Payment Crises", Journal of Money Credit and Banking.
Blackburn K. and M. Sola (1993) "Speculative Currency Attacks and Balance of Payments Crises", Journal of Economic Surveys, 7, 119-144.
Flood, R. and P. Garber (1984) "Collapsing Exchange Rate Regimes: Some Linear Examples", Journal of International Economics.
Obstfeld, M. (1986) "Rational and Self-Fulfilling Balance of Payments Crises", American Economic Review, 76, 72-81.
Blanco, H. and P. Garber (1986) "Recurrent Devaluation and Speculative Attacks on the Mexican Peso", Journal of Political Economy, 94, 148-166.
Buiter, W. and V. Grilli (1989) "Anomalous Speculative Attacks on
Fixed Exchange Rate Regimes: Possible Resolutions of the 'Gold Standard
Paradox", in Krugman, P. and M. Miller (eds.) Exchange Rate Targets
and Currency Bands, Cambridge University Press.
B. "Second generation" models of currency collapse
* Obstfeld, M. (1994) "The Logic of Currency Crises", NBER W.P. No. 4640, February.
* Obstfeld and Rogoff (OR) Chapter 8 (section 6).
* P. Krugman (1997) "Currency Crisis", unpublished, MIT, October.
* Cavallari, L. and G. Corsetti (1997) "Arbitrage Mechanisms Leading to Currency Crises", mimeo, University of Rome, September.
Flood, R.P. and P.M. Garber (1991) "The Linkeage Between Speculative Attack and Target Zone Models of Exchange Rates", Quarterly Journal of Economics, November.
Drazen, A. and P. Masson (1994) "Credibility of Policies versus Credibility of Policymakers", Quarterly Journal of Economics.
Buiter, W., G. Corsetti and P. Pesenti (1997) Financial Markets and International Monetary Cooperation: The Lessons from the 1992-93 ERM Crisis, Cambridge University Press, 1998.
Velasco, A. (1997) "When Are Fixed Exchange Rates Really Fixed?", Journal of Development Economics.
Buiter, W., G. Corsetti and P. Pesenti (1995) "A Center-Periphery Model of Monetary Coordination and Exchange Rate Crises", NBER W.P. No. 5140, June.
Cole, H. and T. Kehoe (1996) "A Self-Fullfilling Model of Mexico
1994-1995 Debt Crisis", Journal of International Economics, 41,
309-330.
C. Recent empirical studies
Goldberg, L. (1994) "Predicting Exchange Rate Crises: Mexico Revisited", Journal of International Economics, 36, 413-430.
Klein, M. and N. Marion (1994) "Explaining the Duration of Exchange-Rate Pegs", NBER W.P. No.4651.
Sachs, J., A. Tornell and A. Velasco (1996) "The Mexican Peso Crisis: Sudden Death or Death Foretold ?", NBER W.P. No. 5563, May.
Eichengreen, B., A. Rose and C. Wyplosz (1994) "Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System", NBER W.P. No. 4898, October.
Rose, A. and L.E.O. Svensson (1993) "European Exchange Rate Credibility Before the Fall", NBER W.P. No.4495, October; also in European Economic Review, 1994.
Jeanne, O. (1998) "Was the French Franc Crisis a Sunspot Equilibrium?", Journal of International Economics.
Eichengreen, B., A. Rose and C. Wyplosz (1996) "Contagious Currency Crises" NBER W.P. No.5681, July.
Milesi-Ferretti, G.M. and A. Razin "Sustainability of Persistent Current Account Deficits", NBER W.P. No. 5467, February.
Roubini, N. and P. Wachtel (1998) "Current Account Sustainability in Transition Economies", forthcoming NBER W.P., January.
Giavazzi, F. and A. Giovannini (1989) Limiting Exchange Rate Flexibility: The European Monetary System, MIT Press.
D. The "Twin Crises": banking and balance of payments crises. The Asian currency crisis.
Jeffrey Sachs, Aaron Tornell and Andres Velasco (1996) "Financial Crises in Emerging Markets: The Lessons from 1995" Brookings Papers on Economic Activity.
Calvo, G. (1995) "Varieties of Capital Market Crises", University of Maryland, November.
* Krugman, P. (1998) "What Happened to Asia?", mimeo, January.
Krugman, P. (1998) "Bubble, Boom, Crash: Theoretical Notes on Asia's Crisis", mimeo, January.
Buiter, W., G. Corsetti and P. Pesenti (1997) Financial Markets and International Monetary Cooperation: The Lessons from the 1992-93 ERM Crisis, Cambridge University Press, 1998.
Kaminsky, G. and C. Reinhard (1995) "The Twin Crises: The Causes of Banking and Balance of Payments Problems", mimeo, University of Maryland.
Velasco, A. (1987) "Financial Crises and Balance of Payments Crises", Journal of Development Economics, 27, 263-283.
Edwards, S. and C. Vegh (1997) "Banks and Macroeconomic Disturbances under Predetermined Exchange Rates", Journal of Monetary Economics.
Kumhof, M. (1997) "Balance of Payments Crises: The Role of Short-Term Debt", University of Maryland, November.
Chang, R. and A. Velasco (1997) "Financial Fragility and the Exchange Rate Regime", unpublished, NYU, October.
Goldfajin, I. and R.O. Valdes (1997) "Capital Flows and the Twin Crises: The Role of Liquidity", IMF Working Paper No. 97/87.
Calvo, G. and E. Mendoza (1997) "Rational Contagion and the Globalization of Securities Markets", unpublished, Duke University, October.
11. MODELS OF TARGET ZONES
A. Basic models and surveys
* Bertola, G. (1994) "Continuous Time Models of Exchange Rates and Intervention"; Chapter 9 of (VP) volume.* Svensson, L.E.O. (1992) "An Interpretation of Recent Research on Exchange Rate Target Zones", Journal of Economic Perspectives, Fall.
* Pesenti, P. (1990) "Exchange Rate Stochastic Dynamics and Target Zones: An Introductory Survey", mimeo, Yale University, April.
* Obstfeld and Rogoff (OR) Chapter 8 (section 5)
Krugman, P. and M. Miller (eds.) (1991) Exchange Rate Targets and Currency Bands, Cambridge University Press.
B. Introductions to regulated Brownian Motions
Dixit, A. (1992) "Investment and Hysteresis", Journal of Economic Perspectives, Winter.
Harrison, J.M. (1985) Brownian Motion and Stochastic Flow Systems.
Dixit, A. (1989) "Entry and Exit Decisions under Uncertainty", Journal of Political Economy, 97, June, 620-638.
Dixit, A. "A Simplified Treatment of the Theory of Optimal Control of Brownian Motion", Journal of Economic Dynamics and Control, October.
Froot, K. and M. Obstfeld (1991) "Exchange Rate Dynamics under Stochastic Regimes Shifts: A Unified Approach", Journal of International Economics, November.
C. Other theoretical developments
Bertola, G. and L.E.O. Svensson (1993) "Stochastic Devaluation Risk and the Empirical Fit of Target Zone Models", Review of Economic Studies.
Flood, R.P. and P.M. Garber (1991) "The Linkeage Between Speculative Attack and Target Zone Models of Exchange Rates", Quarterly Journal of Economics, November.
Bertola, G. and R. Caballero (1992) "Target Zones and Realignments", American Economic Review, June.
Miller, M. and P. Weller (1991) "Exchange Rate Bands with Price Inertia", Economic Journal, November.
Svensson, L.E.O. (1991) "Target Zones and Interest Rate Variability", Journal of International Economics, August.
D. Empirical studies
* Svensson, L.E.O. (1992) "An Interpretation of Recent Research on Exchange Rate Target Zones", Journal of Economic Perspectives, Fall.
Campa, J. and K. Chang (1996) "Arbitrage-Based Tests of Exchange Rates Target Zones: Evidence from ERM Cross-Rate Options", American Economic Review, Vol. 86, No. 4, September, 726-740.
R. Flood, A. Rose and D.J. Mathieson (1991) "An Empirical Exploration of Exchange Rate Target-Zones", Carnegie-Rochester Conference Series on Public Policy, 35, 7-66.
Svensson, L.E.O. (1991) "The Simplest Test of Target Zones Credibility", IMF Staff Papers, September.
Rose, A. and L.E.O. Svensson (1993) "European Exchange Rate Credibility Before the Fall", NBER W.P. No.4495, October; also in European Economic Review, 1994.
12. THE DEBATE ON THE RELATIVE MERITS OF FIXED VERSUS FLEXIBLE EXCHANGE RATES.
A. The relative benefits of fixed versus flexible exchange rates
* Svensson, L.E.O. (1993) "Fixed Exchange Rates as a Means of Price Stability: What Have We Learned ?", NBER W.P. No. 4504, October.
* Obstfeld, M. and K. Rogoff (1995) "The Mirage of Fixed Exchange Rates", NBER W.P. No.5191, July.
Sachs, J., A. Tornell and A. Velasco (1995) "The Collapse of The Mexican Peso: What Have We Learned ?" NBER No. 5142, June.
Tornell, A. and A. Velasco (1995) "Fixed versus Flexible Exchange Rates: Which Provides More Fiscal Discipline ?", NBER W.P. No.5108.
B. Optimal currency areas and the European Monetary Union
Obstfeld and Rogoff (OR) Chapter 8 (section 4), 9 (section 6).
Neumeyer, P.A. (1998) "Currencies and the Allocation of Risk: The Welfare Effects of a Monetary Union" forthcoming, American Economic Review.
* Bean, C. (1992) "Economic and Monetary Union in Europe", Journal of Economic Perspectives, Fall.
* Buiter, W. (1995) "Macroeconomic Policy During the Transition to a Monetary Union", CEPR Discussion Paper No. 1222, August.
De Grauwe, P. (1992) The Economics of Monetary Integration, Oxford University Press.
Eichengreen, B. and F. Ghironi (1995) "European Monetary Union: The Challenges Ahead", CEPR Discussion Paper No. 1217, July.
Buiter, W., G. Corsetti and N. Roubini (1993) "Excessive Deficits: Sense and Nonsense in the Treaty of Maastricht", Economic Policy, April.
Grilli, V. and G. de Kock (1993) "Endogenous Exchange Rate Regime Switches", Economic Journal.
Bayoumi, T. and B. Eichengreen (1992) "Shocking Aspects of European Monetary Unification", CEPR Discussion Paper No.643.
13. CAPITAL CONTROLS AND FOREIGN EXCHANGE MARKET INTERVENTION
A. Capital controls
Dornbusch, R. (1986) "Special Exchange Rates for Capital Account Transactions", The World Bank Economic Review, September.
Dooley, M. (1995) "A Survey of Academic Literature on Controls over International Capital Transactions", NBER W.P. No.5352, November.
Greenwood, J. and K. Kimbrough (1985) "Capital Controls and Fiscal Policy in the World Economy", Canadian Journal of Economics, November.
Greenwood, J. and K. Kimbrough (1987) "An Investigation in the Theory of Capital Controls", Canadian Journal of Economics, May.
Grilli, V. and N. Roubini (1993) "Financial Integration, Capital Controls and Exchange Rates", Journal of International Money and Finance, 1993.
Alesina, A., V. Grilli and G.M. Milesi-Ferretti (1994) "The Political Economy of Capital Controls", in L. Leiderman and A. Razin (eds.) Capital Mobility: New Perspectives, Cambridge: Cambridge University Press.
Bartolini, L. and A. Drazen (1996) "Capital Account Liberalization as a Signal", NBER W.P. No 5725, August.
Eichengreen, B. A. Rose and C. Wyplosz (1994) "Is There a Safe Passage to EMU ? Evidence on Capital Control and a Proposal", CEPR Discussion Paper No. 1061, November.
Stockman, A. and A. Hernandez (1988) "Exchange Controls, Capital Controls, and International Financial Markets", American Economic Review.
B. Exchange rate market intervention and its effects
* Obstfeld and Rogoff (OR) Chapter 8 (Appendix 8B).
Obstfeld, M. (1990) "The Effectiveness of Foreign-Exchange Intervention: Recent Experience 1985-1988", in W. Branson, J. Frenkel and M. Goldstein (eds.) International Policy Coordination and Exchange Rate Determination, University of Chicago Press.
Dominguez, K. (1990) "Market Responses to Coordinated Central Bank Intervention", Carnegie-Rochester Series on Public Policy.
Dominguez, K. and J. Frankel (1992) "Does Foreign Exchange Intervention Matter ? Disentangling The Portfolio and Expectations Effects", NBER WP. No.3299.
Rogoff, K. (1984) "On the Effects of Sterilized Intervention: An Analysis of Weekly Data", Journal of Monetary Economics.
Grilli, G. and N. Roubini (1993) "Financial Liberalization and Exchange Rate Volatility" in V. Conti and R. Hamaui (eds.) Financial Markets' Liberalization and the Role of Banks, Cambridge University Press.
Lewis, K. (1993) "Are Foreign Exchange Intervention and Monetary Policy Related and Does it Really Matter ?", NBER W.P. No.4377, June.
Lewis, K. and G. Kaminsky (1993) "Does Foreign Exchange Intervention Signal Future Monetary Policy ?", NBER W.P. No.4298, March.
14. EXCHANGE RATE-BASED STABILIZATION PROGRAMS: DISINFLATION AND MACRO-VARIABLES ADJUSTMENT
Rebelo, S. and C. Vegh (1995) "Real Effects of Exchange Rate-Based Stabilization: An Analysis of Competing Theories", NBER W.P. No. 5197, July; also in NBER Macroeconomics Annual, 1995, MIT Press.
Calvo, G. and C.Vegh (1997) "Inflation Stabilization in Chronic Inflation", unpublished, UCLA, November.
Vegh, C. (1992) "Stopping High Inflation: An Analytical Overview", IMF Staff Papers, Vol. 39, September.
Guidotti, P. and C. Vegh (1992) "Losing Credibility: The Stabilization Blues", IMF Working Paper, September.
Calvo, G. and C. Vegh (1993) "Fighting Inflation with High Interest Rates: The Small Open Economy Case under Flexible Prices", Journal of Money Credit and Banking.
Calvo, G. L. Leiderman and C. Reinhart (1993) "Capital Inflows to Latin America: The Role of External Factors", IMF Staff Papers, 40, 108-151.
Calvo, G., C. Reinhart and C. Vegh (1994) "Targeting the Real Exchange Rate: Theory and Evidence", IMF Working Paper, May.
Giovannini, A. and B. Turtelboom (1994) "Currency Substitution", Chapter 12 of (VP) volume.
Edwards, S. (1993) "Devaluation Controversies in the Developing Countries", in M. Bordo and B. Eichengreeen (eds.) A Retrospective on the Bretton Woods System, Chicago: University of Chicago Press.
15. FISCAL DEFICITS AND SEIGNIORAGE IN OPEN ECONOMIES: ECONOMIC AND POLITICAL DETERMINANTS
* Obstfeld and Rogoff (OR) Chapter 8 (sections 1-2).
Cukierman, A., S. Edwards and G. Tabellini (1992) "Seigniorage and Political Instability", American Economic Review, June.
Grilli, V. (1989) "Seigniorage in Europe", in Marcello De Cecco and Alberto Giovannini (eds.) A European Central Bank?, Cambridge University Press, 1989, 53-79.
Canzoneri, M. and C.A. Rogers (1992) "Is The European Community an Optimal Currency Area ? Optimal Taxation versus the Cost of Multiple Currencies", American Economic Review, June, 419-433.
Mankiw, G. (1987) "The Optimal Collection of Seigniorage", Journal of Monetary Economics, 20, 327-341.
Roubini, N. (1991) "Economic and Political Determinants of Budget Deficits in Developing Countries", Journal of International Money and Finance, 12, 139-153.
Roubini, N. and J. Sachs (1988) "Economic and Political Determinants of Budget Deficits in the Industrial Democracies", European Economic Review, May.
Persson, T. and G. Tabellini (1992) "Federal Fiscal Constitutions. Part I: Risk Sharing and Moral Hazard", CEPR Discussion Paper No.728, October.
Sala-I-Martin and J. Sachs (1992) "Fiscal Federalism and Optimum Currency Areas: Evidence for Europe from the United States", in M. Canzoneri, P. Masson and V. Grilli Establishing a Central Bank: Issues in Europe and Lessons from the U.S., Cambridge University Press.
Corsetti, G. and N. Roubini (1997) "Politically Motivated Fiscal Deficits: Policy Issues in Closed and Open Economies", Economics and Politics, March.
16. INTERNATIONAL MACROECONOMIC POLICY COORDINATION
* Obstfeld and Rogoff (OR) Chapter 9 (section 5).
Canzoneri, M. and D. Henderson (1988) "Is Sovereign Policymaking Bad ?", Carnegie Rochester Conference Series on Public Policy, Vol.28.
Buiter, W., G. Corsetti and P. Pesenti (1997) Financial Markets and International Monetary Cooperation: The Lessons from the 1992-93 ERM Crisis, Cambridge University Press.
Persson, T. and G. Tabellini (1995) "Double-Edged Incentives: Institutions and Policy Coordination" CEPR Discussion Paper No. 1141, February; also Chapter in (GR) volume, 1996.
Canzoneri, M. and D. Henderson (1991) Monetary Policy in Interdependent Economies: A Game Theoretic Approach, MIT Press, Chapters 2,4,5.
Alogoskoufis, G. (1994) "On Inflation, Unemployment, and the Optimal Exchange Rate Regime", Chapter 7 of (VP) volume.
Bryant, R.C., D.W. Henderson, G. Holtham, P. Hooper and S.A. Symansky (1990) Empirical Macroeconomics for Interdependent Economies, The Brookings Institution, chapters 2,3.
Roubini, N. (1991) "Leadership and Cooperation in the EMS", Journal of Policy Modeling, April.
Buiter, W. and K. Kletzer (1991) "The Welfare Economics of Cooperative and Non-Cooperative Fiscal Policy", Journal of Economic Dynamics and Control, 15, 215-244.
de Combrugghe, A., J. Sachs and N. Roubini (1991) "Dynamic Strategic Monetary Policies and Coordination in Interdependent Economies: A Comment", American Economic Review, December.
Buiter, W. and R. Marston (eds.) (1985) International Economic Policy Coordination, Cambridge University Press, Chapter 7.
17. TRADE, FINANCIAL MARKETS, CAPITAL MOBILITY AND ENDOGENOUS GROWTH
* Obstfeld and Rogoff (OR) Chapter 7.
Sala-I-Martin, X. (1990) "Lecture Notes on Economic Growth", Economic Growth Center Discussion Paper No.621, 622, Yale University, November.
Rebelo, S. (1992) "Growth in Open Economies", Carnegie-Rochester Conference Series.
Barro, R., N.G. Mankiw and X. Sala-i-Martin (1995) "Capital Mobility in Neoclassical Models of Growth", American Economic Review, March.
Van Der Ploeg, F. (1994) "Growth, Deficits, and Research and Development in the Global Economy", Chapter 16 of (VP) volume.
Grossman, G. and E. Helpman (1991) Innovation and Growth: Technological Competition in the Global Economy, MIT Press.
Lucas, R.E. (1988) "On the Mechanics of Economic Development", Journal of Monetary Economics.
Milesi-Ferretti G.M. and N. Roubini (1994) "Taxation and Endogenous Growth in Open Economies", NBER W.P. No.4881, October.
Milesi-Ferretti G.M. and N. Roubini (1994) "Optimal Taxation of Human and Physical Capital in Endogenous Growth Models", NBER W.P. No.4882, October.
Roubini, N. and X. Sala-i-Martin (1992) "Financial Repression and Economic Growth", Journal of Development Economics.
Ventura, J. (1994) "Growth and Interdependence", unpublished, Harvard University, November.
18. SOVEREIGN RISK, IMPERFECTIONS IN INTERNATIONAL CAPITAL MARKETS AND THE DEVELOPING COUNTRIES' DEBT CRISIS
* Obstfeld and Rogoff (OR) Chapter 6.
Eaton, J. and R. Fernandez (1995) "Sovereign Debt", NBER W.P. No. 5131, May; also Chapter in (GR) volume, 1996.
Sachs, J. (ed.) (1989) Developing Country Debt and the World Economy, University of Chicago Press, Chapters 1, 14-17.
Kletzer, K. (1994) "Sovereign Immunity and International Lending", Chapter 13 of (VP) volume.
Cohen, D. (1994) "Growth and External Debt", Chapter 14 of (VP) volume.
Symposium on "New Institutions for Developing Country Debt", Journal of Economic Perspectives, Winter, 1990.
Bulow, J. and K. Rogoff (1989) "Sovereign Debt: Is to Forgive to Forget?", American Economic Review, March.
Bulow, J. and K. Rogoff (1988) "The Buyback Boondoggle", Brookings Papers on Economic Activity, No.2.
Sachs, J. (1988) "Comprehensive Debt Retirement: The Bolivian Example", Brookings Papers on Economic Activity, No.2.