Exchange Rates and Adjustment: Perspectives from the New Open- Economy Macroeconomics
AbstractThe new open-economy macroeconomics has allowed economists to tackle classical problems with new tools, while also generating new ideas and questions. In their attempts to make the new models capture empirical regularities, researchers have entertained a variety of assumptions about the international pricing of goods, notably, models of pricing to market and destination-currency pricing of exports. Some of the resulting models imply that exchange rate changes lack international expenditure-switching effects, and they thus appear to call for a radical rethinking of the role of exchange rates in international adjustment. This paper argues that the recent resurgence of exchange rate pessimism stems from oversimplified modeling strategies rather than from evidence. Like earlier episodes starting with the extreme "elasticity pessimism" of the early postwar era, it is based on a misinterpretation of the empirical record.
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Bibliographic InfoArticle provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.
Volume (Year): 20 (2002)
Issue (Month): S1 (December)
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Other versions of this item:
- Maurice Obstfeld, 2002. "Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics," NBER Working Papers 9118, National Bureau of Economic Research, Inc.
- Maurice Obstfeld, 2003. "Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics," International Finance 0303004, EconWPA.
- Obstfeld, Maurice, 2002. "Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics," Center for International and Development Economics Research, Working Paper Series qt5t38s42v, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Obstfeld, Maurice, 2002. "Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics," CEPR Discussion Papers 3533, C.E.P.R. Discussion Papers.
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- F31 - International Economics - - International Finance - - - Foreign Exchange
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