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Open‐Economy Macroeconomics: Developments in Theory and Policy

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  • Maurice Obstfeld

Abstract

This paper views developments in open‐economy macroeconomics through the lens of the debate over European monetary unification. The empirical tendency for nominal exchange rate regimes to affect the variability of nominal and real exchange rates alike can be rationalized by sticky‐price theories or models of asset‐market liquidity effects. But plausible liquidity models have difficulty generating enough persistence to match the data. Thus, the macroeconomic stabilization costs of forgoing the exchange‐rate realignment option seem pertinent. It is argued that our theories of efficiencies due to a common currency remain unsatisfactory, despite recent advances. The paper concludes by reviewing theories of currency crisis

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  • Maurice Obstfeld, 1998. "Open‐Economy Macroeconomics: Developments in Theory and Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 247-275, March.
  • Handle: RePEc:bla:scandj:v:100:y:1998:i:1:p:247-275
    DOI: 10.1111/1467-9442.00101
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    1. Rotemberg, Julio J., 1985. "Money and the terms of trade," Journal of International Economics, Elsevier, vol. 19(1-2), pages 141-160, August.
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    Cited by:

    1. Head, Allen & Shi, Shouyong, 2003. "A fundamental theory of exchange rates and direct currency trades," Journal of Monetary Economics, Elsevier, vol. 50(7), pages 1555-1591, October.
    2. Obstfeld, Maurice & Rogoff, Kenneth, 2000. "New directions for stochastic open economy models," Journal of International Economics, Elsevier, vol. 50(1), pages 117-153, February.
    3. Russell Cooper & Hubert Kempf, 1998. "Establishing a Monetary Union," NBER Working Papers 6791, National Bureau of Economic Research, Inc.
    4. Benigno, Gianluca & Benigno, Pierpaolo, 2001. "Monetary Policy Rules and the Exchange Rate," CEPR Discussion Papers 2807, C.E.P.R. Discussion Papers.
    5. Obstfeld, Maurice & Taylor, Alan M., 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," Journal of the Japanese and International Economies, Elsevier, vol. 11(4), pages 441-479, December.
    6. Obstfeld, M., 1998. "Risk and Exchange Rate," Papers 193, Princeton, Woodrow Wilson School - Public and International Affairs.
    7. Grade Grade, 1999. "The Political Economy of Exchange Rate Policies in Latin America and the Caribbean: The Case of Peru," Research Department Publications 3063, Inter-American Development Bank, Research Department.
    8. Qing Liu & Shouyong Shi, 2010. "Currency Areas And Monetary Coordination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(3), pages 813-836, August.
    9. Sebastian Edwards, 1999. "Crisis Prevention: Lessons from Mexico and East Asia," NBER Working Papers 7233, National Bureau of Economic Research, Inc.
    10. Chen, Shikuan, 2000. "Endogenous real exchange rate fluctuations in an optimizing open economy model," Journal of International Money and Finance, Elsevier, vol. 19(2), pages 185-205, April.
    11. Benigno, Gianluca & Benigno, Pierpaolo, 2008. "Exchange rate determination under interest rate rules," Journal of International Money and Finance, Elsevier, vol. 27(6), pages 971-993, October.
    12. Sveinn Agnarsson & Axel Hall & Tryggvi Thor Herbertsson & Sigurður Ingólfsson & Gylfi Magnússon & Gylfi Zoega, 1999. "EMU and the Icelandic labour market," Economics wp03, Department of Economics, Central bank of Iceland.

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    More about this item

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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