Enhanced descriptions from Syndetics:

The last decade has seen rapid advances in both the theory and application of international trade and international monetary economics. In this Handbook, Frederick van der Ploeg brings together a team of twenty-one contributors working at the frontiers of research to survey recent breakthroughs in international macroeconomics.

Table of contents provided by Syndetics

• List of Figures (p. xv)
• List of Tables (p. xviii)
• List of Contributors (p. xix)
• Preface (p. xxi)
• Part I Micro Foundations of International Macroeconomics (p. 1)
• 1 Quantity-constrained Models of Open Economies (p. 3)
• 1 Introduction (p. 3)
• 2 Real Models (p. 5)
• 2.1 Short run and long run (p. 5)
• 2.2 The representative household (p. 7)
• 2.3 The representative firm (p. 8)
• 2.4 The government (p. 9)
• 2.5 Keynesian unemployment in the short run and in the long run (p. 10)
• 2.6 Keynesian unemployment in the short run and Walrasian equilibrium in the long run (p. 13)
• 2.7 Discussion (p. 15)
• 3 Monetary Models (p. 16)
• 3.1 Cash in advance (p. 17)
• 3.2 Utility of real balances (p. 20)
• 4 Conclusions (p. 26)
• 2 Imperfect Competition and Open Economy Macroeconomics (p. 31)
• 1 Introduction (p. 31)
• 2 A Two-Sector Model of a Small Open Economy (p. 33)
• 2.1 Households (p. 34)
• 2.2 The export sector (p. 36)
• 2.3 The domestic sector (p. 36)
• 2.4 Balance of payments and nominal national income (p. 37)
• 3 Macroeconomic Equilibrium (p. 38)
• 4 Macroeconomic Policy Under a Fixed Exchange Rate (p. 41)
• 4.1 Monetary policy (p. 41)
• 4.2 Fiscal policy (p. 43)
• 5 Macroeconomic Policy Under a Floating Exchange Rate (p. 45)
• 6 Balanced Trade With Free Entry and Exit of Firms (p. 49)
• 7 Intra-Industry Trade and Exchange Rate Pass-Through (p. 53)
• 7.1 Domestic sector equilibrium (p. 54)
• 7.2 National income (p. 55)
• 7.3 Devaluation and pass-through (p. 56)
• 8 Conclusion (p. 59)
• 3 Relative Price Movements in Dynamic General Equilibrium Models of International Trade (p. 62)
• 1 Introduction (p. 62)
• 2 First Look at the Data for the Terms of Trade, Net Exports, and Real Output (p. 65)
• 3 A Dynamic Exchange Economy (p. 67)
• 3.1 Consumer behavior (p. 68)
• 3.2 Competitive equilibrium (p. 68)
• 3.3 Movements of the terms of trade and net exports (p. 70)
• 4 Preference for Home Goods (p. 73)
• 5 The Marshall-Lerner Condition and the Harberger-Laursen-Metzler Effect (p. 77)
• 5.1 A closer look at the Marshall-Lerner condition (p. 77)
• 5.2 Revival of the Harberger-Laursen-Metzler effect (p. 79)
• 6 Government Spending (p. 81)
• 7 Trade and Capital Formation (p. 83)
• 7.1 The theoretical two-country framework (p. 84)
• 7.2 Behavior of the terms of trade (p. 85)
• 7.3 Net exports and the terms of trade (p. 88)
• 8 Final Thoughts (p. 91)
• Appendix (p. 91)
• Part II Capital Taxation and Real Models (p. 97)
• 4 International Fiscal Policy Coordination and Competition (p. 99)
• 1 Introduction (p. 99)
• 2 Principles of International Taxation (p. 100)
• 2.1 Capital income (direct) taxation (p. 100)
• 2.2 Commodity (indirect) taxation (p. 102)
• 3 Optimal Taxation and Capital Movements (p. 103)
• 3.1 A stylized two-period model (p. 104)
• 3.2 Optimal fiscal policy (p. 107)
• 4 Tax Competition and Tax Coordination: International Price-Taking Behavior (p. 107)
• 5 Extensions: Terms of Trade Manipulation and Discretionary Policy (p. 112)
• 5 Capital Taxation in the World Economy (p. 116)
• 1 Introduction (p. 116)
• 2 Intertemporal Equilibrium of a Small Open Economy (p. 120)
• 2.1 Consumption and saving behavior (p. 120)
• 2.2 Production and investment (p. 121)
• 2.3 Government (p. 123)
• 2.4 The model solution (p. 123)
• 3 A Residence-Based Tax (p. 123)
• 3.1 The intergenerational distribution (p. 124)
• 3.2 Economy-wide consumption (p. 125)
• 3.3 Trade balance and net foreign assets (p. 125)
• 3.4 Neutralizing the effects on the intergenerational distribution (p. 127)
• 3.5 Neutralizing the intertemporal substitution effects (p. 128)
• 4 A Source-Based Tax (p. 128)
• 4.1 Investment and capital accumulation (p. 128)
• 4.2 The intergenerational distribution (p. 129)
• 4.3 Consumption and saving (p. 131)
• 4.4 Trade balance and net foreign assets (p. 133)
• 4.5 Neutralizing the effects on the intergenerational distribution (p. 133)
• 4.6 Neutralizing the effects on the required return on new investment (p. 134)
• 5 Conclusions and Suggestions for Future Research (p. 134)
• Appendix 1 The investment system (p. 138)
• Appendix 2 The saving system (p. 140)
• Appendix 3 Welfare analysis of the residence-based tax (p. 143)
• Part III International Monetary Regimes (p. 151)
• 6 History of the International Monetary System: Implications for Research in International Macroeconomics and Finance (p. 153)
• 1 Introduction (p. 153)
• 2 Historical Overview (p. 154)
• 2.1 The classical gold standard (p. 154)
• 2.2 The interwar years (p. 158)
• 2.3 Bretton Woods and its aftermath (p. 165)
• 3 Statistical Overview (p. 168)
• 3.1 The volatility of gross domestic product (p. 169)
• 3.2 Cross-country correlations (p. 172)
• 3.3 Interwar comparisons (p. 175)
• 3.4 Components of national income (p. 179)
• 4 Implications for Research (p. 182)
• 7 On Inflation, Unemployment, and the Optimal Exchange Rate Regime (p. 192)
• 1 Introduction (p. 192)
• 2 A Simple Open Economy Macromodel (p. 196)
• 2.1 The supply side (p. 197)
• 2.2 The demand side (p. 198)
• 3 Monetary Versus Exchange Rate Targets (p. 199)
• 3.1 A fixed rate of growth for the money supply (p. 199)
• 3.2 A fixed nominal exchange rate (p. 201)
• 3.3 Monetary versus exchange rate targets (p. 202)
• 4 Optimal Exchange Rate Management (p. 203)
• 4.1 Optimal exchange rate management with an efficient "natural" rate (p. 204)
• 4.2 Optimal exchange market intervention under uncertainty (p. 206)
• 4.3 Optimal exchange rate management with an inefficient "natural" rate (p. 208)
• 4.4 Fixed versus managed exchange rates (p. 210)
• 4.5 Credibility and regime changes (p. 212)
• 5 Exchange Rate Regimes in Interdependent Economies (p. 215)
• 6 Conclusions (p. 217)
• 8 Macroeconomic Policy, Speculative Attacks, and Balance of Payments Crises (p. 224)
• 1 Introduction (p. 224)
• 2 A Basic Framework (p. 225)
• 2.1 A model of a small open economy (p. 225)
• 2.2 The shadow floating exchange rate (p. 227)
• 2.3 Date of speculative attack (p. 228)
• 3 Extensions to the Basic Framework (p. 231)
• 3.1 Alternative post-collapse regimes (p. 231)
• 3.2 Uncertainty and the timing of speculative attacks (p. 232)
• 3.3 Imperfect substitutability and sticky prices (p. 235)
• 3.4 Real effects of an anticipated collapse (p. 236)
• 3.5 Borrowing, controls, and the postponement of a crisis (p. 237)
• 3.6 Policy switches and the avoidance of a collapse (p. 240)
• 4 Some Research Perspectives (p. 242)
• 4.1 State space methods (p. 242)
• 4.2 Reputation as a deterrent to speculative attacks (p. 243)
• 5 Conclusions (p. 244)
• 9 Continuous-time Models of Exchange Rates and Intervention (p. 251)
• 1 Introduction (p. 251)
• 2 Certainty (p. 252)
• 2.1 Integration (p. 252)
• 2.2 Money demand and arbitrage-free equilibrium (p. 256)
• 3 Uncertainty (p. 262)
• 3.1 Stochastic processes (p. 263)
• 3.2 Economic interpretation (p. 273)
• 4 Target Zones and Regime Switches (p. 275)
• 4.1 The basic target zone model (p. 276)
• 4.2 Implications (p. 279)
• 4.3 Interventions and realignments (p. 280)
• 4.4 Reserves and other state variables (p. 282)
• 4.5 Different driving processes (p. 284)
• 4.6 Different equilibrium conditions (p. 285)
• 4.7 Bubbles and indeterminacies (p. 288)
• 5 Interventions in Exchange Rates and other Contexts (p. 289)
• Part IV Capital Markets, Money, and Exchange Rates (p. 299)
• 10 Partial Equilibrium versus General Equilibrium Models of the International Capital Market (p. 301)
• 1 Introduction (p. 301)
• 2 The Stylized Facts (p. 304)
• 3 International Capital Asset Pricing Models and Uncovered Interest Rate Parity (p. 305)
• 3.1 Heterogeneity created by consumption goods prices: the international capital asset pricing model (p. 305)
• 3.2 Portfolio holdings in equilibrium (p. 310)
• 3.3 The lessons of international portfolio theory (p. 312)
• 3.4 Other capital asset pricing models applicable to international returns (p. 314)
• 4 Comparing Empirical Methods (p. 316)
• 4.1 Constant risk premia (p. 316)
• 4.2 Instrumental variables (p. 317)
• 4.3 Latent variables models (p. 321)
• 4.4 The arbitrage pricing theory and multi-factor capital asset pricing models (p. 323)
• 4.5 Autoregressive conditional heteroskedasticity (p. 325)
• 4.6 The full conditional version of the capital asset pricing model (p. 326)
• 4.7 Implied pricing kernels (p. 328)
• 4.8 Conclusion: what have we learned from empirical capital asset pricing models? (p. 328)
• 5 General Equilibrium Models without Money (p. 330)
• 5.1 The difficulty with general equilibrium models (p. 330)
• 5.2 General equilibrium models without frictions (p. 331)
• 5.3 General equilibrium models with frictions (p. 332)
• 6 Issues and Conclusions Regarding General Equilibrium Models (p. 335)
• 11 Stylized Facts of Nominal Exchange Rate Returns (p. 348)
• 1 Motivation (p. 348)
• 2 Empirical Regularities (p. 350)
• 2.1 No-arbitrage conditions (p. 350)
• 2.2 Statistical regularities (p. 356)
• 2.3 Artifacts (p. 360)
• 3 Theory (p. 365)
• 3.1 Arbitrage and unit roots (p. 365)
• 3.2 The unconditional distribution function and extreme value theory (p. 374)
• 3.3 The conditional distribution function (p. 379)
• 12 Currency Substitution (p. 390)
• 1 Introduction (p. 390)
• 2 Theoretical Models (p. 394)
• 2.1 Cash-in-advance models (p. 394)
• 2.2 Transactions costs models (p. 398)
• 2.3 Implications of currency substitutability (p. 402)
• 3 Empirical Evidence (p. 404)
• 3.1 A first glance (p. 404)
• 3.2 Econometrics (p. 411)
• 3.3 Parameter estimates (p. 417)
• 4 Policy Questions (p. 418)
• 5 Concluding Observations (p. 424)
• Part V Debt, Deficits, and Growth (p. 437)
• 13 Sovereign Immunity and International Lending (p. 439)
• 1 Introduction (p. 439)
• 2 Repayment Incentives and Sovereign Borrowing (p. 441)
• 3 Potential Repudiation and Willingness to Repay (p. 443)
• 3.1 Lending and the threat of sanctions (p. 443)
• 3.2 Threat of a permanent embargo on new loans (p. 444)
• 4 Bargaining Over Payments (p. 446)
• 4.1 Foreign creditors' ability to disrupt commodity trade (p. 446)
• 4.2 Subgame perfect equilibrium division of the gains from trade (p. 447)
• 4.3 Interpretation of trade between exportables and sanctions (p. 448)
• 5 Intertemporal Exchange and Sovereignty (p. 451)
• 5.1 A consumption-smoothing model of sovereign borrowing (p. 451)
• 5.2 Self-enforcing lending (p. 458)
• 5.3 Debt contracts (p. 463)
• 5.4 Renegotiation and the role of debt contracts (p. 464)
• 6 Conclusion: Some Implications for Policymaking (p. 469)
• 14 Growth and External Debt (p. 480)
• 1 Introduction (p. 480)
• 2 Intertemporal Budget Constraints for Individuals and for Nations (p. 481)
• 3 The Risk of Debt Repudiation (p. 485)
• 3.1 An infinite horizon benchmark with frictionless access to the world financial market (p. 485)
• 3.2 The risk of debt repudiation (p. 486)
• 3.3 The solvency of a growing economy (p. 489)
• 4 Patterns of Growth of a Debtor Country (p. 489)
• 4.1 A model of growth and external debt (p. 490)
• 4.2 Financial autarky (p. 490)
• 4.3 Free access to world financial markets (p. 492)
• 4.4 Credit rationing (p. 492)
• 4.5 The transition to the steady state (p. 495)
• 5 How to Write Off the Debt? (p. 495)
• 5.1 A theoretical background: marginal and average prices (p. 496)
• 5.2 Econometric estimates (p. 498)
• 6 What will be the Fifth Stage? (p. 499)
• Appendix 1 Financial autarky, default, and free access to the world financial markets (p. 500)
• Appendix 2 The smooth repayment case (p. 501)
• 15 Savings, Investment, and the Current Account (p. 506)
• 1 Introduction (p. 506)
• 2 Household Preferences and Saving (p. 508)
• 2.1 Two-period models (p. 508)
• 2.2 Infinite-horizon models (p. 510)
• 2.3 Infinite-horizon model with new births (p. 512)
• 3 Producers and investment (p. 514)
• 3.1 A two-period model (p. 514)
• 3.2 Infinite-horizon one-good models (p. 515)
• 3.3 Infinite-horizon two-sector models (p. 516)
• 4 Three Examples (p. 520)
• 4.1 The Harberger-Laursen-Metzler effect, oil prices etc. (p. 520)
• 4.2 Fiscal policy (p. 524)
• 4.3 The Feldstein-Horioka puzzle (p. 526)
• 5 Other Shocks and Some Neglected Areas (p. 527)
• Appendix (p. 530)
• 16 Growth, Deficits, and Research and Development in the Global Economy (p. 535)
• 1 Introduction (p. 535)
• 2 The Capital Stock and Fiscal Policy (p. 538)
• 2.1 An overlapping generations model for two countries (p. 539)
• 2.2 Short-run dynamics and long-run equilibrium (p. 542)
• 3 New Theories of Endogenous Growth (p. 545)
• 3.1 Relationship to old theories of growth (p. 546)
• 3.2 Learning by doing (p. 547)
• 3.3 Human capital (p. 548)
• 3.4 Research and development (p. 549)
• 3.5 Public infrastructure (p. 549)
• 3.6 Evaluation of various theories of endogenous growth (p. 550)
• 4 Growth and Development: Convergence or Divergence? (p. 552)
• 4.1 Saving, investment, and the current account (p. 552)
• 4.2 International spillovers of investment (p. 553)
• 4.3 Subsistence, poverty, and growth (p. 554)
• 5 Knowledge Spillovers: An International Perspective (p. 555)
• 5.1 Domestic and international spillovers in production (p. 556)
• 5.2 Loose budgetary policy stances destroy global growth prospects (p. 557)
• 5.3 External debt and government debt (p. 561)
• 5.4 Budgetary policies, interest rates, and adjustment costs for investment (p. 562)
• 5.5 Divergence in growth rates (p. 564)
• 6 Research and Development: An Engine of Growth (p. 565)
• 6.1 Expanding product variety (p. 565)
• 6.2 Knowledge spillovers, redundancy, and international trade (p. 569)
• 7 Investment and Trade-Promoting Policy (p. 571)
• 7.1 Monopoly power, public policy, and growth (p. 571)
• 7.2 Trade and economic integration (p. 572)
• 7.3 Increasing returns and international competition (p. 573)
• 7.4 Political economy of growth (p. 574)
• 8 Concluding Remarks (p. 575)
• Index (p. 580)

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