Foundations of International Macroeconomics

by Maurice Obstfeld and Kenneth Rogoff

Contents

  • Preface
  • Introduction

    • 1 Intertemporal Trade and the Current Account Balance

  • 1.1 A Small Two-Period Endowment Economy Application: Consumption Smoothing in the Second Millennium B.C.
  • 1.2 The Role of Investment
  • Box 1.1 Nominal versus Real Current Accounts
  • 1.3 A Two-Region World Economy
  • Application: War and the Current Account
  • Application: Investment Productivity and
  • World Real Interest Rates in the 1980s
  • 1.4 Taxation of Foreign Borrowing and Lending
  • 1.5 International Labor Movements
  • Application: Energy Prices, Global Saving, and Real Interest Rates

    • 1A Stability and the Marshall-Lerner Condition

    Exercises

    2 Dynamics of Small Open Economies

  • 2.1 A Small Economy with Many Periods
  • Application: When Is a Country Bankrupt?
  • 2.2 Dynamics of the Current Account
  • Box 2.1 Japan's 1923 Earthquake
  • 2.3 A Stochastic Current Account Model
  • Application: Deaton's Paradox
  • Application: The Relative Impact of Productivity Shocks on
  • Investment and the Current Account
  • 2.4 Consumer Durables and the Current Account
  • 2.5 Firms, the Labor Market and Investment

    • 2A Trend Productivity Growth, Saving, and Investment: A Detailed Example

  • 2B Speculative Asset Price Bubbles, Ponzi Games, and Transversality Conditions
  • Exercises

    • 3 The Life Cycle, Tax Policy, and the Current Account

  • 3.1 Government Budget Policy in the Absence of Overlapping Generations
  • 3.2 Government Budget Deficits in an Overlapping Generations Model
  • Box 3.1 Generational Accounting
  • Application: Do Government Budget Deficits Cause Current Account Deficits?
  • Application: Overlapping Generations and Econometric Tests of the Euler Equation
  • 3.3 Output Fluctuations, Demographics, and the Life Cycle Application: How Are Saving and Growth Related?
  • 3.4 Investment and Growth
  • Application: Feldstein and Horioka's Saving-Investment Puzzle
  • 3.5 Aggregate and Intergenerational Gains from Trade
  • 3.6 Public Debt and the World Interest Rate
  • Application: Government Debt and World Interest Rates Since 1970
  • 3.7 Integrating the Overlapping Generations and Representative-Consumer Models

    • 3A Dynamic Inefficiency

    Exercises

    4 The Real Exchange Rate and the Terms of Trade

  • 4.1 International Price Levels and the Real Exchange Rate
  • 4.2 The Price of Nontraded Goods with Mobile Capital
  • Box 4.1 Empirical Evidence on the Law of One Price
  • Application: Sectoral Productivity Differentials and the Relative Prices of Nontradables in Industrial Countries
  • Application: Productivity Growth and Real Exchange Rates
  • 4.3 Consumption and Production in the Long Run
  • 4.4 Consumption Dynamics, the Price Level, and the Real Interest Rate
  • 4.5 The Terms of Trade in a Dynamic Ricardian Model
  • Box 4.2 The Transfer Effect for Industrial Countries

    • 4A Endogenous Labor Supply, Revisited

    4B Costly Capital Mobility and Short-Run Relative Price Adjustment

    Exercises

    5 Uncertainty and International Financial Markets

  • 5.1 Trade across Random States of Nature: The Small-Country Case
  • Box 5.1 Lloyd's of London and the Custom Market for Risks
  • 5.2 A Global Model
  • Application: Comparing International Consumption and Output Correlations
  • Box 5.2 Are Markets More Complete within than Among Countries?
  • 5.3 International Portfolio Diversification
  • Application: International Portfolio Diversification and the Home Bias Puzzle
  • 5.4 Asset Pricing
  • Application: The Equity Premium Puzzle over the Very Long Run
  • Application: GDP-Linked Securities and Estimates of VM
  • 5.5 The Role of Nontradables
  • Application: Nontradability and International Consumption Correlations
  • Application: How Large Are the Gains from International Risk Sharing?
  • 5.6 A Model of Intragenerational Risk Sharing
  • Box 5.3 A Test of Complete Markets Based on Consumption Divergence within Age Cohorts

    • 5A Spanning and Completeness

    5B Comparative Advantage, the Current Account, and Gross Asset Purchases: A Simple Example

    5C An Infinite-Horizon Complete-Markets Model

    5D Ongoing Securities Trade and Dynamic Consistency

    Exercises

    6 Imperfections in International Capital Markets

  • 6.1 Sovereign Risk
  • Box 6.1 Sovereign Immunity and Creditor Sanctions
  • Application: How Costly Is Exclusion from World Insurance Markets?
  • Application: How Have Prior Defaults Affected Countries Borrowing Terms?
  • 6.2 Sovereign Risk and Investment
  • Application: Debt Buybacks in Practice
  • 6.3 Risk Sharing with Hidden Information
  • 6.4 Moral Hazard in International Lending
  • Application: Financing Constraints and Investment

    • 6A Recontracting Sovereign Debt Repayments

    6B Risk Sharing with Default Risk and Saving

    Exercises

    7 Global Linkages and Economic Growth

  • 7.1 The Neoclassical Growth Model
  • Box 7.1 Capital-Output Ratios since World War II
  • 7.2 International Convergence
  • Application: Productivity Convergence, 1870-1979: The Baumol-DeLong-Romer Debate
  • Application: Public Capital Accumulation and Convergence
  • 7.3 Endogenous Growth
  • Application: Can Capital Deepening Be an Engine of Sustained
  • High Growth Rates: Evidence from Fast-Growing East Asia
  • Application: Population Size and Growth
  • 7.4 Stochastic Neoclassical Growth Models

    • 7A Continuous-Time Growth Models as Limits of Discrete-Time Models

  • 7B A Simple Stochastic Overlapping Generations Model with Two-Period Lives
  • Exercises

    • 8 Money and Exchange Rates under Flexible Prices

  • 8.1 Assumptions on the Nature of Money
  • 8.2 The Cagan Model of Money and Prices
  • Box 8.1 How Important Is Seignorage?
  • 8.3 Monetary Exchange Rate Models with Maximizing Individuals
  • Application: Testing for Speculative Bubbles
  • 8.4 Nominal Exchange Rate Regimes
  • Box 8.2 Growing Use of the Dollar Abroad
  • 8.5 Target Zones for Exchange Rates
  • 8.6 Speculative Attacks on a Target Zone
  • 8.7 A Stochastic Global General Equilibrium Model with Nominal Assets

    • 8A A Two-Country Cash-in-Advance Model

    8B The Mechanics of Foreign-Exchange Intervention

    Exercises

    9 Nominal Price Rigidities: Empirical Facts and Basic Open-Economy Models

  • 9.1 Sticky Domestic Goods Prices and Exchange Rates
  • 9.2 The Mundell-Fleming-Dornbusch Model
  • 9.3 Empirical Evidence on Sticky-Price Exchange-Rate Models
  • 9.4 Choice of the Exchange-Rate Regime
  • 9.5 Models of Credibility in Monetary Policy
  • Application: Central Bank Independence and Inflation
  • Application: Openness and Inflation

    • Exercises

    10 Sticky-Price Models of Output, the Exchange Rate, and the Current Account

  • 10.1 A Two-Country General Equilibrium Model of International Monetary Policy Transmission
  • Box 10.1 More Empirical Evidence on Sticky Prices
  • Box 10.2 The Role of Imperfect Competition in Business Cycles
  • 10.2 Imperfect Competition and Preset Prices for Nontradables: Overshooting Revisited
  • Application: Wealth Effects and the Real Exchange Rate
  • 10.3 Government Spending and Productivity Shocks
  • 10.4 Nominal Wage Rigidities
  • Application: Pricing to Market and Exchange-Rate Pass-Through

    • Exercises

    Supplements to Chapter 2

    A Methods of Intertemporal Optimization

    B A Model with Intertemporally Nonadditive Preferences

    C Solving Systems of Linear Difference Equations

    Supplement to Chapter 5

  • A Multiperiod Portfolio Selection

    • Supplement to Chapter 8

  • A Continuous-Time Maximization and the Maximum Principle

    • References

    Notation Guide and Symbol Glossary

    Author Index

    Subject Index