International Macroeconomics

Balance-of-Payments Accounting......Page 11
The U.S. Current Account......Page 17
Trade Balances and Current-Account Balances Across Countries......Page 20
Imbalances in Merchandise Trade......Page 24
The Current Account and the Net International Investment Position......Page 25
Valuation Changes and the Net International Investment Position......Page 28
The Negative NIIP And Positive NII Paradox: Dark Matter?......Page 36
Dark Matter......Page 37
Return Differentials......Page 39
Who Lends and Who Borrows Around the World?......Page 41
Exercises......Page 44
Can a Country Run a Perpetual Trade Balance Deficit?......Page 51
Can a Country Run a Perpetual Current Account Deficit?......Page 55
Savings, Investment, and the Current Account......Page 57
Current Account Deficits As Reflections of Trade Deficits......Page 58
The Current Account As The Gap Between Savings and Investment......Page 59
The Current Account As the Gap Between National Income and Domestic Absorption......Page 61
Appendix: Perpetual Trade-Balance and Current-Account Deficits in Infinite-Horizon Economies......Page 62
Exercises......Page 68
A Small Open Economy......Page 71
The Intertemporal Budget Constraint......Page 74
The Lifetime Utility Function......Page 76
The Optimal Intertemporal Allocation of Consumption......Page 78
Equilibrium......Page 81
Temporary Versus Permanent Output Shocks......Page 85
Temporary Output Shocks......Page 87
Permanent Output Shocks......Page 90
Terms-of-Trade Shocks......Page 92
Imperfect Information, Terms-of-Trade Shocks, And The Current Account......Page 94
World Interest Rate Shocks......Page 97
An Economy with Logarithmic Preferences......Page 99
Capital Controls......Page 102
Exercises......Page 107
Current Account Determination in a Production Economy......Page 117
The Investment Decision of Firms......Page 118
Households......Page 129
Equilibrium......Page 131
The Savings Schedule......Page 133
Collateral Constraints and Financial Shocks......Page 138
Exercises......Page 139
Uncertainty and the Current Account......Page 143
The Great Moderation......Page 144
A Small Open Economy Model With Uncertainty......Page 147
Exercises......Page 154
The Current Account Schedule......Page 161
External Adjustment in a Small Open Economy......Page 164
Interest Rate Shocks......Page 165
Temporary Output Shock......Page 166
An investment surge......Page 167
Country Risk Premia......Page 169
External Adjustment in a Large Open Economy......Page 171
The Global Saving Glut Hypothesis......Page 173
The Period 1996 to 2006......Page 174
The Period 2006 to 2012......Page 178
Optimal Capital Controls in a Two-Country Model......Page 179
Market Clearing in World Capital Markets......Page 185
Equilibrium Under Free Capital Mobility......Page 186
Equilibrium when country C imposes capital controls......Page 188
Exercises......Page 195
Twin Deficits: Fiscal Deficits and Current Account Imbalances......Page 199
Twin Deficits in the United States......Page 200
Testable Implications of the Twin Deficit Hypothesis......Page 202
The government sector in the open economy......Page 209
Ricardian Equivalence......Page 214
Government Spending and Current Account Deficits......Page 218
Borrowing Constraints......Page 221
Distortionary Taxation......Page 225
Exercises......Page 228
International Capital Market Integration......Page 235
Measuring the degree of capital mobility: (I) Saving-Investment correlations......Page 236
Measuring capital mobility: (II) Interest rate differentials......Page 244
Covered interest rate parity......Page 245
Real interest rate differentials and capital market integration......Page 252
Exchange Risk Premium (f-se)......Page 256
Expected Real Depreciation, se-s+*e-e......Page 257
Uncovered Interest Rate Parity......Page 260
Asset Pricing in a 2-Period Small Open Economy......Page 261
The Forward Premium Puzzle......Page 270
Carry Trade......Page 272
Exercises......Page 276
The Law of One Price......Page 279
Purchasing Power Parity......Page 283
Does Relative PPP Hold?......Page 286
Nontradable Goods and Deviations from Absolute PPP......Page 290
Productivity Differentials and Real Exchange Rates: The Balassa-Samuelson Model......Page 294
Application: The Real Exchange Rate and Labor Productivity: 1970-1993......Page 300
Application: Deviations from PPP observed between rich and poor countries......Page 302
Trade Barriers and Real Exchange Rates......Page 304
Microfoundations of Price Indices......Page 306
Exercises......Page 313
The Argentine Sudden Stop of 2001......Page 321
The TNT Model......Page 329
Real Exchange Rate Adjustment Under a Sudden Stop......Page 335
The Chilean Sudden Stop of the 1980s......Page 336
The Turkish Sudden Stop of 2001......Page 337
Exercises......Page 338
The Great Recession in Peripheral Europe: 2008-2011......Page 343
The Production of Nontraded Goods......Page 346
The Problem of Households......Page 350
The Determination of Wages and Disequilibrium in the Labor Market......Page 356
A Sudden Stop, r1 "3222378 , leads to a contraction in traded consumption, cT1 "3223379......Page 359
Managing a Currency Peg......Page 361
Exercises......Page 365
The debt crisis of developing countries of the 1980s......Page 371
The resurgence of capital inflows to developing countries in the 1990s......Page 378
The Debt Burden......Page 381
Unilateral Debt Forgiveness......Page 384
Debt Overhang......Page 386
Third-party debt buy-backs......Page 390
Debt swaps......Page 392
Exercises......Page 395
Monetary Policy and Nominal Exchange Rate Determination......Page 397
The quantity theory of money......Page 398
A floating (or Flexible) Exchange Rate Regime......Page 400
Fixed Exchange Rate Regime......Page 401
Fiscal deficits, inflation, and the exchange rate......Page 402
The Demand For Money......Page 403
Purchasing power parity (PPP)......Page 404
The interest parity condition......Page 405
The government budget constraint......Page 406
A fixed exchange rate regime......Page 408
Fiscal deficits and the sustainability of currency pegs......Page 409
A constant-money-growth-rate regime......Page 412
The Inflation Tax......Page 415
Inflationary finance......Page 417
Money growth and inflation in a growing economy......Page 422
Balance-of-payments crises......Page 424
Appendix: A dynamic optimizing model of the demand for money......Page 432