Foundations of International Macroeconomics is an innovative text that offers the first integrative modern treatment of the core issues in open economy macroeconomics and finance. With its clear and accessible style, it is suitable for first-year graduate macroeconomics courses as well as graduate courses in international macroeconomics and finance. Each chapter incorporates an extensive and eclectic array of empirical evidence. For the beginning student, these examples provide motivation and aid in understanding the practical value of the economic models developed. For advanced researchers, they highlight key insights and conundrums in the field.Topic coverage includes intertemporal consumption and investment theory, government spending and budget deficits, finance theory and asset pricing, the implications of (and problems inherent in) international capital market integration, growth, inflation and seignorage, policy credibility, real and nominal exchange rate determination, and many interesting special topics such as speculative attacks, target exchange rate zones, and parallels between immigration and capital mobility.Most main results are derived both for the small country and world economy cases.
The first seven chapters cover models of the real economy, while the final three chapters incorporate the economy's monetary side, including an innovative approach to bridging the usual chasm between real and monetary models.
Part 1 Intertemporal trade and the current account balance: a small two-period endowment economy - application - consumption smoothing in the second millennium BC
the role of investment - nominal versus real current accounts
a two-region world economy - application - war and the current account, application - investment productivity and world real interest rates in the 1980s
taxation of foreign borrowing and lending
international labour movements - application - energy prices, global saving, and real interest rates
stability and the Marshall-Lerner condition. Part 2 Dynamics of small open economies: a small economy with many periods - application - when is a country bankrupt?
dynamics of the current account - Japan's 1923 earthquake
a stochasic current account model - application - Deaton's paradox, application - the relative impact of productivity shocks on investment and the current account
consumer durables and the current account
firms, the labour market and investment
trend productivity growth, saving and investment - a detailed example
speculative asset price bubbles, ponzi games and transversatility conditions. Part 3 The life cycle, tax policy and the current account: government budget policy in the absence of overlapping generations
government budget deficits in an overlapping generations model - generational accounting, application - do government budget deficits cause current account deficits?, application - overlapping generations and econometric tests of the Euler equation
output fluctuations, demographics and the life cycle - application - how are saving and growth related?
investment and growth - application - Feldstein and Horioka's saving-investment puzzle
aggregate and intergenerational gains from trade
public debt and the world interest rate - application - government debt and world interest rates since 1970
integrating the overlapping generations and representative-consumer models
dynamic inefficiency. Part 4 The real exchange rate and the terms of trade: international price levels and the real exchange rate
the price of nontraded goods with mobile capital - 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
consumption and production in the long run
consumption dynamics, the price level and the real interest rate
the terms of trade in a dynamic Ricardian model - the transfer effect for industrial countries, endogenous labour supply, revisited, costly capital mobility and short-run relative price adjustment. (Part contents).