Economics 434
International Finance Readings

Many interesting additional readings are available on the web. By clicking on the appropriate paper you can download selected papers for this course. Some papers are in pdf format. To read them you need the Acrobat Reader, which can be downloaded for free by clicking here.
 

  • For current events you may want to read the Forex Blog or ForEx Street.
  • There is also a lot of good stuff at Econbrowser.
  • And to see information about exchange rates go to the New York Fed's Foreign Exchange Page.


    • The Panic of 2008 and the World Financial Crisis

  • Here is a series of articles on the first global financial crisis of the 21st century by various authors.
  • Gary Gorton has an article on The Panic of 2007.
  • The IMF's World Economic Outlook: Crisis and Recovery has lots of information.
  • "The Financial Crisis: An Inside View," by Phillip Swagel who was at the Treasury when the panic erupted.
  • Barry Eichengreen discusses a Tale of Two Depressions.

     

    Some Recent Articles on Currency Crises and the Debate on Globalization
     

  • Maurice Obstfeld, Jay Shambaugh, and Alan Taylor discuss the role of international reserves in coping with the Panic of 2008.
  • Jeffrey Frankel discusses what is in and what is out with regard to Global Currencies.
  • Ken Rogoff asks "Who Needs the IMF?"
  • Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve System, discusses Global Economic Integration: What's New and What's Not?
  • Raghuram Rajan, Chief Economist at the IMF, discusses Debt Relief for Poor Countries.
  • Joseph Stiglitz, former Chief Economist at the World Bank discusses "What I learned at the world economic crisis."
  • Ken Rogoff's open letter to Joseph Stiglitz.
  • Ken Rogoff defends the IMF against critics.
  • Barry Eichengreen reviews Stiglitz's controversial new book.
  • Benjamin Friedman's review of Stiglitz's book in the New York Review of Books.
  • Paul Krugman discusses how "How Washington worsened Asia's crash."
  • A conference volume from the NBER focuses on  Preventing Currency Crises in Emerging Economies.
  • An article by Brad DeLong on The International Financial Crises of the 1990s: Analytics.
  • Anne Krueger's important new proposal on Sovereign Debt Restructuring.


    • Articles on China and on the New Bretton Woods
  • Ronald McKinnon explains Why China Should Keep its Exchange Rate Pegged to the Dollar
  • Ronald McKinnon and Gunther Schnabl discuss Current Account Surpluses and Conflicted Virtue in East Asia: China and Japan under the Dollar Standard
  • Here is how John Anderson learned to stop worrying and forget the yuan.
  • Here is an article by Morris Goldstein on China's Exchange Rate Policies.
  • Ronald McKinnon discusses The East Asian Dollar Standard, Fear of Floating, and Original Sin.
  • Michael Dooley, David Folkerts-Landau, and Peter Garber discuss the Revived Bretton Woods System.
  • Barry Eichengreen discusses Global Imbalances and the Lessons of Bretton Woods.


    • Some Recent Articles on the Euro and Accession
  • Susan Schadler discusses the benefits of Euro adoption for accession countries.
  • Hamid Faruqee reviews the first five years of experience with the Euro.


    • Globalization and the World Economy
     
  • Here is a classic article by Paul Krugman on Interstellar Trade. He proves a theorem on inter-planetary capital flows.
  • Here is an article by Prasad, Rajan, and Subramanian on paradoxical direction that capital flows have taken recently.
  • Here is an article by Gourinchas and Jeanne on the Capital Allocation Puzzle.
  • Here is an article that discusses the changing pattern of US Investment Abroad: Going Global
  • Michael Bordo puts Globalization in Historical Perspective.
  • Here is Stanley Fischer on Globalization and its Challenges.
  • A Symposium sponsored by the Kansas City Federal Reserve Bank focused on Global Economic Integration: Opportunities and Challenges.
  • Jeffrey Frankel has an interesting paper on Globalization and the Economy.
  • The World Bank has issued a report on Poverty in an Age of Globalization.
  • The Economic Report of the President, 2000 has a chapter on Opportunity and Change in the Global Economy. This chapter has material on international capital flows, the trade balance, and international financial crises. You can find more recent editions of the EOP by clicking here.

    • The Meltzer Commission produced a report critical of the IMF and argued for reform of international financial institutions
  • To read the final report of the commission click here.
  • Timothy Lane and Steven Phillips of the IMF examine the issue of moral hazard created by IMF programs in IMF Financing and Moral Hazard.
  • Here is a recent article by Ken Rogoff on the subject of moral hazard and IMF programs.
  • This article contains some interesting data on foreign aid to poor countries.

    • Derivatives in International Capital Flows
  • You can view Peter Garber's presentation, slides and video, that discusses how derivatives complicate our picture of international financial crises. It focuses on the question of on-balance sheet vs. off-balance sheet indicators of position taking in the national balance sheet. The paper includes discussions of how derivative transactions affect a country’s foreign currency exposure, traditional measures of capital account flows, and the distribution of risk.
  • An article by Barry Eichengreen and Donald Mathieson explores the role of hedge funds, and includes a discussion of LTCM.


    • Recent Articles on Asset Markets and Bubbles
  • The most recent World Economic Outlook from the IMF has a chapter on what happens when bubbles burst.
  • The IMF's Global Financial Report has a chapter on asset price volatility. The appendix describes the circumstances that surround the bubble in Japan and the collapse of LTCM.
  • Here is an article that discusses whether Alan Greenspan contributed to "irrational exuberance," and whether this is bad monetary policy. It is titled the "Economic Consequences of Mr. Greenspan."
  • Asset prices, such as exchange rates, are often subject to what economists call "Peso Problems." Here is an article that explains this phenomenon and how it impact on some puzzles in international finance, such as the forward premium puzzle.
  • Peter Garber writes about Famous First Bubbles.
  • Here is an article by Michael Lewis that looks at the internet bubble, entitled In Defense of the Boom (NYTimes registration required).
  • A symposium on bubbles in asset prices (includes the Garber article and others).


    • Articles on Argentina
  • The IMF has produced a new report on its role in Argentina.
  • Here is a good article that provides background and analysis and asks Why Was Argentina Special and What Can We Learn From it?
  • Michael Mussa, former Chief Economist at the IMF discusses Argentina and the Fund: From Triumph to Tragedy.
  • A report by World Bank Economists studies the link between the currency board and the financial system in Argentina, and its role in the collapse.
  • Kurt Shuler argues that implementing a real currency board is the solution for Argentina.
  • Here is an article that considers dollarization in Argentina.
  • Kurt Shuler criticizes other economists for their advice to Argentina.


    • Current Account and Sustainability
  • Larry Summers provides Reflections on Global Account Imbalances and Emerging Markets Reserve Accumulation.
  • Ricardo Hausman and Fredric Sturzenegger have asked whether global imbalances are really due to missed accounting of dark matter.
  • Willem Buiter responds wonders whether dark matter will end up as cold fusion.
  • A BEA analyst responds on the calculation of Dark Matter.
  • Barry Eichengreen analyzes four approaches to Global Imbalances, including Dark Matter, the New Economy, and the Savvy Investor theories.
  • Here is a web page run by Charles Engel and Menzie Chinn devoted to the topic of current account sustainability.
  • The Economist Magazine has an excellent survey on the Great Thrift Shift and how this effects global imbalances (subscription required). You can purchase the whole article as a pdf file here.
  • Maurice Obstfeld has an interesting paper on America’s Deficit, the World’s Problem.
  • Sebastian Edwards discusses the End of Large Current Account Deficits.
  • Gourinchas and Rey discuss the Exhorbitant Privilege and US Adjustment.
  • Edwin Truman discusses the consequences of postponing global adjustment.
  • Maurice Obstfeld and Ken Rogoff analyze how unsustainable is the US current account deficit.
  • Ben Bernanke argues that the current account deficit is the result of a glut of global savings.
  • Ronald McKinnon explains the relationship between the current account deficit and lost jobs in manufacturing.
  • This paper takes an optimistic view on the sustainability of the US current account.
  • Here is a paper by Caroline Freund that discusses current account reversals.
  • Here is a recent article that studies the US current account deficit in the context of the "new economy."
  • Here is a more recent article which asks "Is the Large U.S. Current Account Deficit Sustainable?"
  • Here is another recent article on the "Record Current Account Deficit: Causes and Implications."
  • Jeff Frankel's article on "Zen and the Art of Modern Macroeconomics: The Search for Perfect Nothingness."


    • Bimetallism and the Silver Standard
  • To read more about the Wizard of Oz and how this relates to the issue of free coinage of silver in the 1896 election, see Hugh Rockoff, The "Wizard of Oz" as a Monetary Allegory, Journal of Political Economy, vol. 98, 4, August 1990.
  • Here is an article by Francois Velde that analyzes Bimetallism, "The Crime of 1873: Back to the Scene."
  • Readings on Exchange Rate Regimes and the Foreign Exchange Market
  • Here is a primer on the construction of real exchange rate indices.
  • Here is a New York Federal Reserve Bank Publication that provides background on the foreign exchange market.
  • Here is a IMF staff report that discusses problems in the Euro zone.
  • Maurice Obstfeld discusses the implications of New Open Economy Macroeconomics for Exchange Rate Adjustment.
  • Here is a paper by Guillermo Calvo and Fredric Mishkin that discusses the "Mirage of Exchange Rate Regimes for Emerging Market Countries."
  • Ken Rogoff discusses the overshooting model and its relevance for G3 exchange rates.
  • Ken Rogoff's article on Dornbusch's Overshooting Model after 25 Years.
  • The Federal Reserve Bank of New York prepared a detailed report on the operation of the foreign exchange market. For those who want to understand the nuts and bolts of this market, this is the place.
  • Stanley Fischer, former Deputy Managing Director of the IMF analyzes the new view about exchange rate regimes, in Exchange Rate Regimes: Is the Bipolar View Correct?"
  • A report by a team from the IMF (Michael Mussa, Paul Masson, Alexander Swoboda Esteban Jadresic, Paolo Mauro, and Andy Berg) discusses Exchange Rate Regimes in an Increasingly Integrated World Economy.
  • An article, A Case for Fixing Exchange Rates, by two economists at the Minneapolis Fed.
  • An article, Why Markets in Foreign Exchange Are Different From Other Markets, by my colleague Neil Wallace, published in the Quarterly Review of the Minneapolis Federal Reserve Bank, Vol. 14 No. 1.
  • Paul Krugman writes in Slate Magazine on multiple currencies: Monomoney Mania Why fewer currencies aren't necessarily better.
  • The most recent issue of the IMF's World Economic Outlook.
  • Here is an article on pegging exchanges rates and stablization policy in developing economies.


    • Capital Controls
  • An article by Christopher Neely provides an Introduction to Capital Controls.
  • An article by Sebastian Edwards asks How Effective are Capital Controls.


    • From the International Financial Institutions
  • The World Economic Outlook is published by the IMF and presents a topical analysis of the international economy. This issue has a large focus on currency instability.
  • Here is the current Economic Report of the President. There are two chapters on international capital flows and lots of data.
  • The IMF has just published a report detailing its performance in the Asian Currency Crisis. This is document provides an extensive analysis of events, and is critical of the Fund's performance. To find it, click here.


    • Selected Literature on Currency Crises
  • Nouriel Roubini's Asia Crisis Homepage. This is the best source of information on the web. It has hundreds of papers, and links to sites all over the web.
  • A special issue of the Economic Policy Review at the New York Fed examines "Lessons from Recent Crises in Asia and Other Emerging Markets."
  • An article by Ahearne, Fernald, and Loungani, discusses why China did not Succumb to Contagion.
  • An article by George Kaufman on Banking and "Currency Crisis and Systemic Risk: Lesson from Recent Events." This article reviews recent experience on the relationship between banking and currency crises.
  • Craig Burnside, Martin Eichenbaum and Sergio Rebelo emphasize the role of fiscal policy in generating the Korean and Thai Currency Crises.
  • International Institutions for Reducing Global Financial Instability  by Ken Rogoff.
  • Stanley Fischer, Deputy Managing Director of the International Monetary Fund, recently addressed the American Economics Association. His paper is titled, On the Need for an International Lender of Last Resort.
  • "The Asian Model, the Miracle, the Crisis and the Fund" by Jeffrey A. Frankel.
  • What Happened to Asia? by Paul Krugman.
  • Latin America's Swan Song, by Paul Krugman.
  • The Confidence Game: How Washington Worsened Asia's crash, by Paul Krugman.
  • The New York Times Series on Global Contagion (registration required):

    •     - Who Sank, or Swam, in Choppy Currents of a World Cash Ocean
        - How U.S. Wooed Asia to Let Cash Flow In
        - World's Markets, None of Them an Island
        - The World's Ills May Be Obvious, but Their Cure Is Not
  •  The most recent Economic Report of the President has two chapters that are related to issues of international finance. See Chapter 6: Capital Flows in the Global Economy and Chapter 7: The Evolution and Reform of the International Financial System.
  • The Asian Financial Crisis What Have We Learned? by Timothy Lane.
  • The Onset of the East Asian Financial Crisis, by Steve Radelet and Jeffrey Sachs. This paper contains the typology of crises table that was presented in class. See figure 1 in the paper. You need to be logged on to a psu account to access this paper.
  • Here is an article by David Marshall which explains how a crisis like the Russian default can trigger a global liquidity crisis. The puzzle is why a problem associated with emerging market debt was resolved by the Fed cutting interest rates.

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  • Information on what has happened in Asia, Brazil and Russia, along with links to many other sites, are available at the following Yahoo pages. In addition, there is a Yahoo page on the Euro.

    •     -Yahoo's Asian Economy Page.
        -Yahoo's Brazil's Currency Crisis Page.
        -Yahoo's Russia Crisis Page.
        -Yahoo's Euro Page.

    Here are some articles I have written related to the Russian Economic Crisis.
  • My paper with Clifford Gaddy, "To Restructure or Not to Restructure: Informal Activities and Enterprise Behavior in Transition" discusses the restructuring problem in Russian enterprises.
  • Russia's financial crisis is discussed in Russia's Virtual Economy, which is forthcoming in the September/October issue of Foreign Affairs.
  • The virtual economy is examined in more detail in my paper, A Simple Four-Sector Model of the Virtual Economy.
  • You can read about the post-August 1998 period in my paper, The Virtual Economy and Economic Recovery in Russia.



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    This page was prepared by Barry W. Ickes
    Last updated: August 9, 2006
    bwickes@psu.edu
    http://econ.la.psu.edu/~bickes/index.htm