Download PDF International Macroeconomics by Robert C. Feenstra; Alan M Taylor (2023)

Available for the first time with Macmillan's new e-learning tool, Achieve, the new edition of Feenstra and Taylor's International Economics offers engaging, balanced reporting and applications of key concepts. Developed in the classroom of two of the leading researchers in the field, it seamlessly blends theory and empirical data with guidelines, events and real-world evidence. And with Achieve, the new edition of Inquiry into the World Economy adds an enhanced interactive dimension.

About this BookPage: FCCover PagePage: FCHalftitle PagePage: iTitle PagePage: iiiCopyright PagePage: ivDedicationPage: ivAbout the AuthorsPage: vBrief ContentsPage: viPrefacePage: ixAcknowledgmentsPage: xvContentsPage: xviiiChapter 1: The Global MacroeconomyPage: 11 Foreign Exchange: Currencies and CrisesPage: 2How Exchange Rates BehavePage: 2Why Exchange Rates MatterPage: 4When Exchange Rates MisbehavePage: 4Headlines: Economic Crisis in IcelandPage: 7Summary and Plan of StudyPage: 72 Globalization of Finance: Debts and DeficitsPage: 7Deficits and Surpluses: The Balance of PaymentsPage: 8Debtors and Creditors: External WealthPage: 10Darlings and Deadbeats: Defaults and Other RisksPage: 11Summary and Plan of StudyPage: 123 Government and Institutions: Policies and PerformancePage: 12Integration and Capital Controls: The Regulation of International FinancePage: 13Independence and Monetary Policy: The Choice of Exchange Rate RegimesPage: 14Institutions and Economic Performance: The Quality of GovernancePage: 15Summary and Plan of StudyPage: 174 ConclusionsPage: 18End of ChapterPage: 18Key PointsPage: 18Key TermsPage: 18ProblemsPage: 18Chapter 2: Introduction to Exchange Rates and the Foreign Exchange MarketPage: 211 Exchange Rate EssentialsPage: 22Defining the Exchange RatePage: 22Appreciations and DepreciationsPage: 24Multilateral Exchange RatesPage: 25Example: Using Exchange Rates to Compare Prices in a Common CurrencyPage: 262 Exchange Rates in PracticePage: 28Exchange Rate Regimes: Fixed Versus FloatingPage: 29Application: Recent Exchange Rate ExperiencesPage: 293 The Market for Foreign ExchangePage: 34The Spot ContractPage: 34Transaction CostsPage: 35DerivativesPage: 35Private ActorsPage: 35Government ActionsPage: 364 Arbitrage and Spot Exchange RatesPage: 37Arbitrage with Two CurrenciesPage: 38Arbitrage with Three CurrenciesPage: 38Cross Rates and Vehicle CurrenciesPage: 405 Arbitrage and Interest RatesPage: 40Riskless Arbitrage: Covered Interest ParityPage: 41Application: Evidence on Covered Interest ParityPage: 43Risky Arbitrage: Uncovered Interest ParityPage: 44Application: Evidence on Uncovered Interest ParityPage: 46Uncovered Interest Parity: A Useful ApproximationPage: 47SummaryPage: 496 ConclusionsPage: 50End of ChapterPage: 50Key PointsPage: 50Key TermsPage: 51ProblemsPage: 51Chapter 3: Exchange Rates I: The Monetary Approach in the Long RunPage: 551 Exchange Rates and Prices in the Long Run: Purchasing Power Parity and Goods Market EquilibriumPage: 56The Law of One PricePage: 57Purchasing Power ParityPage: 58The Real Exchange RatePage: 58Absolute PPP and the Real Exchange RatePage: 59Absolute PPP, Prices, and the Nominal Exchange RatePage: 59Relative PPP, Inflation, and Exchange Rate DepreciationPage: 60SummaryPage: 61Application: Evidence for PPP in the Long Run and Short RunPage: 61How Slow Is Convergence to PPP?Page: 63What Explains Deviations from PPP?Page: 64Headlines: The Big Mac IndexPage: 652 Money, Prices, and Exchange Rates in the Long Run: Money Market Equilibrium in a Simple ModelPage: 66What Is Money?Page: 67The Measurement of MoneyPage: 68The Supply of MoneyPage: 69The Demand for Money: A Simple ModelPage: 69Equilibrium in the Money MarketPage: 70A Simple Monetary Model of PricesPage: 70A Simple Monetary Model of the Exchange RatePage: 71Money Growth, Inflation, and DepreciationPage: 723 The Monetary Approach: Implications and EvidencePage: 73Exchange Rate Forecasts Using the Simple ModelPage: 74Application: Evidence for the Monetary ApproachPage: 75Application: HyperinflationsPage: 754 Money, Interest Rates, and Prices in the Long Run: A General ModelPage: 80The Demand for Money: The General ModelPage: 80Long-Run Equilibrium in the Money MarketPage: 82Inflation and Interest Rates in the Long RunPage: 82The Fisher EffectPage: 83Real Interest ParityPage: 83Application: Evidence on the Fisher EffectPage: 84The Fundamental Equation Under the General ModelPage: 85Exchange Rate Forecasts Using the General ModelPage: 865 Monetary Regimes and Exchange Rate RegimesPage: 88The Long Run: The Nominal AnchorPage: 89Application: Nominal Anchors in Theory and PracticePage: 906 ConclusionsPage: 93End of ChapterPage: 93Key PointsPage: 93Key TermsPage: 94ProblemsPage: 94Chapter 4: Exchange Rates II: The Asset Approach in the Short RunPage: 991 Exchange Rates and Interest Rates in the Short Run: UIP and FX Market EquilibriumPage: 100Risky ArbitragePage: 100Equilibrium in the FX Market: An ExamplePage: 101Adjustment to Forex Market EquilibriumPage: 103Changes in Domestic and Foreign Returns and FX Market EquilibriumPage: 104SummaryPage: 1062 Interest Rates in the Short Run: Money Market EquilibriumPage: 106Money Market Equilibrium in the Short Run: How Nominal Interest Rates Are DeterminedPage: 106Money Market Equilibrium in the Short Run: Graphical SolutionPage: 107Adjustment to Money Market Equilibrium in the Short RunPage: 107Another Building Block: Short-Run Money Market EquilibriumPage: 108Changes in Money Supply and the Nominal Interest RatePage: 109Application: Can Central Banks Always Control the Interest Rate? A Lesson from the Crisis of 2008–09Page: 110Changes in Real Income and the Nominal Interest RatePage: 112The Monetary Model: The Short Run Versus the Long RunPage: 1123 The Asset Approach: Applications and EvidencePage: 112The Asset Approach to Exchange Rates: Graphical SolutionPage: 113Short-Run Policy AnalysisPage: 114Application: The Rise and Fall of the Dollar, 1999–2004Page: 1164 A Complete Theory: Unifying the Monetary and Asset ApproachesPage: 118Long-Run Policy AnalysisPage: 120OvershootingPage: 1245 Fixed Exchange Rates and the TrilemmaPage: 127What Is a Fixed Exchange Rate Regime?Page: 127Pegging Sacrifices Monetary Policy Autonomy in the Short Run: ExamplePage: 127Pegging Sacrifices Monetary Policy Autonomy in the Long Run: ExamplePage: 128The TrilemmaPage: 130Application: The Trilemma in EuropePage: 1316 ConclusionsPage: 133Application: News and the Foreign Exchange Market in WartimePage: 133End of ChapterPage: 137Key PointsPage: 137Key TermsPage: 137ProblemsPage: 138Chapter 5: National and International Accounts: Income, Wealth, and the Balance of PaymentsPage: 1411 Measuring Macroeconomic Activity: An OverviewPage: 142The Flow of Payments in a Closed Economy: Introducing the National Income and Product AccountsPage: 142The Flow of Payments in an Open Economy: Incorporating the Balance of Payments AccountsPage: 1442 Income, Product, and ExpenditurePage: 146Three Approaches to Measuring Economic ActivityPage: 146From GNE to GDP: Accounting for Trade in Goods and ServicesPage: 147From GDP to GNI: Accounting for Trade in Factor ServicesPage: 148Application: Celtic Tiger or Tortoise?Page: 149From GNI to GNDI: Accounting for Transfers of IncomePage: 150What the National Economic Aggregates Tell UsPage: 152Understanding the Data for the National Economic AggregatesPage: 152What the Current Account Tells UsPage: 154Application: Global ImbalancesPage: 1553 The Balance of PaymentsPage: 159Accounting for Asset Transactions: The Financial AccountPage: 160Accounting for Asset Transactions: The Capital AccountPage: 160Accounting for Home and Foreign AssetsPage: 161How the Balance of Payments Accounts Work: A Macroeconomic ViewPage: 161How the Balance of Payments Accounts Work: A Microeconomic ViewPage: 162Understanding the Data for the Balance of Payments AccountPage: 164What the Balance of Payments Account Tells UsPage: 1664 External WealthPage: 167The Level of External WealthPage: 168Changes in External WealthPage: 168Understanding the Data on External WealthPage: 169What External Wealth Tells UsPage: 1715 ConclusionsPage: 171End of ChapterPage: 173Key PointsPage: 173Key TermsPage: 173ProblemsPage: 174Appendix: External Wealth and Total WealthPage: 177Chapter 6: Balance of Payments I: The Gains from Financial GlobalizationPage: 1791 The Limits on How Much a Country Can Borrow: The Long-Run Budget ConstraintPage: 181How the Long-Run Budget Constraint Is DeterminedPage: 182The Budget Constraint in a Two-Period ExamplePage: 183A Long-Run Example: The Perpetual LoanPage: 185Implications of the LRBC for Gross National Expenditure and Gross Domestic ProductPage: 186SummaryPage: 186Application: The Favorable Situation of the United StatesPage: 186Application: The Difficult Situation of the Emerging MarketsPage: 1892 Gains from Consumption SmoothingPage: 192The Basic ModelPage: 192Consumption Smoothing: A Numerical Example and GeneralizationPage: 193Summary: Save for a Rainy DayPage: 196Application: Consumption Volatility and Financial OpennessPage: 196Application: Precautionary Saving, Reserves, and Sovereign Wealth FundsPage: 198Headlines: Copper-Bottomed InsurancePage: 1993 Gains from Efficient InvestmentPage: 200The Basic ModelPage: 200Efficient Investment: A Numerical Example and GeneralizationPage: 201Summary: Make Hay While the Sun ShinesPage: 203Application: Delinking Saving from InvestmentPage: 2044 Gains from Diversification of RiskPage: 205Diversification: A Numerical Example and GeneralizationPage: 206Application: The Home Bias PuzzlePage: 210Summary: Don’t Put All Your Eggs in One BasketPage: 2125 ConclusionsPage: 212End of ChapterPage: 213Key PointsPage: 213Key TermsPage: 213ProblemsPage: 214Appendix 1: Common Versus Idiosyncratic ShocksPage: 218Appendix 2: Can Poor Countries Gain from Financial Globalization?Page: 220Chapter 7: Balance of Payments II: Output, Exchange Rates, and Macroeconomic Policies in the Short RunPage: 2291 Demand in the Open EconomyPage: 230Preliminaries and AssumptionsPage: 230ConsumptionPage: 231InvestmentPage: 232The GovernmentPage: 233The Trade BalancePage: 233Headlines: The Curry TradePage: 236Application: The Trade Balance and the Real Exchange RatePage: 236Exogenous Changes in DemandPage: 2402 Goods Market Equilibrium: The Keynesian CrossPage: 241Supply and DemandPage: 241Determinants of DemandPage: 242Factors That Shift the Demand CurvePage: 243SummaryPage: 2443 Goods and Forex Market Equilibria: Deriving the IS CurvePage: 244Equilibrium in Two MarketsPage: 245Forex Market RecapPage: 245Deriving the IS CurvePage: 246Factors That Shift the IS CurvePage: 247Summing Up the IS CurvePage: 2494 Money Market Equilibrium: Deriving the LM CurvePage: 250Money Market RecapPage: 250Deriving the LM CurvePage: 251Factors That Shift the LM CurvePage: 252Summing Up the LM CurvePage: 2535 The Short-Run IS–LM–FX Model of an Open EconomyPage: 253Macroeconomic Policies in the Short RunPage: 255Monetary Policy Under Floating Exchange RatesPage: 255Monetary Policy Under Fixed Exchange RatesPage: 257Fiscal Policy Under Floating Exchange RatesPage: 258Fiscal Policy Under Fixed Exchange RatesPage: 259SummaryPage: 2606 Stabilization PolicyPage: 261Application: The Right Time for Austerity?Page: 262Headlines: Poland Is Not LatviaPage: 263Problems in Policy Design and ImplementationPage: 263Application: Macroeconomic Policies in the Liquidity Trap: From the Global Financial Crisis to the Coronavirus RecessionPage: 2667 ConclusionsPage: 270End of ChapterPage: 271Key PointsPage: 271Key TermsPage: 272ProblemsPage: 272Appendix 1: The Marshall–Lerner ConditionPage: 275Appendix 2: Multilateral Real Exchange RatesPage: 277Chapter 8: Fixed Versus Floating: International Monetary ExperiencePage: 2791 Exchange Rate Regime Choice: Key IssuesPage: 281Application: Britain and Europe: The Big IssuesPage: 281Key Factors in Exchange Rate Regime Choice: Integration and SimilarityPage: 286Economic Integration and the Gains in EfficiencyPage: 286Economic Similarity and the Costs of Asymmetric ShocksPage: 286Simple Criteria for a Fixed Exchange RatePage: 287Application: Do Fixed Exchange Rates Promote Trade?Page: 288Application: Do Fixed Exchange Rates Diminish Monetary Autonomy and Stability?Page: 2902 Other Benefits of FixingPage: 293Fiscal Discipline, Seigniorage, and InflationPage: 293Liability Dollarization, National Wealth, and Contractionary DepreciationsPage: 295SummaryPage: 3013 Fixed Exchange Rate SystemsPage: 302Cooperative and Noncooperative Adjustments to Interest RatesPage: 302Cooperative and Noncooperative Adjustments to Exchange RatesPage: 305Application: The Gold StandardPage: 3074 International Monetary ExperiencePage: 309The Rise and Fall of the Gold StandardPage: 309Bretton Woods to the PresentPage: 3115 ConclusionsPage: 314End of ChapterPage: 315Key PointsPage: 315Key TermsPage: 315ProblemsPage: 315Chapter 9: Exchange Rate Crises: How Pegs Work and How They BreakPage: 3191 Facts About Exchange Rate CrisesPage: 320What Is an Exchange Rate Crisis?Page: 320How Costly Are Exchange Rate Crises?Page: 320SummaryPage: 3252 How Pegs Work: The Mechanics of a Fixed Exchange RatePage: 325Preliminaries and AssumptionsPage: 325The Central Bank Balance SheetPage: 326Fixing, Floating, and the Role of ReservesPage: 327How Reserves Adjust to Maintain the PegPage: 328Graphical Analysis of the Central Bank Balance SheetPage: 328Defending the Peg I: Changes in the Level of Money DemandPage: 330Application: Risk Premiums in Advanced and Emerging MarketsPage: 333Application: The Argentine Convertibility Plan Before the Tequila CrisisPage: 335Defending the Peg II: Changes in the Composition of Money SupplyPage: 337Application: The Argentine Convertibility Plan After the Tequila CrisisPage: 342The Central Bank Balance Sheet and the Financial SystemPage: 344SummaryPage: 3473 How Pegs Break I: Inconsistent Fiscal PoliciesPage: 349The Basic Problem: Fiscal DominancePage: 349A Simple ModelPage: 350Application: The Peruvian Crisis of 1986Page: 353SummaryPage: 3564 How Pegs Break II: Contingent Monetary PoliciesPage: 356The Basic Problem: Contingent CommitmentPage: 357A Simple ModelPage: 357Application: The Man Who Broke the Bank of EnglandPage: 362SummaryPage: 3635 ConclusionsPage: 363Can We Prevent Crises?Page: 364End of ChapterPage: 366Key PointsPage: 366Key TermsPage: 367ProblemsPage: 367Chapter 10: The Euro: Economics and PoliticsPage: 3711 The Economics of the EuroPage: 374The Theory of Optimum Currency AreasPage: 374Simple Optimum Currency Area CriteriaPage: 375What’s the Difference Between a Fixed Exchange Rate and a Currency Union?Page: 376Other Optimum Currency Area CriteriaPage: 377Application: Optimum Currency Areas: Europe Versus the United StatesPage: 379Are the OCA Criteria Self-Fulfilling?Page: 382Headlines: Currency Unions and TradePage: 385SummaryPage: 3852 The History and Politics of the EuroPage: 385A Brief History of EuropePage: 386SummaryPage: 3913 Eurozone Tensions in Tranquil Times, 1999–2007Page: 393The European Central BankPage: 393The Rules of the ClubPage: 396Sticking to the RulesPage: 4004 The Eurozone in Crisis, 2008–13Page: 4025 Conclusions: Assessing the EuroPage: 409End of ChapterPage: 412Key PointsPage: 412Key TermsPage: 412ProblemsPage: 413Chapter 11: Topics in International MacroeconomicsPage: 11-11 Exchange Rates in the Long Run: Deviations from Purchasing Power ParityPage: 11-2Limits to ArbitragePage: 11-2Application: It’s Not Just the Burgers That Are CheapPage: 11-5Nontraded Goods and the Balassa–Samuelson ModelPage: 11-6Overvaluations, Undervaluations, and Productivity Growth: Forecasting Implications for Real and Nominal Exchange RatesPage: 11-8Application: Real Exchange Rates in Emerging MarketsPage: 11-10ConclusionPage: 11-112 Exchange Rates in the Short Run: Deviations from Uncovered Interest ParityPage: 11-12Application: The Carry TradePage: 11-12Application: Peso ProblemsPage: 11-15The Efficient Markets HypothesisPage: 11-17Limits to ArbitragePage: 11-19ConclusionPage: 11-223 Debt and DefaultPage: 11-23A Few Peculiar Facts About Sovereign DebtPage: 11-24A Model of Default, Part One: The Probability of DefaultPage: 11-25Application: Is There Profit in Lending to Developing Countries?Page: 11-30A Model of Default, Part Two: Loan Supply and DemandPage: 11-31Application: The Costs of DefaultPage: 11-34ConclusionPage: 11-36Application: The Argentina Crisis of 2001–02Page: 11-374 Case Study: The Global Macroeconomy and the Global Financial CrisisPage: 11-40Backdrop to the CrisisPage: 11-41Panic and the Great RecessionPage: 11-46Conclusion: Lessons for MacroeconomicsPage: 11-54End of ChapterPage: 11-57Key PointsPage: 11-57Key TermsPage: 11-57ProblemsPage: 11-57IndexPage: I-1NotesPage: N-1Back CoverPage: BC

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