International Money and Finance

by Hallwood, C. Paul; MacDonald, Ronald

• ISBN13: 9780631204626
• ISBN10: 0631204628
• Edition: 3rd
• Format: Paperback
• Copyright: 2000-09-01
• Publisher: Wiley-Blackwell

Summary

With the third edition of International Money and Finance, Hallwood and MacDonald continue to provide an invaluable resource for advanced undergraduates and graduates studying monetary economics in an international context. Reflecting monetary, neoclassical, and neoKeynesian research agendas, the book investigates all four dimensions of international money and finance - theory, evidence, policy, and institutions.In addition to offering new and revised sections to reflect the latest theoretical and empirical research, the third edition includes new chapters on:- real shocks and exchange regime volatility.- currency crises and speculative attack.- exchange rate target zones and 'dirty floating'- exchange rates and transition economies.

Author Biography

C. Paul Hallwood is Professor of Economics at University of Connecticut. He has authored five books and many papers within the international economics field, covering areas such as international money and finance, the multinational corporation, the international oil industry and developing economies, and the economics of commodity markets.

Ronald MacDonald is Professor of International Finance in the Department of Economics at University of Strathclyde. He is the author/editor of several books in international money and finance and has written numerous articles in the areas of international finance, macroeconomics, and financial economics.

Table of Contents

List of Figures	x
List of Tables	xiv
Preface	xvi
Introduction	1	(9)
The chapters	2	(8)
Some Basic Concepts in International Finance	10	(14)
The exchange rate	10	(4)
The balance of payments accounts	14	(4)
Purchasing power parity	18	(1)
Floating exchange rates: prospect and retrospect	19	(3)
Exchange rate volatility	22	(2)
Spot and Forward Exchange Rates: Some More Basic Ideas	24	(20)
The elasticities view of the exchange rate	24	(8)
The forward exchange rate, arbitrage, and pure speculation	32	(6)
Covered interest rate parity--empirical evidence	38	(2)
Uncovered interest rate parity--empirical evidence	40	(1)
Real interest rate parity--empirical evidence	41	(3)
Income and the Balance of Payments	44	(23)
The foreign trade multiplier	45	(1)
The equilibrium real exchange rate	46	(3)
An early view of economic management	49	(1)
The assignment problem	50	(2)
The absorption approach	52	(4)
Intertemporal utility maximization and the current account	56	(2)
Twin deficits	58	(1)
Foreign repercussions with no capital mobility	59	(8)
Macroeconomics in an Open Economy: The Mundell--Fleming Model and Some Extensions	67	(27)
The ``base-line'' Mundell-Fleming model	68	(7)
The large country case	75	(1)
Insulation and the Mundell-Fleming model	76	(1)
Imperfect capital mobility and the Mundell-Fleming model	77	(3)
Regressive expectations and monetary-fiscal policy	80	(3)
The J curve effect and regressive expectations	83	(1)
Wealth effects	84	(1)
Aggregate supply, the real balance effect, and the exchange rate in the Mundell-Fleming model	85	(6)
Summary and conclusions	91	(3)
International Policy Coordination	94	(28)
The two-country Mundell-Fleming model and macroeconomic interdependence	95	(11)
The potential gains from policy coordination	106	(7)
Dynamic games, and the sustainability and reputation credibility of international cooperation	113	(2)
Some evidence on the potential benefits of coordination	115	(2)
Potential impediments to policy coordination and the appropriate form of such coordination	117	(5)
Purchasing Power Parity: Theory and Evidence	122	(33)
The absolute and relative purchasing power parity concepts	123	(2)
The efficient markets view of purchasing power parity	125	(2)
Further interpretation of purchasing power parity	127	(7)
The empirical validity of purchasing power parity	134	(19)
Concluding comments	153	(2)
The Monetary Approach to the Balance of Payments	155	(21)
What is so different about the monetary approach?	156	(3)
The global monetarist model	159	(9)
Sterilization and the reserve offset coefficient	168	(5)
The international transmission of inflation: some evidence	173	(3)
The Monetary View of Exchange Rate Determination	176	(36)
The asset approach to the exchange rate	177	(2)
The flex-price monetary approach to the exchange rate	179	(3)
Introducing expectations	182	(4)
Rational speculative bubbles	186	(2)
The sticky-price monetary approach	188	(5)
Currency substitution	193	(5)
Empirical evidence on the monetary model	198	(5)
Recent empirical evidence on the monetary model	203	(3)
Empirical tests for the existence of speculative bubbles	206	(2)
Concluding comments	208	(4)
The Monetary Model: Further Applications--Real Shocks and Exchange Regime Volatility	212	(14)
The general equilibrium monetary model	213	(2)
The monetary model and regime volatility	215	(2)
Empirical evidence on the general equilibrium approach	217	(7)
Concluding comments	224	(2)
The Portfolio Balance Approach to the Determination of the Exchange Rate	226	(23)
The portfolio balance model	230	(5)
Open market purchase of bonds: monetary policy	235	(3)
An increase in the supply of domestic bonds: fiscal policy	238	(3)
Asset preference shift	241	(1)
Econometric evidence on the portfolio balance approach	242	(4)
Summary and concluding comments	246	(3)
Spot and Forward Exchange Rates and the Efficient Markets Hypothesis	249	(28)
Spot and forward exchange rates	250	(5)
The efficient markets hypothesis and the forward market for foreign exchange	255	(4)
Econometric estimation of the efficient markets hypothesis	259	(4)
A risk premium story to explain why &betta; may not be unity	263	(5)
Empirically implementing equation (12.20)	268	(6)
Concluding comments	274	(3)
Expectational Explanations for the Rejection of the Efficient Markets Hypothesis and the ``News''	277	(26)
Peso effects, rational speculative bubbles, and econometric inference	278	(2)
Technical analysis and chartism	280	(8)
Survey data, expectations, and risk	288	(3)
Market microstructure	291	(3)
The news approach to exchange rate modeling	294	(1)
Empirical studies of the news approach	295	(5)
The noise-trader paradigm	300	(3)
Currency Crises and Speculative Attacks	303	(18)
Recent international financial crises	303	(2)
First-generation speculative attack models	305	(5)
Second-generation models	310	(1)
Econometric estimates of speculative attack models	311	(1)
Microeconomic indicators	312	(2)
Contagion	314	(1)
Interest rate, foreign exchange, and credit risk	315	(2)
Possible policy responses	317	(4)
Exchange Rate Target Zones and ``Dirty Floating''	321	(15)
Target zones	321	(6)
Target zone credibility	327	(3)
Calculating the devaluation probability--Mizrach's method	330	(2)
Dirty floating	332	(4)
The International Gold Standard: Theory and Experience	336	(17)
Credibility and exchange rate regimes	336	(9)
The gold standard during the interwar period	345	(8)
The Dollar Standard Today and During the Bretton Woods Era	353	(18)
The Bretton Woods system to 1971	354	(4)
The dollar standard	358	(5)
Reserve creation and the US and world price levels	363	(4)
The East Asian dollar standard	367	(4)
Monetary Unions	371	(17)
Benefits and costs of a monetary area: seminal ideas	371	(3)
Melitz and the covariance of equilibrium real exchange rates approach	374	(5)
Bayoumi's general equilibrium model of the optimum currency area	379	(1)
Ad hoc benefits of a pegged exchange rate or common currency	380	(3)
Estimating shocks	383	(2)
Fiscal federalism	385	(1)
More on fiscal policy in a monetary union	386	(2)
International Capital Flows	388	(21)
International money and capital flows	388	(2)
Eurobanking	390	(6)
Regulation: the Basle capital accord	396	(2)
Measuring international capital mobility	398	(6)
International bond markets	404	(5)
Developing Countries, Balance of Payments Adjustment, and the International Monetary Fund	409	(21)
Developing country exchange rate arrangements: to peg or not to peg?	410	(3)
Liberalization, the equilibrium real exchange rate, and economic policy	413	(2)
The IMF: its role	415	(4)
The IMF's monetary approach to the balance of payments	419	(2)
The new structuralist debate	421	(9)
The Order of Liberalization in Developing Countries	430	(13)
Distortions and economic performance	431	(4)
Unhappy experience with financial liberalization	435	(2)
The order of liberalization	437	(6)
Exchange Rates and Transition Economies	443	(13)
Economic reforms	443	(1)
Microeconomic-macroeconomic equilbrium	444	(3)
Shocks to the equilibrium real exchange rate	447	(2)
The real exchange rate in asset market equilibrium	449	(4)
On knowing the correct real exchange rate	453	(1)
Choice of an exchange rate regime by a TE	454	(2)
International Debt	456	(16)
The debt problem	456	(3)
Growth of international debt	459	(2)
Debt and economic growth	461	(2)
Capital flight	463	(1)
Governmental and national foreign indebtedness	464	(1)
The lenders' trap	465	(1)
Some debt reform proposals	466	(3)
An international debt facility	469	(3)
International Monetary Reform	472	(18)
Financing or adjustment?	473	(3)
Designing an international monetary system	476	(3)
Yen and DM currency blocs	479	(2)
The costs and benefits of flexible exchange rates	481	(4)
Alternative plans for the reform of the international monetary system	485	(5)
Bibliography	490	(40)
Author Index	530	(8)
Subject Index	538