Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics

Maurice Obstfeld

No 9118, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The New Open Economy Macroeconomics has allowed economists to tackle classical problems with new tools, while also generating new ideas and questions. In their attempts to make the new models capture empirical regularities, researchers have entertained a variety of assumptions about the international pricing of goods, notably, models of pricing to market and destination-currency pricing of exports. Some of the resulting models imply that exchange-rate changes lack international expenditure-switching effects, and they thus appear to call for a radical rethinking of the role of exchange rates in international adjustment. This paper argues that the recent resurgence of exchange-rate pessimism stems from oversimplified modeling strategies rather than from evidence. Like earlier episodes starting with the extreme 'elasticity pessimism' of the early postwar era, it is based on a misinterpretation of the empirical record.

JEL-codes: F31 F32 (search for similar items in EconPapers)
Date: 2002-08
New Economics Papers: this item is included in nep-cba, nep-dge and nep-ifn
Note: EFG IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (101)

Published as Obstfeld, Maurice, 2002. "Exchange Rates and Adjustment: Perspectives from the New Open- Economy Macroeconomics," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(S1), pages 23-46, December.

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Working Paper: Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics (2003)
Journal Article: Exchange Rates and Adjustment: Perspectives from the New Open- Economy Macroeconomics (2002)
Working Paper: Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics (2002)
Working Paper: Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics (2002)
Working Paper: Exchange Rates and Adjustment: Perspectives from the New Open Economy Macroeconomics (2002)
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