Comment on M. Obstfeld, "open-economy macroeconomics: developments in theory and policy."

Article Abstract:

Questions were raised with regards to M. Obstfeld work involving open-economy macroeconomics. With regards to Obstfeld model, improvements can be undertaken so as to generate more variance in the nominal exchange rate and covariance between the nominal and the real rate. It is also suggested to broaden the menu of asstes being discussed in the model as to create a powerful immediate effects on the exchange rate. Widening of asset menu also increases the possibility of introducing different monetary policies.

Analysis, Economic research

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Open-economy macroeconomics: developments in theory and policy

Article Abstract:

The European Monetary Union's (EMU) plan for a single currency was analyzed to better understand international developments in open-economy macroeconomics. The lack of quantitative analysis of the advantages and disadvantages of such an undertaking has led bodies such as the Swedish commission on EMU not to advise early entry in light of existing high unemployment. However, the EMU can aid in creating better international economic relations by promoting fiscal stability and preventing protectionism.

European Monetary System, Liquidity (Finance), International liquidity

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Comment on M. Obstfeld, "Open-Economy Macroeconomics: Developments in Theory and Policy."

Article Abstract:

Obstfeld's outline of the progress made in open-economy macroeconomics should be commended, however, the observations made about the realism of models are flawed. Obstfeld has wrongly argued that short and medium term movements in real and nominal exchange rates can mostly be explained by monetary policy. Obstfeld's supposition about floating exchange rate regimes are unfounded due to the unintelligibility of decomposition in structural VARs.

Prices, International economic integration, Economic integration, Foreign exchange market

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