This paper considers the main elements of the standard pattern of fi nancial liberalization that has become widely prevalent in developing countries. The theoretical arguments in favour of such liberalization are considered and critiqued, and the political economy of such measures is discussed. The problems for developing countries, with respect to fi nancial fragility and the greater propensit...

The considerable amount of research in recent years on New Keynesian, open-economy models -models with nominal price rigidities and intertemporally maximizing agents -has yielded fresh insights for what Alan Blinder has called the “dark art” of making monetary policy. The literature has made its greatest contributions in understanding the transmission of shocks across countries, exchange rate p...

This paper argues that the basic model of the ‘modern’ view of macroeconomics appears to be a poor approximation of the actual economy.

Ideas taught at the macroeconomics principles level should satisfy two goals. First, they should be simple enough to be both understandable and memorable for the beginning student. Second, they should be consistent both with the modern economy and with the macroeconomic models of this economy that are used in practice for policy evaluation. There is no necessary conflict between these two goals...

This dissertation consists of four chapters and an appendix. After an introductory chapter with an extended literature overview, Chapter 2 is dedicated to the topic of macroeconomic policy in a heterogeneous monetary union. Chapter 3 investigates the macroeconomics of real estate, and Chapter 4 deals with a New Keynesian open economy model versus the six major puzzles in International Macroecon...

R ecent developments in open-economy macroeconomics have progressed under the paradigm of nominal price rigidities, where monetary disturbances are the main source of fluctuations. Following developments in closed-economy models, new open-economy models have combined price rigidities and market imperfections in a fully microfounded intertemporal general equilibrium setup. This framework has bee...

This paper revisits the Lucas paradox by quantifying empirically the relevance of a specific set of policies — restrictions on international capital flows — in shaping the patterns of capital movements at various stages of economic development. The determinants of the direction of capital flows, and their relation to economic development, constitute an important topic in open economy macroecono...

Results of empirical research have revealed a characteristic hump-shaped effect of monetary policy shocks on output: the effect builds to a peak after several months and then gradually dies out. We analyze, in the context of a “new open economy macroeconomics” model, factors that imply a humpshaped effect of a monetary policy shock on output. We find that a humpshaped effect of output is likely...