M18_KRUG8276_08_IM_C18 -

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Overview of Section IV: International Macroeconomic Policy Part IV of the text is comprised of five chapters: Chapter 18 The International Monetary System, 1870–1973 Chapter 19 Macroeconomic Policy and Coordination Under Floating Exchange Rates Chapter 20 Optimum Currency Areas and the European Experience Chapter 21 The Global Capital Market: Performance and Policy Problems Chapter 22 Developing Countries: Growth, Crisis, and Reform n Section Overview This final section of the book, which discusses international macroeconomic policy, provides historical and institutional background to complement the theoretical presentation of the previous section. These chapters also provide an opportunity for students to hone their analytic skills and intuition by applying and extending the models learned in Section III to a range of current and historical issues. The first two chapters of this section discuss various international monetary arrangements. These chapters describe the workings of different exchange rate systems through the central theme of internal and external balance. The model developed in the previous section provides a general framework for analysis of gold standard, reserve currency, managed floating, and floating exchange-rate systems. Chapter 18 chronicles the evolution of the international monetary system from the gold standard of 1870–1914, through the interwar years, and up to and including the post-war Bretton Woods period. The chapter discusses the price-specie-flow mechanism of adjustment in the context of the discussion of the gold standard. Conditions for internal and external balance are presented through diagrammatic analysis based upon the short-run macroeconomic model of Chapter 16. This analysis illustrates the strengths and weaknesses of alternative fixed exchange rate arrangements. The chapter also draws upon earlier discussion of balance of payments crises to make clear the interplay between “fundamental disequilibrium” and speculative attacks. There is a detailed analysis of the Bretton Woods system that includes a case study of the experience during its decline beginning in the mid-1960s and culminating with its collapse in 1973. Chapter 19 focuses on recent experience under floating exchange rates. The discussion is couched in terms of current debate concerning the advantages of floating versus fixed exchange rate systems. The theoretical arguments for and against floating exchange rates frame two case studies, the first on the experience between the two oil shocks in the 1970s and the second on the experience since 1980. The transmission of monetary and fiscal shocks from one country to another is also considered. Discussion of the experience in the 1980s points out the shift in policy toward greater coordination in the second half of the decade. Discussion of the 1990s focuses on the strong U.S. economy from 1992 on and the extended economic difficulties in Japan. Current topics, such as the funding of the large U.S. current
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This note was uploaded on 05/19/2009 for the course ECON jungminiss taught by Professor Hmhmyt during the Spring '09 term at Stanford.

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M18_KRUG8276_08_IM_C18 -

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