International Macroeconomics and Finance - Theory and Empirical Methods

International Macroeconomics and Finance - Theory and Empirical Methods

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International Macroeconomics and Finance: Theory and Empirical Methods Nelson C. Mark December 12, 2000 forthcoming, Blackwell Publishers
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i To Shirley, Laurie, and Lesli
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ii Preface This book grew out of my lecture notes for a graduate course in in- ternational macroeconomics and ° nance that I teach at the Ohio State University. The book is targeted towards second year graduate stu- dents in a Ph.D. program. The material is accessible to those who have completed core courses in statistics, econometrics, and macroeconomic theory typically taken in the ° rst year of graduate study. These days, there is a high level of interaction between empirical and theoretical research. This book re ± ects this healthy development by integrating both theoretical and empirical issues. The theory is in- troduced by developing the canonical model in a topic area and then its predictions are evaluated quantitatively. Both the calibration method and standard econometric methods are covered. In many of the empir- ical applications, I have updated the data sets from the original studies and have re-done the calculations using the Gauss programming lan- guage. The data and Gauss programs will be available for downloading from my website: www.econ.ohio-state.edu/Mark . There are several di ff erent °camps± in international macroeconomics and ° nance. One of the major divisions is between the use of ad hoc and optimizing models. The academic research frontier stresses the theoretical rigor and internal consistency of fully articulated general equilibrium models with optimizing agents. However, the ad hoc mod- els that predate optimizing models are still used in policy analysis and evidently still have something useful to say. The book strikes a middle ground by providing coverage of both types of models. Some of the other divisions in the ° eld are ± exible price versus sticky price models, rationality versus irrationality, and calibration versus sta- tistical inference. The book gives consideration to each of these °mini debates.± Each approach has its good points and its bad points. Al- though many people feel ° rmly about the particular way that research in the ° eld should be done, I believe that beginning students should see a balanced treatment of the di ff erent views. Here±s a brief outline of what is to come. Chapter 1 derives some basic relations and gives some institutional background on international ° nancial markets, national income and balance of payments accounts, and central bank operations.
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iii Chapter 2 collects many of the time-series techniques that we draw upon. It is not necessary work through this chapter carefully in the ° rst reading. I would suggest that you skim the chapter and make note of the contents, then refer back to the relevant sections when the need arises. This chapter keeps the book reasonably self-contained and provides an e cient reference with uniform notation.
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