International Finance and Financial Crises Essays in Honor of Robert
International Finance and Financial Crises: Essays in Honor of Robert P. Flood, Jr. contains the proceedings of a conference held in honor of Robert P. Flood, Jr. Bob Flood has made important contributions to many areas of economic analysis, including reg
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International Finance and Financial Crises Essays in Honor of Robert P. Flood, Jr.
Edited by
Peter Isard, Assaf Razin and Andrew K. Rose Partly reprinted from International Tax and Public Finance, Volume 6, No. 4 (1999)
SPRINGER SCIENCE +BUSINESS MEDIA, LLC
INTERNATIONAL MONETARY FUND Washington, D. C.
Library of Congress Cataloging-in-Publication Data International finance and financial crises : essays in honor of Robert P. Flood, Jr. / edited by Peter Isard, AssafRazin, and Andrew K. Rose. p. cm. Proceedings of a conference. "Partly reprinted from the International tax and public finance. volume 6. no. 4 (1999)." IncIudes bibliographical references. ISBN 978-94-010-5770-7 ISBN 978-94-011-4004-1 (eBook) DOI 10.1007/978-94-011-4004-1 P. 1. Flood, Robert P. II. Isard, Peter. III. Razin, Assaf. IV. Rose, Andrew, 1959- . V. International tax and public finance. HG3881.16027 2000 99-40806 332-dc21 CIP Copyright@ 1999 by Springer Science+Business Media New York Originally published by K1uwer Academic Publishers, New York in 1999 Softcover reprint of the hardcover 1st edition 1999 AII rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher, Springer Science+Business Media, LLC
Printed on acid-free paper.
to Bob's parents, Robert and Nancy Flood,
and to Ofair Razin
Contents Preface
ix
Contributors and Conference Participants
Xl
A Tribute to Robert P. Flood, Jr. Stanley Fischer Overview
XV
xvii
1. Some Parallels Between Currency and Banking Crises Nancy P. Marion Comments Carmen M. Reinhart Donald J. Mathieson
19
General Discussion
27
2. Balance Sheets, the Transfer Problem, and Financial Crises Paul Krugman
31
Comments Peter Garber Olivier Jeanne
45
General Discussion
55
3. Financial Crises: What Have We Learned from Theory and Experience?
57
Summary of Panel Remarks Michael P. Dooley Rudiger Dornbusch David Folkerts-Landau Michael Mussa Remarks Jacob A. Frenkel 4. On the Foreign Exchange Risk Premium in Sticky-Price General Equilibrium Models Charles Engel
63
71
Comments James M. Boughton Richard A. Meese
87
General Discussion
93
5. An Information-Based Model of Foreign Direct Investment: The Gains from Trade Revisited 95 Assaf Razin, Efraim Sadka, and Chi- Wa Yuen Comment Joshua Aizenman
113
General Discussion
119
Vlll
CONTENTS
6. An International Dynamic Asset Pricing Model Robert J. Hodrick, David Tat-Chee Ng, and Paul Sengmueller
121
Comments Louis Scott Paul D. Kaplan
145
General Discussion
149
7. Role of the Minimal State Variable Criterion in Rational Expectations Models Bennett T. McCallum
151
Comment Edwin Burmeister
171
General Discussion
175
8. Exact Utilities under Alternative Monetary Policy Rules in a Simple Macro Model with Optimizing Agents Dale W. Henderson and Jinill Kim
177
Simple Monetary Policy Rules Under Model Uncertainty Peter Isard, Douglas Laxton, and An
