Academic Papers

2004
Brooks, Robin J, Aasim M Husain, Ashoka Mody, Nienke Oomes, and Kenneth Rogoff. 2004. “Evolution and Performance of Exchange Rates Regimes.” International Monetary Fund Occasional Paper 229. IMF Working Paper WP03/243 Abstract

Using recent advances in the classification of exchange rate regimes, this paper finds no support for the popular bipolar view that countries will tend over time to move to the polar extremes of free float or rigid peg. Rather, intermediate regimes have shown remarkable durability. The analysis suggests that as economies mature, the value of exchange rate flexibility rises. For countries at a relatively early stage of financial development and integration, fixed or relatively rigid regimes appear to offer some anti-inflation credibility gain without compromising growth objectives. As countries develop economically and institutionally, there appear to be considerable benefits to more flexible regimes. For developed countries that are not in a currency union, relatively flexible exchange rate regimes appear to offer higher growth without any cost in credibility.

Monograph
Reinhart, Carmen M, and Kenneth S Rogoff. 2004. “The Modern History of Exchange Rate Arrangements: A Reinterpretation.” Quarterly Journal of Economics 119: 1-48. Working Paper Abstract

We develop a novel system of re-classifying historical exchange rate regimes. One difference between our study and previous classification efforts is that we employ an extensive data base on market-determined parallel exchange rates. Our 'natural' classification algorithm leads to a stark reassessment of the post-war history of exchange rate arrangements. When the official categorization is a form of peg, roughly half the time our classification reveals the true underlying monetary regime to be something radically different, often a variant of a float. Conversely, when official classification is floating, our scheme routinely suggests that the reality was a form of de facto peg. Our new classification scheme points to a complete rethinking of economic performance under alternative exchange rate regimes. Indeed, the breakup of Bretton Woods had a far less dramatic impact on most exchange rate regimes than is popularly believed. Also, contrary to an influential empirical literature, our evidence suggests that exchange rate arraignments may be quite important for growth, trade and inflation. Our newly compiled monthly data set on market-determined exchange rates goes back to 1946 for 153 countries.

Article
Ilzetzki, Ethan O, Carmen M Reinhart, and Kenneth Rogoff. 2004. “Exchange Rate Arrangements into the 21st Century: Will the Anchor Currency Hold?” Unpublished. DATA
Rogoff, Kenneth. 2004. “Some Speculation on Growth and Poverty over the Twenty-First Century.” The Brookings Trade Forum: Globalization, Growth and Poverty. Edited by Sue Collins and Carol Graham. Washington, D.C. Brookings Institution, 305-311. Brookings Trade Forum;
Chapter
2004. “Extending the Limits of Global Financial Integration.” Journal of Policy Modeling 26 (4): 519-523. JPM
2004. “U S Imbalances and the Euro's Outlook.” Cato Journal 24 (1-2): 41-43. Cato Journal
Rogoff, Kenneth. 2004. “Globalization and Global Disinflation.” Monetary Policy and Uncertainity: Adapting to a Changing Economy, 77-112. Federal Reserve Bank of Kansas City. Monetary Policy and Uncertainty conference
Chapter
Reinhart, Carmen M, and Kenneth Rogoff. 2004. “Serial Default and the “Paradox” of Rich-to-Poor Capital Flows.” American Economic Review 94 (2): 52–58.
Article
2003
Kose, Ayhan, Eswar Prasad, Kenneth Rogoff, and Shang-Jin Wei. 2003. “The Effects of Financial Globalization on Developing Countries: Some Empirical Evidence.” IMF Occasional Paper 220. Download from IMF
Monograph
Chen, Yu-chin, and Kenneth Rogoff. 2003. “Commodity Currencies.” Journal of International Economics 60: 133–160.
Paper
Reinhart, Carmen M, Kenneth Rogoff, and Miguel A Savastano. 2003. “Debt Intolerance.” Brookings Papers on Economic Activity 1: 1–74. Abstract

This paper introduces the concept of debt intolerance,' which manifests itself in the extreme duress many emerging markets experience at debt levels that would seem manageable by advanced country standards. We argue that safe' external debt-to-GNP thresholds for debt intolerant countries are low, perhaps as low as 15 percent in some cases. These thresholds depend on a country's default and inflation history. Debt intolerance is linked to the phenomenon of serial default that has plagued many countries over the past two centuries. Understanding and measuring debt intolerance is fundamental to assess the problems of debt sustainability, debt restructuring, capital market integration, and the scope for international lending to ameliorate crises. Our goal is to make a first pass at quantifying debt intolerance, including delineating debtors' clubs and regions of vulnerability, on the basis on a history of credit events going back to the 1820s for over 100 countries.

Article
2002
Reinhart, Carmen M., and Kenneth S. Rogoff. 2002. “F D I to Africa: The Role of Price Stability and Currency Instability.” (Pleskovic, Boris, Nicholas Stern, eds.) The New Reform Agenda. Washington, DC: Annual World Bank Conference on Development Economics, 247-282. Download from IMF
Obstfeld, Maurice, and Kenneth Rogoff. 2002. “Global Implications of Self-Oriented National Monetary Rules.” Quarterly Journal of Economics 117: 503-36. Abstract

In recent years, many countries have instituted monetary reforms aimed at improving anti-inflation credibility. Is it a problem, however, that international welfare spillover effects seldom receive much consideration in the design of monetary reforms? Surprisingly, the answer may be no. Under plausible conditions, as domestic rules improve and international financial markets become more complete, the Nash and cooperative monetary rule setting games converge. We base our analysis on a utility-theoretic sticky-wage (new open economy macroeconomics) model; the question we pose simply could not have been adequately formulated using earlier models of monetary cooperation.

Article
Obstfeld, Maurice, Kenneth Rogoff, Elhanan Helpman, and Effraim Sadka. 2002. “Risk and Exchange Rates.” Contemporary Economic Policy: Essays in Honor of Assaf Razin. Cambridge: Cambridge University Press. NBER Working Paper; Abstract

This paper develops an explicitly stochastic new open economy macroeconomics' model, which can potentially be used to explore the qualitative and quantitative welfare differences between alternative exchange rate regimes. A crucial feature is that we do not simplify by assuming certainty equivalence for producer price setting behavior. Our framework also provides a sticky-price alternative to Lucas's (1982) exchange rate risk premium model. We show that the level risk premium' in the exchage rate is potentially quite large and may be an important missing fundamental in empirical exchange rate equations. As a byproduct analysis also suggests an intriguing possible explanation of the forward premium puzzle.

Paper
Rogoff, Kenneth, and Jeromin Zettelmeyer. 2002. “Bankruptcy Procedures for Sovereigns: A History of Ideas, 1976–2001.” International Monetary Fund Staff Papers 49 (3): 471–507. Abstract

This paper describes the evolution of ideas to apply bankruptcy reorganization principles to sovereign debt crises. Our focus is on policy proposals between the late 1970s and Anne Krueger's (2001) proposed 'Sovereign Debt Restructuring Mechanism," with brief reference to the economics literature on sovereign debt. We describe the perceived inefficiencies that motivate proposals, and how proposals seek to change debtor and creditor incentives. We find that there has been a moving consensus on what constitutes the underlying problem, but not on how to fix it. The range of proposed approaches remains broad and only recently shows some signs of narrowing.

Article
2001
Obstfeld, Maurice, and Kenneth Rogoff. 2001. “Perspectives on OECD Capital Market Integration: Implications for U.S. Current Account Adjustment.” Global Economic Integration: Opportunities and Challenges, 169-208. Federal Reserve Bank of Kansas City. Chapter
Obstfeld, Maurice, Kenneth Rogoff, Ben Bernanke, and Kenneth Rogoff. 2001. “The Six Major Puzzles in International Macroeconomics: Is there a Common Cause?” NBER Macroeconomics Annual 2000, 339-390. Cambridge, MA: MIT Press. NBER volume; Abstract

The central claim in this paper is that by explicitly introducing costs of international trade (narrowly, transport costs but more broadly, tariffs, nontariff barriers and other trade costs), one can go far toward explaining a great number of the main empirical puzzles that international macroeconomists have struggled with over twenty-five years. Our approach elucidates J. McCallum's home bias in trade puzzle, the Feldstein-Horioka saving-investment puzzle, the French-Poterba equity home bias puzzle, and the Backus-Kehoe- Kydland consumption correlations puzzle. That one simple alteration to an otherwise canonical international macroeconomic model can help substantially to explain such a broad arrange of empirical puzzles, including some that previously seemed intractable, suggests a rich area for future research. We also address a variety of international pricing puzzles, including the purchasing power parity puzzle emphasized by Rogoff, and what we term the exchange-rate disconnect puzzle.' The latter category of riddles includes both the Meese-Rogoff exchange rate forecasting puzzle and the Baxter-Stockman neutrality of exchange rate regime puzzle. Here although many elements need to be added to our extremely simple model, we can still show that trade costs play an essential role.

Chapter
Rogoff, Kenneth. 2001. “Why Not a Global Currency.” American Economic Review 91: 243-47.
Article
Rogoff, Kenneth. 2001. “The Failure of Empirical Exchange Rate Models: No Longer New but Still True.” Economic Policy Web Essay 1 (1). Economic Policy
Article
2000
Obstfeld, Maurice, and Kenneth Rogoff. 2000. “New Directions for Stochastic Open Economy Models.” Journal of International Economics 50: 117-53. Abstract

The paper develops a simple stochastic new open economy macroeconomic model based on sticky nominal wages. Explicit solution of the wage-setting problem under uncertainty allows one to analyze the effects of the monetary regime on welfare, expected output, and the expected terms of trade. Despite the potential interplay between imperfections due to sticky wages and monopoly, the optimal monetary policy rule has a closed-form solution. To motivate our model, we show that observed correlations between terms of trade and exchange rates are more consistent with our traditional assumptions about nominal rigidities than with a popular alternative based on local-currency pricing.

Article

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