Academic Papers

Rogoff, Kenneth. 1996. “The Purchasing Power Parity Puzzle.” Journal of Economic Literature 34: 647-68.
Froot, Kenneth, Michael Kim, and Kenneth Rogoff. 1995. “The Law of One Price over 700 Years”. Download from IMF
Paper Appendix Data
Obstfeld, Maurice, and Kenneth Rogoff. 1995. “The Intertemporal Approach to the Current Account.” Handbook of International Economics 3: 1731-99. NBER Working Paper #4893 Abstract

The intertemporal approach views the current-account balance as the outcome of forward-looking dynamic saving and investment decisions. This paper, a chapter in the forthcoming third volume of the Handbook of International Economics, surveys the theory and empirical work on the intertemporal approach as it has developed since the early 1980s. After reviewing the basic one-good, representative- consumer model, the paper considers a series of extended models incorporating relative prices, complex demographic structures, consumer durables, asset-market incompleteness, and asymmetric information. We also present a variety of empirical evidence illustrating the usefulness of the intertemporal approach, and argue that intertemporal models provide a consistent and coherent foundation for open-economy policy analysis. As such, the intertemporal approach should supplant the expanded versions of the Mundell-Fleming IS-LM model that currently furnish the dominant paradigm used by central banks, finance ministries, and international economic agencies.

Froot, Ken, and Kenneth Rogoff. 1995. “Perspectives on PPP and Long-Run Real Exchange Rates.” Handbook of International Economics, 3: 1647-88. Abstract

This paper reviews the large and growing literature which tests PPP and other models of the long-run real exchange rate. We distinguish three different stages of PPP testing and focus on what has been learned from each. The most important overall lesson has been that the real exchange rate appears stationary over sufficiently long horizons. Simple, univariate random walk specifications can be rejected in favor of stationary alternatives. However, we argue that multivariate tests, which ask whether any linear combination of prices and exchange rates are stationary, have not necessarily provided meaningful rejections of nonstationarity. We also review a number of other theories of the long run real exchange rate -- including the Balassa-Samuelson hypothesis -- as well as the evidence supporting them. We argue that the persistence of real exchange rate movements can be generated by a number of sensible models and that Balassa- Samuelson effects seem important, but mainly for countries with widely disparate levels of income of growth. Finally, this paper presents new evidence testing the law of one price on 200 years of historical commodity price data for England and France, and uses a century of data from Argentina to test the possibility of sample-selection bias in tests of long-run PPP.

NBER Working Paper
Glick, Reuven, and Kenneth Rogoff. 1995. “Global versus Country-Specific Productivity Shocks and the Current Account.” Journal of Monetary Economics 35: 159-92. Abstract

This paper develops an analytically tractable empirical model of investment and the current account, and applies it to data from the G-7 countries. This distinction between global and country-specific shock turns out to be quite important for explaining current account behavior; overall the model performs surprisingly well. One apparent puzzle, however, is that the current account responds by much less than investment to country-specific shocks, despite the near unit root behavior of these shocks. We show theoretically that this apparent anomaly can be explained if the shocks have very slow mean reversion.

Obstfeld, Maurice, and Kenneth Rogoff. 1995. “The Mirage of Fixed Exchange Rates.” Journal of Economic Perspectives 9: 73-96. Data
Obstfeld, Maurice, and Kenneth Rogoff. 1995. “Exchange Rate Dynamics Redux.” The Journal of Political Economy 103: 624–60. Abstract

We develop an analytically tractable two-country model that marries a full account of global macroeconomic dynamics to a supply framework based on monopolistic competition and sticky nominal prices. The model offers simple and intuitive predictions about exchange rates and current accounts that sometimes differ sharply from those of either modern flexible-price inter-temporal models or traditional sticky price Keynesian models. Our analysis leads to a novel perspective on international welfare spillovers due to monetary and fiscal policies.


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Rogoff, Kenneth. 1993. “Achieving Exchange Rate Stability in a Tri-Polar World: A Target Zone System with a Rotating Anchor.” Price Stabilization in the 1990s, edited by Kumiharu Shigehara. London: McMillan Press.
Rogoff, Kenneth. 1992. “Traded Goods Consumption Smoothing and the Random Walk Behavior of the Real Eschange Rate.” Monetary and and Economic Studies 10: 1-29. NBER Abstract

Conventional explanations of the near random walk behavior of real exchange rates rely on near random walk behavior in the underlying fundamentals (e.g.. tastes and technology). The present paper offers an alternative rationale, based on a fixed-factor neoclassical model with traded and non-traded goods. The basic idea is that with open capital markets, agents can smooth their consumption of tradeables in the face of transitory traded goods productivity shocks. Agents cannot smooth non-traded goods productivity shocks, but if these are relatively small (as is often argued to be the case) then traded goods consumption smoothing will lead to smoothing of the intra-temporal price of traded and non-traded goods. The (near) random walk implications of the model for the real exchange rate are in stark contrast to the empirical predictions of the classic Balassa-Samuelson model. The paper applies the model to the yen/dollar exchange rate over the floating rate period.

NBER Working Paper
Rogoff, Kenneth. 1992. “Dealing with Developing Country Debt in the 1990s.” The World Economy 15: 475–86.
Bevilaqua, Afonso, Jeremy Bulow, and Kenneth Rogoff. 1992. “Official Creditor Seniority and Burden Sharing in the Former Soviet Bloc.” Brookings Papers in Macroeconomic Activity 1: 195-222.
Rogoff, Kennth. 1991. “Review of The Age of Diminished Expectations: U S Economy Policy in the 1990's, by Paul Krugman.” Journal of Economic Literature 29, no. (December): 1753-55.
Rogoff, Kenneth. 1991. “Strategic Perspectives on Economic Policy.” Information, Strategic Behavior and Economic Policy, edited by Andrew Stevenson and David Vines. London: Basil Blackwell.
Froot, Kenneth, Kenneth Rogoff, Olivier Blanchard, and Stanley Fischer. 1991. “The EMS, the EMU, and the Transition to a Common Currency.” NBER Macroeconomics Annual 6, 269-317. NBER. NBER volume;
Bulow, Jeremy, and Kenneth Rogoff. 1991. “Sovereign Debt Repurchases: No Cure for Overhang.” Quarterly Journal of Economics 106: 1219-35.
Rogoff, Kenneth. 1990. “Equilibrium Political Budget Cycles.” American Economic Review 80: 21-36. Abstract

Political business cycle theories generally rely on nominal rigidities and voter myopia. This paper offers an equilibrium theory with preserves some basic insights from earlier models, though with significant refinements. The "political budget cycle" emphasized here is in fiscal policy rather than output and inflation; it arises via a multidimensional signal process. One can consider the welfare implications of proposals to mitigate the cycle, and the effects of altering the electoral structure.

Rogoff, Kenneth. 1990. “Bargaining and International Policy Cooperation.” American Economic Review 80: 139–142.
Bulow, Jeremy, and Kenneth Rogoff. 1990. “Cleaning Up Third-World Debt Without Getting Taken To the Cleaners.” Journal of Economic Perspectives 4: 31–42.
Rogoff, Kenneth. 1990. “"Introduction" to Symposium on New Institutions for Developing-Country Debt.” Journal of Economic Perspectives 4 (1): 3-6.