Academic Papers

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.
Bulow, Jeremy, Kenneth Rogoff, and Afonso Bevilaqua. 1992. “Official Creditor Seniority and Burden Sharing in the Former Soviet Bloc.” Brookings Papers on 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.
Gertler, Mark, and Kenneth Rogoff. 1990. “North-South Lending and Endogenous Domestic Capital Market Inefficiencies.” Journal of Monetary Economics 26: 245-266. Abstract

We develop an open-economy of intertemporal trade under asymmetric information. Capital market imperfections are endogenous and depend on a county's stage of economic development. Relative to the perfect-information benchmark, North-South capital flows are dampened (and possibly reversed) and world interest rates are lower. Whereas riskless rates are equalized across borders, the domestic loan rate is higher in poorer countries. The model can be applied to a number of policy issues including the debt-overhang problem, the indexation of foreign public debts, and the effect of income on distribution growth.

Bulow, Jeremy, and Kenneth Rogoff. 1989. “A Constant Recontracting Model of Sovereign Debt.” The Journal of Political Economy 97: 155–178. Abstract

We present a dynamic model of international lending in which borrowers cannot commit to future repayments and in which debtors can sometimes successfully negotiate partial defaulters or "rescheduling agreements." All parties in a debt rescheduling negotiation realize that today's rescheduling agreement may itself have to be renegotiated in the future. Our bargaining-theoretic approach allows us to handle the effects of uncertainty on sovereign debt contracts in a much more satisfactory way than in earlier analyses. The framework is readily extended to analyze the conflicting interests of different lenders and of banks and creditor country taxpayers.

Bulow, Jeremy, and Kenneth Rogoff. 1989. “Sovereign Debt: Is to Forgive to Forget?” American Economic Review 79: 43–50.
Meese, Richard, and Kenneth Rogoff. 1988. “Was It Real? The Exchange Rate-Interest Differential Relation over the Modern Floating-Rate Period.” Journal of Finance 43 (4): 933-948. Download from JSTOR Abstract

In this paper, we explore the relationship between real exchange rates and real interest rate differentials in the United States, Germany, Japan, and the United Kingdom. Contrary to theories based on the joint hypothesis that domestic prices are sticky and monetary disturbances are predominant, we find little evidence of a stable relationship between real interest rates and real exchange rates. We consider both in-sample and out-of-sample tests. One hypothesis that is consistent with our findings is that real disturbances (such as productivity shocks) may be a major source of exchange rate volatility.