Those were some of the topics covered at the West Coast Workshop on International Finance and Open Economy Macroeconomics, held last Friday on the beautiful UC-Santa Cruz campus, co-organized by Helen Popper (Santa Clara University), Michael Hutchison (UC Santa Cruz), and Carl Walsh (UC Santa Cruz).
Session 1: Implications of Currency Ties, Chair: Helen Popper, SCU
“Currency Unions and Trade: A Post-EMU Mea Culpa,” by Andrew Rose, UC Berkeley, and Reuven Glick, SF Fed
Discussant: Thuy Lan Nguyen, SCU
Session 2: Default Risk, Chair: Carl Walsh, UCSC
“Debt Overhang and Rollover,” by Michal Szkup, UBC
Discussant: Pablo Kurlat, Stanford University
“Envelope Condition Method with an Application to Default Risk Models,” by Cristina Arellano, Minneapolis Fed, Lilia Maliar, Stanford, Serguei Maliar, SCU, and Viktor Tsyrennikov, Cornell
Discussant Grace Gu, UCSC
Session 3: Trade and Business Cycles, Chair, Fernanda Nechio, FRBSF
“The Distributional Consequences of Large Devaluations,” by Javier Cravino, U. Michigan, and Andrei Levchenko, U. Michigan
Discussant: Yu-chin Chen, University of Washington
“Chinese Outwards Mercantilism-The Art and Practice of Bundling,” by Joshua Aizenman, USC, Yothin Jinjarak, Victoria Business School, Huanhuan Zheng, Chinese University of Hong Kong
Discussant Antonio Rodriguez-Lopez, UC Irvine
Panel Discussion: The Future of International Finance, Chair, Michael Hutchison, UCSC
“Reflections on 40 Years in International Finance as Guide to New Developments in the Field”, Michael Dooley, UCSC
Discussant Panel: James Boughton (Centre for International Governance Innovation), Robert Flood, Notre Dame U, Hali Edison, IMF, Aris Protopapadakis, USC
The conference marked the retirement of my former colleague and coauthor on several papers, Mike Dooley. Some of his most recent work is associated with the Revived Bretton Woods thesis, but he’s made lots of contributions in policy and research over the years, starting with his time at the Federal Reserve Board in 1971 (at the end of Bretton Woods) and then the IMF Research Department, before arriving at UCSC.
I can’t do justice to all his remarks, but one key theme is that international financial transactions only take place when there is some sort of implicit or explicit government guarantee; otherwise, the fact that financial contracts cannot be enforced cross-border means that there is too much risk associated with such transactions.
In this vein, the concept of a “safe asset” is problematic, even though we have many models of safe assets. The more appropriate concept is of enforceable contracts on assets; in the absence of that the only transactions that will occur are those that are collateralized. The “global imbalances” can be viewed through this vein, as in Mike’s 2005 Brookings Papers on Economic Activity article, coauthored with Peter Garber.
Many of his papers can be accessed from his homepage, but here are some representative works:
“A Model of Crises in Emerging Markets”, The Economic Journal, Vol. 110, no. 460, January, 2000 pp. 256-272.
“Latin America and East Asia in the Context of an Insurance Model of Currency Crises”, Journal of
International Money and Finance, August 1999. (with Menzie Chinn
and Sona Shrestha).
“Recent Private Capital Inflows to Developing Countries: Is the Debt Crisis History?”, World Bank Economic Review, vol. 10, 1996 pp. 27-50.
“Transactions Taxes and Foreign Exchange: Good Theory, Weak Evidence, Bad Policy”, in The Tobin Tax: Coping with Financial Volatility, Mahbub ul Haq, Inge Kaul and Isabelle Grundberg eds. Oxford University Press,1996,pp.83-108.
“Capital Controls, Political Risk, and Deviations from Interest Parity”, Journal of Political Economy, April 1980. (with Peter Isard)
“Capital Flight :A Response to Differences in Financial Risks,” IMF Staff Papers September 1988
“Capital Flight, External Debt and
Domestic Policies,” FRBSF Economic Review, 1994 (with Ken Kletzer).