The term “economic interdependence” has come into widespread use during the past decade. The chapter addresses the various meanings of this term, the possible reasons for increased economic interdependence on some of its meanings, and the implications of that increased economic...

This chapter examines the current research on the basic purpose and functions of international monetary arrangements. The terms and conditions under which assets denominated in different currencies may be exchanged for each other are related both to the intrinsic worth or “purchasing power”...

This chapter provides an overview of empirical results concerning recent exchange rate behavior. Alternative valuation measures, time series, and distributional properties have been covered in the chapter, along with estimates of transaction costs in the foreign exchange market. The chapter...

This chapter discusses that the modern open economy is not the one found in most macroeconomic textbooks, an economy that occasionally imports Bordeaux wine but which produces most of what it consumes at prices determined domestically. It is rather an economy integrated with those abroad through...

The art of macroeconomic model-building involves making strategic choices among a wide range of alternatives. Theoretical models range from the equation of exchange of the simple quantity theory to vast dynamic models involving many sectors and many agents and which defy analytical solutions....

This chapter reviews developments in international monetary economics from the late 1960s through the early 1980s. It discusses that the “monetary approach to the balance of payments” was the economic determinants of the behavior of the balance of payments, especially, the theoretical...

This chapter discusses history of international transactions and relationships that were introduced into macroeconomic models and policy in the twenty-five years following the Second World War. Modern models of exchange-rate determination focus sharply on money and bond markets. The chapter...

This chapter presents some empirical results from studies of macroeconomic interdependence. It focuses on studies that involve linked macroeconometric models of two or more countries. It presents specific versions of the models and analysis with special attention to the role of exchange rates in...

This chapter identifies, summarizes, and evaluates the main methodological and policy issues that have surrounded the estimation of trade equations. By “trade equations,” it mean equations for the time-series behavior of the quantities and prices of merchandise imports and exports, and as...