Abstract

http://ssrn.com/abstract=997553
 
 

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The Two Crises of International Economics


Michael P. Dooley


University of California at Santa Cruz; National Bureau of Economic Research (NBER)

Peter M. Garber


Brown University - Department of Economics; National Bureau of Economic Research (NBER)

David Folkerts-Landau


Deutsche Bank, London; National Bureau of Economic Research (NBER)

June 2007

NBER Working Paper No. w13197

Abstract:     
In this essay, we argue that key assumptions in international macroeconomic theory, though useful for understanding the economic relationships among developed countries, have been pushed beyond their competence to include relationships between developed economies and emerging markets. The Achilles heel of this extended development model is the assumption that threats to deprive the debtor countries of gains from trade provide incentives for poor countries to repay more than trivial amounts of international debt. Replacing this assumption with the idea that collateral is required to support gross international capital flows suggests that the pattern of current account balances seen in recent years is a sustainable equilibrium.

Number of Pages in PDF File: 30

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Date posted: July 3, 2007  

Suggested Citation

Dooley, Michael P. and Garber, Peter M. and Folkerts-Landau, David, The Two Crises of International Economics (June 2007). NBER Working Paper No. w13197. Available at SSRN: http://ssrn.com/abstract=997553

Contact Information

Michael P. Dooley (Contact Author)
University of California at Santa Cruz ( email )
Santa Cruz, CA 95064
United States
510-459-3662 (Phone)
510-459-5900 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Peter M. Garber
Brown University - Department of Economics ( email )
64 Waterman Street
Providence, RI 02912
United States
401-863-2145 (Phone)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
David Folkerts-Landau
Deutsche Bank, London ( email )
Winchester House
Great Winchester Street, 1
London EC2N 2DB
United Kingdom
(44) 171 545-4545 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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