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Introduction

Published online by Cambridge University Press:  03 November 2009

Elhanan Helpman
Affiliation:
Harvard University, Massachusetts
Efraim Sadka
Affiliation:
Tel-Aviv University
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Summary

This volume brings together fifteen essays from various fields of economics to which Assaf Razin has made major contributions in the last thirty years – international economics, economic growth, public economics, and political economy. They all share a common feature: close relevance to economic policy, something which is at the essence of all of Assaf's contributions.

In “Crises: The Next Generation?” Paul Krugman reviews the evolution of the literature on currency and financial crises and suggests a direction to which this literature will turn in the future. The first-generation models were tailored to address a simple scenario. A government maintains a fixed exchange rate while running a budget deficit. The budget deficit is monetized, leading to a loss of foreign exchange reserves. As the level of reserves reaches a lower bound there is a run on the central bank that wipes out the remaining reserves. Unable to support the exchange rate, the government floats the currency. Under these circumstances the timing of the crisis is predictable, as are its consequences. It is an inevitable outcome of a set of inconsistent policies.

This description suited various episodes during the operation of the Bretton Woods system. With the advent of floating exchange rates, however, the nature of crises changed. This is particularly true of the 1992 episodes in Europe, which triggered the development of second-generation models.

Type
Chapter
Information
Economic Policy in the International Economy
Essays in Honor of Assaf Razin
, pp. 1 - 12
Publisher: Cambridge University Press
Print publication year: 2003

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  • Introduction
  • Edited by Elhanan Helpman, Harvard University, Massachusetts, Efraim Sadka, Tel-Aviv University
  • Book: Economic Policy in the International Economy
  • Online publication: 03 November 2009
  • Chapter DOI: https://doi.org/10.1017/CBO9780511610141.002
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Send book to Dropbox

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  • Introduction
  • Edited by Elhanan Helpman, Harvard University, Massachusetts, Efraim Sadka, Tel-Aviv University
  • Book: Economic Policy in the International Economy
  • Online publication: 03 November 2009
  • Chapter DOI: https://doi.org/10.1017/CBO9780511610141.002
Available formats
×

Send book to Google Drive

To send content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about sending content to Google Drive.

  • Introduction
  • Edited by Elhanan Helpman, Harvard University, Massachusetts, Efraim Sadka, Tel-Aviv University
  • Book: Economic Policy in the International Economy
  • Online publication: 03 November 2009
  • Chapter DOI: https://doi.org/10.1017/CBO9780511610141.002
Available formats
×