Washington Consensus in Latin America: From Raw Model to Straw Man

[Symposium: Washington Consensus Revisited]

By Ilan Goldfajn, Lorenza Martínez, and Rodrigo O. Valdés

Journal of Economic Perspectives, Summer 2021

We take stock of three decades of a love-hate relationship between Latin American policies and the Washington Consensus, reviewing its implementation, national debate, and outcomes. Using regional data and case studies of Brazil, Chile, and Mexico, we dis...

Affirmative Action and Its Mythology

By Roland G. Fryer Jr. and Glenn C. Loury

Journal of Economic Perspectives, Summer 2005

For more than three decades, critics and supporters of affirmative action have fought for the moral high ground through ballot initiatives and lawsuits, in state legislatures, and in varied courts of public opinion. The goal of this paper is to show the c...

Individual Irrationality and Aggregate Outcomes

[Symposium: Cognition, Brain Science and Economics]

By Ernst Fehr and Jean-Robert Tyran

Journal of Economic Perspectives, Fall 2005

In their personal lives, many economists recognize that they are surrounded by individuals who are less than fully rational. In their professional lives, however, economists often use models that examine the interactions of fully rational agents. To reduc...

An Equilibrium Model of the International Price System

By Dmitry Mukhin

American Economic Review, February 2022

What explains the central role of the dollar in world trade? Will the US currency retain its dominant status in the future? This paper develops a quantitative general equilibrium framework with endogenous currency choice that can address these questions...

Retrospectives: Eugenics and Economics in the Progressive Era

By Thomas C. Leonard

Journal of Economic Perspectives, Fall 2005

During the Progressive Era, eugenic approaches to social and economic reform were popular, respectable and widespread. This essay documents the influence of eugenic ideas upon American economic reform, especially in the areas of immigration and labor refo...

Hump-Shaped Cross-Price Effects and the Extensive Margin in Cross-Border Shopping

By Richard Friberg, Frode Steen, and Simen A. Ulsaker

American Economic Journal: Microeconomics, May 2022

This paper examines the effect of cross-border shopping on grocery demand in Norway using monthly store × category sales data from Norway's largest grocery chain 2012–2016. The sensitivity of demand to the foreign price is hump-shaped and greatest 30â€...

Book Reviews

Journal of Economic Literature, June 2002

The Voice of Monetary Policy

By Yuriy Gorodnichenko, Tho Pham, and Oleksandr Talavera

American Economic Review, February 2023

We develop a deep learning model to detect emotions embedded in press conferences after the Federal Open Market Committee meetings and examine the influence of the detected emotions on financial markets. We find that, after controlling for the Federal Res...

Risk Appetite and the Risk-Taking Channel of Monetary Policy

[Symposium: Monetary Policy]

By Michael D. Bauer, Ben S. Bernanke, and Eric Milstein

Journal of Economic Perspectives, Winter 2023

Monetary policy affects financial markets and the broader economy in part by changing the risk appetite of investors. This article provides new evidence for this so-called risk-taking channel of monetary policy by revisiting and extending event-study an...

Technologies That Replace a "Central Planner"

By Robert M. Townsend and Nicolas X. Zhang

AEA Papers and Proceedings, May 2023

Contracting possibilities are endogenous to the technologies on which the negotiation and the trading environments are built. Here we review how different technologies allow different implementations of the "central planner" and gradually abstract this ce...

Optimal Policy under Dollar Pricing

By Konstantin Egorov and Dmitry Mukhin

American Economic Review, July 2023

Empirical evidence shows that most international prices are sticky in dollars. This paper studies the policy implications of this fact in the context of an open economy model with general preferences, technologies, asset markets, nominal rigidities, and a...

A Minimalist Model for the Ruble during the Russian Invasion of Ukraine

By Guido Lorenzoni and Iván Werning

American Economic Review: Insights, September 2023

This note isolates an overlooked economic force for the ruble to appreciate in response to international sanctions limiting exports to Russia. The intuition is that when Russians are unable to buy the mix of foreign goods they wish, foreign goods become l...

Monetary Policy in Sudden Stop-Prone Economies

By Louphou Coulibaly

American Economic Journal: Macroeconomics, October 2023

This paper proposes a parsimonious theory explaining the cyclicality of monetary policy in emerging countries in a model where access to foreign financing depends on the real exchange rate and the government lacks commitment. The discretionary monetary po...

A Dual Liquidity Model for Emerging Markets

By Ricardo J. Caballero and Arvind Krishnamurthy

American Economic Review, May 2002

Inflation-Targeting, Exchange-Rate Pass-Through, and Volatility

By Maurice Obstfeld

American Economic Review, May 2002

Uncertainty and Information Acquisition: Evidence from Firms and Households

By Heiner Mikosch, Christopher Roth, Samad Sarferaz, and Johannes Wohlfart

American Economic Journal: Macroeconomics, April 2024

We leverage the small open economy Switzerland as a testing ground for basic premises of macroeconomic models of endogenous information acquisition, using tailored surveys of firms and households. Firms and households perceiving a greater exposure to exch...

Global Spillovers from Fed Hikes and a Strong Dollar: The Risk Channel

By José Cristi, Şebnem Kalemli-Özcan, Mariana Sans, and Filiz Unsal

AEA Papers and Proceedings, May 2024

We study the international transmission of US monetary policy shocks and a strong US dollar. We show that monetary tightening is linked to a higher risk premium, only in emerging markets, measured by deviations from uncovered interest parity. An appreciat...

Optimal Foreign Reserves and Central Bank Policy under Financial Stress

By Luis Felipe Céspedes and Roberto Chang

American Economic Journal: Macroeconomics, July 2024

We study foreign reserves accumulation and liquidity policy in an open economy under financial stress. Firms and households finance investment and consumption by borrowing from banks, which borrow from abroad. Binding financial constraints cause the domes...

Delayed Overshooting: The Case for Information Rigidities

By Gernot J. Müller, Martin Wolf, and Thomas Hettig

American Economic Journal: Macroeconomics, July 2024

We provide evidence that the delayed overshooting puzzle reflects a slow adjustment of exchange rate expectations to monetary policy shocks rather than a failure of uncovered interest parity. Consistent with this evidence, we put forward a New Keynesian m...

Arbitraging Covered Interest Rate Parity Deviations and Bank Lending

By Lorena Keller

American Economic Review, September 2024

I propose and test a new channel through which covered interest rate parity (CIP) deviations can affect bank lending in emerging economies. I argue that when CIP deviations exist, banks attempt to arbitrage them. To do so, banks must borrow in a particula...