NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

International Finance

Maurice Obstfeld

NBER Working Paper No. 2077 (Also Reprint No. r1094)
Issued in December 1988
NBER Program(s):   ITI   IFM

This essay written for The New Palgrave dictionary of Ecnomics provides a selective and interpretive account of the development of thought on international financial questions. Attention is focused on the process of international adjustment and on the proper definition of external balance. Since the first descriptions of the price-specie-flow mechanism in Humes time, the definition of external balance has evolved in response to changes in the world economy's structure. The foreign reserve constraint so central under the gold standard or in the early Bretton Woods years is less important under conditions of high international capital mobility. Increasingly, the current account and the national intertemporal budget constraint are emphasized in discussions of international adjustment. In analogy with the idea of a high-employment government budget surplus, a working definition of external balance might be a current account that maintains the highest possible steady consumption level consistent with the economy's expected intertemporal budget constraint. Intertemporal approaches to external balance become more difficult to apply when countries face credit rationing as a result of nonrepayment risk.

download in pdf format
   (908 K)

download in djvu format
   (593 K)

email paper

This paper is available as PDF (908 K) or DjVu (593 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: From The New Palgrave: A Dictionary of Economics, edited by John Eatwell, Murray Milgate, and Peter Newman, Vol. 2, E to J, pp. 898-906. New York: Stockton Press, 1987.

Users who downloaded this paper also downloaded these:
Obstfeld w14691 International Finance and Growth in Developing Countries: What Have We Learned?
Lewis w6351 International Home Bias in International Finance and Business Cycles
Eichengreen w10497 Global Imbalances and the Lessons of Bretton Woods
Engel, Fischer, and Galetovic w13284 The Basic Public Finance of Public-Private Partnerships
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us