0tghrcgovershooting多恩布什超调模型.docx
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0tghrcgovershooting多恩布什超调模型
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Dornbusch'sOvershootingModelAfterTwenty-FiveYears
SecondAnnualIMFResearchConference
Mundell-FlemingLecture
KennethRogoff1
EconomicCounselorandDirectoroftheIMFResearchDepartment
November30,2001(revisedJanuary22,2002)
I.Introduction
ItisagreathonortopaytributeheretooneofthemostinfluentialpaperswritteninthefieldofInternationalEconomicssinceWorldWarII.RudigerDornbusch'smasterpiece,"ExpectationsandExchangeRateDynamics"waspublishedtwenty-fiveyearsagointheJournalofPoliticalEconomy,in1976.The"overshooting"paper-aseveryonecallsit-marksthebirthofmoderninternationalmacroeconomics.ThereislittlequestionthatDornbusch'srationalexpectationsreformulationoftheMundell-Flemingmodelextendedthelatter'slifeforanothertwenty-fiveyears,keepingitintheforefrontofpracticalpolicyanalysis.
Thislectureisdividedintothreeparts.First,Iwilltrytoconveytothereaderasenseofwhy"ExpectationsandExchangeRateDynamics"hasbeensoinfluential.Mygoalhereisnotsomuchtoofferacomprehensiveliteraturesurvey,thoughofcoursetherehastobesomeofthat.Rather,Ihopethereaderwillgainanappreciationofthepaper'senormousstatureinthefieldandwhysomuchexcitementhasalwayssurroundedit.Tothatend,IhavealsoincludedsomematerialonlifeinDornbusch'sMITclassroom.Thesecondpartofthelectureisamoredetacheddiscussionoftheempiricalevidenceforandagainstthemodel,andathumbnailsketchofthemodelitself.Thefinalsectiontouchesoncompetingnotionsofovershooting.
II.TheOvershootingModelinPerspective
OneofthefirstwordsthatcomestomindindescribingDornbusch'sovershootingpaperis"elegant".Policyeconomistsareunderstandablycynicalaboutacademics'preoccupationwiththeoreticalelegance.ButDornbusch'sworkisaperfectillustrationofwhythesearchforabstractbeautycansometimesyieldalargepracticalpayoff.ItispreciselythebeautyandclarityofDornbusch'sanalysisthathasmadeitsoflexibleanduseful.Likegreatliterature,Dornbusch(1976)canbeappreciatedatmanylevels.Policymakerscanappreciateitsinsightswithoutreferencetoextensivemathematics;graduatestudentsandadvancedresearchersfoundwithinitarichlodeofsubtleties.
Asecondwordtodescribetheworkis"pathbreaking".Iwilloffersomequantitativeevidencelater,butsufficetosayherethatliterallyscoresofPh.D.theses(includingmyown)havebuiltuponDornbusch(1976).ItisnothyperboletosaythatDornbusch'snewviewoffloatingexchangeratesreinvigoratedafieldthatwasonitswaytobecomingmoribund,usingonlydated,discreditedmodelsandmethods.Dornbusch(1976)inspiredfreshthinkingandbroughtinfreshfacesintothefield.Inpreparingthislecture,Ire-readMauriceObstfeld'ssuperbinauguralMundell-Fleminglecturefromlastyear(IMFStaffPapers,Vol.47,2001).Obstfeld'spaperspansthewholemodernhistoryofinternationalmacroeconomics,fromMeadeto"NewOpenEconomyMacroeconomics",butthemainemphasisisonBobMundell'spapers.I,andperhapsmanyotherreaders,foundObstfeld'sdiscussionenlighteninginpartbecausewedonothavethesameintimateknowledgeofMundell'spapersthatwedoofDornbusch(1976).Mundell'sprofoundlyoriginalideasare,ofcourse,atthecoreofmanythingswedoinmoderninternationalfinance,andhewastheteacherofmanyimportantfiguresinthefieldincludingMichaelMussa,JacobFrenkel,andRudigerDornbusch.MundellisacreativegiantwhowasthinkingaboutasinglecurrencyinEuropebackwhenintergalactictradeseemedlikeamorerealistictopicforresearch.ButthemethodsandmodelsinMundell'spapersarenowbadlydated,andarenotalwayseasytodigestfortoday'sreader(evenifatthetimetheyseemedapictureofclaritycomparedtotheexistingstateoftheart,Meade(1951)).OneoftheremarkablefeaturesofDornbusch'spaperisthattoday'sgraduatestudentscanstilleasilyreaditintheoriginaland,asIwilldocument,manystilldo.
Thereadershouldunderstandthatasnovelastheovershootingmodelwas,Dornbuschwashardlywritinginavacuum.JoAnnaGray(1976),StanleyFischer(1977),andNedPhelpsandJohnTaylor(1977)wereallworkingonclosedeconomysticky-pricerationalexpectationsmodelsataroundthesametime.StanleyBlack(1973)hadalreadyintroducedrationalexpectationstointernationalmacroeconomics.Dornbusch'sChicagoclassmateMichaelMussa(mypredecessorasEconomicCounsellorattheFund)wasalsoworkingactivelyintheareainthetime,thoughhedelayedpublicationofhismainpieceonthetopicuntilMussa(1982).TherewereotherswhowerefishinginthesamewatersasDornbuschataroundthesametime,(e.g.,HansGenbergandHenrykKierzkowski,1979).ButtheeleganceandclarityofDornbusch'smodel,anditsobviousandimmediatepolicyrelevance,putshispaperinaseparateclassfromtheotherinternationalmacroeconomicspapersofitstime.
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A.StillaUsefulPolicyTool
AwordaboutNewOpenEconomyMacroeconomics,whichObstfeldsurveyedlastyear;certainlythisliteraturehascometodominatetheacademicliteratureoninternationalmacroeconomicpolicy.2Superficially,ofcourse,mostofthenewergenerationmodelsappearquitedifferentfromDornbusch'smodel,notleastbecausetheyintroducerigorousmicrofoundationsforconsumerandinvestorbehavior.Atthesametime,however,theycanbeviewedasdirectdescendants.Formally,NewOpenEconomyMacroeconomicsattemptstomarrytheempiricalsensibilityofthesticky-priceDornbuschmodelwiththeelegantbutunrealistic"intertemporalapproachtothecurrentaccount".3
Butevenwiththeinevitableonslaughtofmoremodernapproaches,theDornbuschmodelisstillverymuchalivetodayonitsown,preciselybecauseitissoclear,simpleandelegant.Let'sbehonest.Ifoneisinapinchandneedsaquickresponsetoaquestionabouthowmonetarypolicymightaffecttheexchangerate,mostofuswillstillwanttocheckanyansweragainstDornbusch'smodel.
Dornbusch'svariantoftheMundell-Flemingpaperisnotjustaboutovershooting.Thegeneralapproachhasbeenappliedtoahostofdifferentproblems,includingthe"Dutchdisease,"thechoiceofexchangerateregime,commoditypricevolatility,andtheanalysisofdisinflationindevelopingcountries.Itisaframeworkforthinkingaboutinternationalmonetarypolicy,notsimplyamodelforunderstandingexchangerates.Butwhatsoldthepapertopolicymakers,whatstillsellsthepapertograduatestudents,isovershooting.OnehastorealizethatatthetimeDornbuschwaswriting,theworldhadjustmadethetransitionfromfixedtoflexibleexchangerates,andnoonereallyunderstoodwhatwasgoingon.ContrarytoFriedman's(1953)rosydepictionoflifeunderfloating,exchangeratechangesdidnotturnouttosmoothlymirrorinternationalinflationdifferentials.Instead,theywereanorderofmagnitudemorevolatile,farmorevolatilethanmostexpertshadguessedtheywouldbe.AlongcomesDornbuschwholaysoutanincrediblysimpletheorythatshowedhow,withstickyprices,instabilityinmonetarypolicy-andmonetarypolicywasparticularlyunstableduringthemid-1970s-couldbetheculprit,andtoafargreaterdegreethananyonehadimagined.Dornbusch'sexplanationshockedanddelightedresearchersbecauseheshowedhowovershootingdidnotnecessarilygrowoutofmyopiaorherdbehaviorinmarkets.Rather,exchangeratevolatilitywasneededtotemporarilyequilibratethesysteminresponsetomonetaryshocks,becauseunderlyingnationalpricesadjustsoslowly.Itwasthisideathattookthepaperfrombeingamere"A"toan"A++".Asweshallsee,Dornbusch'sconjectureaboutwhyexchangeratesovershoothasprovenofrelativelylimitedvalueempirically,althoughaplausiblecasecanbemadethatitcapturestheeffectsofmajorturningpointsinmonetarypolicy.Butthetruestrengthofthemodelliesinthatithighlightshow,intoday'smoderneconomies,oneneedstothinkabouttheinteractionofsluggishlyadjustinggoodsmarketsandhyperactiveassetmarkets.Thisbroaderinsightcertainlystillliesatthecoreofmodernthinkingaboutexchangerates,evenifthedetailsofourmodelstodaydifferquiteabit.
PaulSamuelsononceremarkedthatthereareveryfewideasineconomicsthatareboth(a)trueand(b),notobvious.Dornbusch'sovershootingpaperiscertainlyoneofthoserareideas.Now,ofcourse,unlessoneissteepedinrecenteconomictheory,littleofwhatappearsintoday'sprofessionaleconomicsjournalswillseemobvious.However,thatisonlybecauseittakesconstanttrainingandretoolingtobeabletofollowtheassumptionsinthelatestpapers.Onceyoucanunderstandtheassumptions,whatfollowsisusuallynotsosurprising.Butthisiscertainlynotthecasewiththe"overshooting"result,asIwillnowbrieflyillustrate.
B.Overshooting:
TheBasicIdea
Sincethislectureisaimedatabroadaudience,itisnotmyintentiontoinvoketoomanymathematicalformulas,thoughtherewillbeafew.Asmallnumberofequationsisnecessaryifonlytoimpressuponthereaderhowsimpletheconceptreallyis.Thereadercaneasilyskipoverthem.
Tworelationshipslieattheheartoftheovershootingresult.Thefirst,equation
(1)below,isthe"uncoveredinterestparity"condition.Itsaysthatthehomeinterestrateonbonds,i,mustequaltheforeigninterestratei*,plustheexpectedrateofdepreciationoftheexchangerate,Et(et+1-et),whereeisthelogarithmoftheexchan