Since my last program report (NBER Reporter, Spring 1987), the focus of attention in international economics has remained on competitiveness and protection; macroeconomic policy coordination; debt and stabilization in developing countries; and international financial markets. There also has been a resurgence of interest in growth and its interaction with trade, and the emergence of the single European market of 1992 has provided a new set of questions for researchers.
This report will discuss the program's research in six main areas: trade and competitiveness; strategic behavior and trade; international macroeconomics; international finance; developing country debt; and stabilization programs in developing countries. The report ends with a discussion of the NBER project on international taxation and the series of international seminars sponsored jointly by the NBER and other organizations.
Trade and Competitiveness
Analyses of U.S. trade and competitiveness, and of adjustment of U.S. trade to changes in the pattern of world trade and competitive pressure from abroad, have long been a central part of our research. Current work includes studies of growth and trade with differentiated products; hysteresis in trade fluctuations; the role of multinational corporations in trade; growth of trade in services; trade and fluctuations in stock prices; competitiveness and differences in the cost of capital; and the effects of trade policy.
Gene M. Grossman and Elhanan Helpman have been studying the effect of the international economic environment, including trade policy, on innovation and growth.(1) One of their results is that trade can make available a wider range of inputs and technologies, and thus can increase the growth rate. Nancy P. Marion also has developed a model in which the growth rate is endogenous, with learning by doing. In her model, open capital markets do not necessarily increase the growth rates; the nation's knowledge-based growth rate actually could fall.(2)
In a related area, Richard E. Baldwin, one of the pioneers in the analysis of hysteresis in U.S. trade, has been working with Richard Lyons.(3) With hysteresis, foreign firms enter the U.S. market as the dollar appreciates but do not exit when the dollar comes back down to the level at which they entered. The exit price is lower than the entry price. This is one explanation of why U.S. imports remained high as the dollar depreciated after 1987.
Robert E. Lipsey, Rachel McCulloch, Irving B. Kravis, and Magnus Blomstrom have continued their work on multinational corporations and international investment. Kravis and Lipsey also are studying the determinants of price level differences across countries. Kravis and Lipsey have found that exports of manufactured goods by U.S. multinationals have retained their share of world exports in the 1980s, while the share of the United States in world exports has declined.(4) Blomstrom finds that multinationals increase competition in the host country.(5) McCulloch is now studying the effects of inward foreign investment in the United States.(6)
Albert Ando, Jorge Braga de Macedo, and I are studying international comparisons of the cost of capital. In a comparative study of saving and investment in the United States and Japan, Ando has estimated their relative costs of capital.(7) In a joint research project with J. David Richardson, de Macedo and I are estimating real effective exchange rates, inclusive of relative costs of capital. Our study of the effects of exchange rate changes across countries will follow the lines of my recent work with James H. Love.(8) Related research on the effects of changes in exchange rates or trade policies on relative stock prices of sectors producing traded goods has been done by Grossman and James A. Levinsohn, and by James A. Brander. These studies find that stock prices do react to trade news.(9)
Barry J. Eichengreen and Lawrence H. Goulder have developed a dynamic computable general equilibrium (CGE) model to study the changing international competitive position of the U.S. economy. They have used it to study the effects of changes in domestic taxation designed to promote saving and investment on export-producing sectors, and to compare the effects of tariffs versus voluntary export restrictions (VERs). With a high degree of international capital mobility, subsidizing saving helps exports in the short run, but not in the long run. The opposite is true for subsidizing investment. Also, VERs do more damage to the economy than tariffs do. In April 1988, Robert C. Feenstra organized a conference on "Trade Policies for International Competitiveness" (summarized in the NBER Reporter, Summer 1988).(10)
Robert E. Baldwin continues to head the project on American trade relations; he and Richardson edited a Conference Report, Issues in the Uruguay Round, in 1988.
Strategic Behavior and Trade
The analysis of trade and the consequences of trade policy in a world of imperfect competition and strategic behavior between and among governments and actors in the private sector has been a major research area in the program since 1983. More recently, Paul R. Krugman, and Alasdair Smith of the Center for Economic Policy Research (CEPR) in London have been leading a group of researchers who are conducting empirical case studies of strategic behavior and trade at the industry level. A report on their October conference will appear in the Winter 1989/90 issue of the NBER Reporter. Several NBER researchers made important early contributions in this area. Helpman and Krugman have written a concise exposition of this topic, with extensive references.(11)
In addition, Barbara J. Spencer has been working on the trade policy implications of domestic dependence on imports for the supply of a key intermediate input, examining incentives for the exporting firm and the government to restrict exports of the input.(12) Carl Shapiro has been working on the related problem of the costs of switching between sources of supply, and horizontal mergers.(13)
Feenstra, Kala Krishna, Robert W. Staiger, and Richard H. Clarida also continue to work in this area. Feenstra and Krishna have analyzed the consequence of auctioning import quota rights. Feenstra argues that giving any quota rents to foreign suppliers will remove an incentive for domestic producers to appeal for protection. Krishna argues that foreign producers will appropriate the quota rent by their price reactions, anyway.(14)
Staiger is working on the determinants of the equilibrium level of protection in a framework that recognizes that trade volumes fluctuate, so that all parties are tempted to protect when import volumes surge. He interprets the General Agreement on Tariffs and Trade (GATT) as a forum for countries to coordinate their policies to achieve the most cooperative self-enforcing equilibrium low levels of protection.(15) Clarida has been working on the interaction between learning by doing and trade policy.
On the empirical side, Richard C. Marston and I have studied the responses of price and output by Japanese manufacturing firms when the real exchange rate changes. We present evidence that Japanese firms "price to market," varying their export prices in yen relative to their domestic prices and absorbing the exchange rate fluctuations in profit margins. This may be one reason why U.S. import prices respond slowly to exchange rate changes.(16)
Several researchers have examined the political economy of trade policy. Research Associate Marie C. Thursby has been working on rules versus discretion in trade policy when governments have private information about political pressure at home. If the government needs to establish its reputation as a trade policymaker, then discretion may dominate rules. Anne O. Krueger has found that the biases inherent in political decisionmaking imply that government intervention is likely to be more pervasive in import-competing industries than in exportables.(17)
Robert Baldwin has collected papers on the political economy of trade policy.(18) Richardson has surveyed the research on the effects of trade policy with imperfect competition.(19) These, plus the Helpman-Krugman book, provide a good summary of the program's work on strategic behavior and trade.
Within international macroeconomics, the most active research areas have been analyses of aspects of fiscal policy and public debt, and international cooperation with some emphasis on the European Monetary System. In the fiscal area, Jacob A. Frenkel--on leave as Economic Counsellor and Director of Research at the International Monetary Fund (IMF)--and Assaf Razin have completed a major project on the role of fiscal policies in the world economy. (The project produced several working papers and a book.) They show how the composition of spending, taxing, and borrowing will have differential effects between countries and over time.(20)
Willem H. Buiter also has studied the conditions under which the choice between tax and debt financing of spending matters.(21) John F. Helliwell and Vittorio U. Grilli, among others, study the effects of fiscal policies on exchange rates and international imbalances.(22) Nouriel Roubini has studied the determinants of the level of spending and deficits, and rejects the tax-smoothing model in favor of political determinants.(23) Francesco Giavazzi finds that a longer average maturity of the public debt contributes to the sustainability of fixed exchange rates with free capital mobility.(24)
Koichi Hamada wrote on international coordination in the 1970s and has continued his work on the topic. Paul R. Masson was one of the builders of the IMF's Multimod, a world simulation model that is used to make projections for the IMF's semiannual World Economic Outlook. He has continued his simulation studies of coordination using the model, along with Jacob A. Frenkel and other IMF colleagues.(25) Jeffrey A. Frankel has focused on the obstacles to international macroeconomic policy coordination, including disagreement among policymakers on the true model of the economy, the current state of the economy, and policy objectives. A recent Frankel paper analyzes the case for international targeting of nominal GNP.(26)
Frenkel has written several papers on aspects of cooperation. In the fall of 1988, Frenkel, Morris Goldstein, and I organized a conference on "International Policy Coordination and Exchange Rate Fluctuations." Earlier, in the spring of 1987, Martin Feldstein organized a conference on "International Economic Cooperation."(27) One general conclusion from the papers in these two conference volumes, and from the entire line of research in the area, seems to be that the gains from macroeconomic policy coordination, narrowly defined, are likely to be small, but the gains from cooperation, more broadly defined, may be significant.
Susan M. Collins, currently on leave at the Council of Economic Advisers, studied the effects of the formation of the European Monetary System (EMS) on inflation in Europe. She questioned the widely held view that the EMS contributed significantly to the reduction of inflation.(28) Alessandra Casella is studying the optimal design of a European central bank and the constraints that a common European currency would place on national fiscal policies.(29) Francesco Giavazzi and Alberto Giovannini have written a book on the operation and effects of the EMS.(30)
Other lines of research in international macroeconomics do not fit into the fiscal and cooperation themes. Robert P. Flood and Marion continue their work on two-tier exchange markets, finding empirically that domestic policy variables have little influence on the spread between the two rates. Carol Osler shows how real disturbances are transmitted internationally and intertemporally via the terms of trade. Alan C. Stockman studies the effect of the choice of a nominal exchange rate regime on real exchange rate variability.(31)
Robert J. Hodrick, Lars E. O. Svensson, Takatoshi Ito, and Karen K. Lewis have continued the program's work in international asset pricing and exchange rate determination. Hodrick examines how changes in the degree of uncertainty about the economic environment or policy affect not only the variance of asset prices but also their levels. Svensson has shown how uncertainty about monetary policy affects asset substitutability and has studied optimal portfolio allocation when some assets are traded internationally. Ito has estimated the impact of news on exchange markets as trading opens and closes around the world daily. He also has analyzed the role of news versus noise in dollar/yen trading. Lewis has evaluated the behavior of exchange rates and asset prices when the process driving their fundamental determinants changes.(32)
Frankel, Charles M. Engel, Kenneth A. Froot, and Grilli have considered market efficiency and excess volatility in exchange rates. Their work suggests that exchange rates overreact to news; that is, that the market is excessively volatile.(33) Linda Goldberg is working on the effects of exchange rate volatility on investment in the United States. She finds that in the 1980s, increased exchange rate volatility reduced investment.(34) Richard M. Levich has studied innovation in financial markets, the pressure for harmonization in European financial markets from the 1992 unification provisions, and hedging techniques in the Euromarkets.(35)
A number of NBER researchers have been working on problems of trigger pricing, exchange rate bands, and hysteresis, mentioned earlier with respect to trade. These problems generally involve "smooth pasting" conditions, in which asset prices approach limits smoothly. One example is the behavior of exchange rates within a target zone, analyzed in an early contribution by Krugman.(36) These problems also involve a return for waiting, so that options pricing models are relevant for their analysis. Bernard Dumas analyzed the behavior of the real exchange rate when it is costly to transfer assets internationally.(37) Krugman and Dumas have continued to work in this area, along with Flood, Froot, and Maurice Obstfeld.(38)
The debt problems of the developing countries and their partners, the lending banks, became an important research focus, and an international public policy issue in the 1980s. Jeffrey D. Sachs headed a major project on this topic that has produced four volumes on debt issues.(39) This project examined the causes and consequences of the debt crisis in Argentina, Bolivia, Brazil, Mexico, Indonesia, Korea, the Philippines, and Turkey. It also included studies of earlier debt crises, structural adjustment policies in debtor countries and the role of the IMF, growth in industrial economies, and domestic political factors in debt crises.
The potential for default, or the ability to force renegotiations, makes the borrowing and repaying process a strategic interaction between the banks and the borrower. The interaction may be complicated by asymmetries of information between the two sides. In a series of papers, Raquel Fernandez has analyzed this strategic process and the conditions under which a country has the incentive to continue payment. Jonathan Eaton has studied conditions under which the threat by the lender to impose sanctions is credible. Joshua Aizenman has studied country risk and strategic investment, in which investment in trade-dependent sectors may increase the country's incentives to repay.(40)
The possibility of an increase in future taxes to service debt can create a disincentive to invest in the debtor country. This creates a "debt overhang," and the possibility that debt relief may be a positive-sum game, by removing this disincentive. NBER researchers have analyzed various techniques for such debt relief. Froot, Krugman, and Helpman analyze cases in which it may pay a country to buy back debt or in which the banks may gain by forgiving a fraction of debt.(41) Sachs has argued that debt repurchases may benefit the debtor country in some situations; Jeremy I. Bulow and Kenneth Rogoff have emphasized other situations in which buybacks will not benefit debtors.(42) Eichengreen and Richard Portes also have continued to study debt crises during the 1930s and earlier.(43)
Stabilization in Developing Countries
Rudiger Dornbusch and Sebastian Edwards have studied the determinants of the outcomes of stabilization and structural adjustment, including credibility aspects. Dornbusch identified the stages from expansion to collapse in programs that have failed, the role of the financial sector in adjustment, and the role of credibility in determining why countries wait before stabilizing. Edwards studied the role of openness in determining the outcome of an adjustment program.(44)
Credibility has been one focus for Michael Bruno, on leave as governor of the Bank of Israel, and Dani Rodrik. Bruno has evaluated the use of econometrics in the design of credible macroeconomic stabilization programs. Rodrik emphasizes the links between trade and macroeconomics. He finds that, in some circumstances, policymakers must use overkill to establish a reputation as credible reformers. Rodrik's recent work focuses on the effects of uncertainty about policy on investment.(45)
Other work on stabilization and structural adjustment includes research by Robert E. Cumby and Sweder J. G. van Wijnbergen on the effect of capital flight in undermining a stabilization program, and by myself and colleagues on the effect of stabilization and structural adjustment programs on income distribution.(46)
In addition to the research and meetings described above, Krugman is leading a research group on U.S./Japan economic relations. The Winter 1989/90 issue of the NBER Reporter will summarize the results of their October meeting. Marston headed a group that examined the misalignment of the dollar.(47) Razin and Joel B. Slemrod, from the Bureau's Program in Taxation, jointly organized a project on the international aspects of taxation. The project culminated in a conference in February 1989 (described in the Spring 1989 Reporter). A conference volume is forthcoming.
Each year since 1979, the international studies program has held an intensive series of workshops and seminars in Cambridge over three weeks in August as part of the NBER's Summer Institute. This provides an especially important opportunity for the international studies group to gather, because its members are quite dispersed geographically, with many in Europe, Israel, and Japan. Since 1987, Marston has organized the macroeconomics and finance sessions of the Summer Institute, joined in 1989 by Froot. Richardson has continued to organize the trade sessions, joined in 1987 by Feenstra, in 1988 by Grossman, and in 1989 by Staiger.
Since 1987, three new international seminars, jointly or wholly sponsored by the NBER, have begun. The InterAmerican Seminar on Economics (IASE) is jointly sponsored by the Pontifica Universidade Catolica do Rio de Janeiro (PUC) and NBER, and meets annually in Latin America. It is organized by Edwards, and Edmar Bacha of PUC. Its papers appear in English in the Journal of Development Economics and in Spanish in El Trimestre Economico.
The International Seminar on International Trade (ISIT) is sponsored jointly with CEPR and meets biannually in the United States or Europe. It is organized by Robert Baldwin and Alan Winters. Its papers appear in Weltwirtschaftliches Archiv.
Finally, the East Asian Seminar on Economics (EASE), which will have its first meeting in Korea in 1990, is organized by Anne Krueger. The model for these seminars is the annual International Seminar on Macroeconomics (ISOM), sponsored jointly by the NBER and the Ecole des Hautes Etudes en Sciences Sociales (EHESS) in Paris and, since 1988, by the European Economic Association (EEA). The ISOM is organized by Robert J. Gordon of the NBER and Georges de Menil of EHESS and meets each June in Europe. Its papers are published in the European Economic Review, now the journal of the EEA, in the May issue following the meeting.
An exceptional meeting, sponsored by the Foundation for Advanced Information and Research (FAIR), Japan, was held in Tokyo in 1988.
(1)G. M. Grossman and E. Helpman, "Product Development and International Trade," NBER Working Paper No. 2540, March 1988, and "Growth and Welfare in a Small Open Economy," NBER Working Paper No. 2970, May 1989. (2)M. Kohn and N. P. Marion, "The Implications of Knowledge-Based Growth for the Optimality of Open Capital Markets," NBER Working Paper No. 2487, January 1988. (3)Richard E. Baldwin, "Some Empirical Evidence on Hysteresis in Aggregate U.S. Import Prices," NBER Working Paper No. 2483, January 1988; and Richard E. Baldwin and R. Lyons, "Exchange Rate Hysteresis: The Real Effects of Large versus Small Policy Misalignments," NBER Working Paper No. 2828, January 1989. (4)I. B. Kravis and R. E. Lipsey, "Technological Characteristics of Industry and the Competitiveness of the United States and Its Multinationals," NBER Working Paper No. 2933, April 1989. (5)M. Blomstrom, "Efficiency Differences between Foreign and Domestic Firms in Mexico," World Development (November 1988). (6)R. McCulloch, "Japanese Investment in the United States," in The Internationalization of U.S. Markets, D. Audretsch and M. Claudon, eds. New York: New York University Press, forthcoming. (7)A. Ando and A. J. Auerbach, "The Corporate Cost of Capital in Japan and the United States: A Comparison," NBER Reprint No. 1213, June 1989; in Journal of Japanese and International Economics (1988), pp. 134-158; and in Government Policy Towards Industry in the United States and Japan, J. B. Shoven, ed. New York: Cambridge University Press, pp. 21-49. (8)W. H. Branson and J. H. Love, "The Real Exchange Rate, Employment, and Output in Manufacturing in the United States and Japan," NBER Working Paper No. 2491, January 1988. (9)G. M. Grossman and J. A. Levinsohn, "Import Competition and the Stock Market Return to Capital," NBER Working Paper No. 2421, October 1987; and J. A. Brander, "Election Polls, Free Trade, and the Stock Market: Evidence from the 1988 Canadian General Election," NBER Working Paper No. 3073, August 1989. (10)B. J. Eichengreen and L. H. Goulder, "Savings Promotion, Investment Promotion, and International Competitiveness," NBER Working Paper No. 2635, June 1988, and in Trade Policies for International Competitiveness, R. C. Feenstra, ed. Chicago: University of Chicago Press, 1989; and "Trade Liberalization in General Equilibrium: Intertemporal and Interindustry Effects," NBER Working Paper No. 2965, May 1989. (11)E. Helpman and P. R. Krugman, Trade Policy and Market Structure. Cambridge, MA: MIT Press, 1989. (12)B. J. Spencer and R. W. Jones, "Vertical Foreclosures and International Trade Policy," NBER Working Paper No. 2920, April 1989, and "Trade and Protection in Vertically Related Markets," NBER Working Paper No. 3023, June 1989. (13)C. Shapiro, "Dynamic Competition with Switching Costs," Rand Journal of Economics (Spring 1988). (14)K. Krishna, "The Case of the Vanishing Revenues: Auction Quotas with Oligopoly," NBER Working Paper No. 2723, September 1988, and "The Case of the Vanishing Revenues: Auction Quotas with Monopoly," NBER Working Paper No. 2840, February 1989; and R. C. Feenstra, "Auctioning U.S. Import Quotas, Foreign Response, and Alternative Policies," NBER Working Paper No. 2839, February 1989. (15)K. Bagwell and R. W. Staiger, "A Theory of Managed Trade," NBER Working Paper No. 2756, November 1988. (16)W. H. Branson and R. C. Marston, "Price and Output Adjustment in Japanese Manufacturing," NBER Working Paper No. 2878, March 1989; and R. C. Marston, "Pricing to Market in Japanese Manufacturing," NBER Working Paper No. 2905, March 1989. (17)R. Jensen and M. C. Thursby, "Tariffs with Private Information and Reputation," NBER Working Paper No. 2959, May 1989; and A. O. Krueger, "Asymmetries in Policy between Exportables and Import-Competing Goods," NBER Working Paper No. 2904, March 1989. (18)Robert E. Baldwin, ed., Trade Policy Issues and Empirical Analysis. Chicago: University of Chicago Press, 1988. (19)J. D. Richardson, "Empirical Research on Trade Liberalization with Imperfect Competition: A Survey," NBER Working Paper No. 2883, March 1989, and in OECD Economic Studies 12 (Spring 1989), pp. 7-50. (20)J. A. Frenkel and A. Razin, Fiscal Policies and the World Economy. Cambridge, MA: MIT Press, 1987. (21)W. H. Buiter, "Debt Neutrality, Professor Vickrey, and Henry George's `Single Tax,'" NBER Reprint No. 1211, June 1989. (22)J. F. Helliwell, "The Effects of Fiscal Policy on International Imbalances: Japan and the United States," NBER Working Paper No. 2660, July 1988; and V. U. Grilli, "Fiscal Policies and the Dollar/Pound Exchange Rate, 1870-1984," NBER Working Paper No. 2482, January 1988. (23)N. Roubini and J. D. Sachs, "Government Spending and Budget Deficits in the Industrial Economies," NBER Working Paper No. 2919, April 1989. (24)F. Giavazzi and M. Pagano, "Confidence Crises and Public Debt Management," NBER Working Paper No. 2926, April 1989. (25)J. A. Frenkel, M. Goldstein, and P. R. Masson, "International Coordination of Economic Policies: Scope, Methods, and Effects," NBER Working Paper No. 2670, July 1988. (26)J. A. Frankel, "A Modest Proposal for International Nominal Targeting (INT)," NBER Working Paper No. 2849, February 1989. (27)M. Feldstein, ed., International Economic Cooperation. Chicago: University of Chicago Press, 1988. (28)S. M. Collins, "Inflation and the EMS," NBER Working Paper No. 2599, May 1988. (29)A. Casella and J. Feinstein, "Management of a Common Currency," NBER Working Paper No. 2740, October 1988. (30)F. Giavazzi and A. Giovannini, Limited Exchange Rate Flexibility. Cambridge, MA: MIT Press, 1989. (31)R. P. Flood and N. P. Marion, "Risk Neutrality and the Two-Tier Foreign Exchange Market: Evidence from Belgium," NBER Working Paper No. 3015, June 1989; C. Osler, "Terms of Trade and the Transmission of Output Shocks in a Rational Expectations Model," NBER Working Paper No. 2681, August 1988; and A. C. Stockman, "Real Exchange Rate Variability under Pegged and Floating Nominal Exchange Rate Systems: An Equilibrium Theory," NBER Working Paper No. 2565, April 1988. (32)R. J. Hodrick, "Risk Uncertainty and Exchange Rates," NBER Working Paper No. 2429, November 1987; L. E. O. Svensson, "Portfolio Choice and Asset Pricing with Nontraded Assets," NBER Working Paper No. 2774, November 1988; T. Ito and V. V. Roley, "Intraday Yen/Dollar Exchange Rate Movements: News or Noise?" NBER Working Paper No. 2703, September 1988; and K. K. Lewis, "On Occasional Monetary Policy Coordinations That Fix the Exchange Rate," Journal of International Economics 26, 1/2 (1989), pp. 139-156. (33)K. A. Froot, "Tests of Excess Forecast Volatility in the Foreign Exchange and Stock Markets," NBER Working Paper No. 2362, August 1987; C. M. Engel, J. A. Frankel, K. A. Froot, and A. Rodriguez, "Conditional Mean-Variance Efficiency of the U.S. Stock Market," NBER Working Paper No. 2890, March 1989; and V. U. Grilli, "Financial Integration, Liquidity, and Exchange Rates," NBER Working Paper No. 3088, August 1989. (34)L. Goldberg, "Nominal Exchange Rate Patterns: Effects on Entry, Exit, and Investment in U.S. Industry," forthcoming as an NBER Working Paper. (35)R. M. Levich, "The Euromarkets After 1992," NBER Working Paper No. 3003, June 1989; and A. Koh and R. M. Levich, "Synthetic Eurocurrency Interest Rate Futures Contracts: Theory and Evidence," NBER Working Paper No. 3055, August 1989. (36)P. R. Krugman, "Trigger Strategies and Price Dynamics in Equity and Foreign Exchange Markets," NBER Working Paper No. 2459, December 1987. (37)B. Dumas, "Pricing Physical Assets Internationally," NBER Working Paper No. 2569, April 1988. (38)R. P. Flood and P. M. Garber, "The Linkage between Speculative Attack and Target Zone Models of Exchange Rates," NBER Working Paper No. 2918, April 1989; K. A. Froot and M. Obstfeld, "Exchange Rate Dynamics under Stochastic Regime Shifts: A Unified Approach," NBER Working Paper No. 2835, February 1989; B. Dumas, "Super Contact and Related Optimality Conditions: A Supplement to Avinash Dixit's `A Simplified Exposition of Some Results Concerning Regulated Brownian Movement," NBER Technical Working Paper No. 77, April 1989; and P. R. Krugman, "Target Zones with Limited Reserves," forthcoming as an NBER Working Paper. (39)J. D. Sachs, ed., Developing Country Debt and the World Economy, 1988; Developing Country Debt and Economic Performance, Volume 1: The International Financial System, 1988; Volume 2: Country Studies--Argentina, Bolivia, Brazil, Mexico, 1989; and Volume 3: Country Studies--Indonesia, Korea, the Philippines, Turkey, 1989; all published by the University of Chicago Press. (40)R. Fernandez and R. W. Rosenthal, "Sovereign-Debt Renegotiations Revisited," NBER Working Paper No. 2981, May 1989; J. Eaton, "Monopoly Wealth and International Debt," NBER Reprint No. 1186, May 1989, and in International Economic Review 30, 1 (February 1989), pp. 33-48; and J. Aizenman, "Inward versus Outward Growth Orientation on the Presence of Country Risk," NBER Working Paper No. 2868, February 1989. (41)K. A. Froot, "Buybacks, Exit Bonds, and the Optimality of Debt and Liquidity Relief," NBER Reprint No. 1166, April 1989, and in International Economic Review 30, 1 (February 1989), pp. 49-70; P. R. Krugman, "Financing versus Forgiving a Debt Overhang," NBER Working Paper No. 2486, January 1988; and E. Helpman, "Voluntary Debt Reduction: Incentives and Welfare," NBER Working Paper No. 2692, August 1988. (42)J. D. Sachs, "Conditionality, Debt Relief, and the Developing Country Debt Crisis," NBER Working Paper No. 2644, July 1988; and J. I. Bulow and K. Rogoff, "Sovereign Debt Repurchases: No Cure for Overhang," NBER Working Paper No. 2850, February 1989. (43)B. J. Eichengreen and R. Portes, "Dealing with Debt: The 1930s and the 1980s," NBER Working Paper No. 2867, February 1989. (44)R. Dornbusch, "Notes on Credibility and Stabilization," NBER Working Paper No. 2790, December 1988; R. Dornbusch and A. Reynoso, "Financial Factors in Economic Development," NBER Working Paper No. 2889, March 1989; and S. Edwards, "Openness, Outward Orientation, Trade Liberalization, and Economic Performance in Developing Countries," NBER Working Paper No. 2908, March 1989. (45)M. Bruno, "Econometrics and the Design of Economic Reform," NBER Working Paper No. 2178, September 1988; and D. Rodrik, "Promises, Promises: Credible Policy Reform via Signaling," NBER Working Paper No. 2600, May 1988, and "Policy Uncertainty and Private Investment in Developing Countries," NBER Working Paper No. 2999, June 1989. (46)R. E. Cumby and S. J. G. van Wijnbergen, "Financial Policy and Speculative Runs with a Crawling Peg: Argentina, 1979-1981," NBER Working Paper No. 2376, September 1987; and F. Bourguignon, W. H. Branson, and J. de Melo, "Adjustment and Income Distribution: A Counterfactual Analysis," NBER Working Paper No. 2943, April 1989. (47)R. C. Marston, ed., Misalignment of Exchange Rates: Effects on Trade and Industry. Chicago: University of Chicago Press, 1988.…