Macroeconomics in Emerging Markets

This book is a rigorous, yet nonmathematical analysis of key macroeconomic issues faced by emerging economies. The first part develops an analytical framework that can be used as a workhorse model to study short-run macroeconomic issues of stabilization and adjustment in such economies, comparable to the IS-LM framework widely used in intermediate-level macroeconomics textbooks for industrial countries. The rest of the book considers fiscal issues, financial sector issues, and issues concerning exchange rate regimes and policies. In the fiscal area, the focus is on the formulation of intertemporal policies, i.e. fiscal sustainability, seigniorage, and the roles of central bank independence and privatization of public enterprises in achieving fiscal credibility. The analysis of the financial sector examines its role in promoting welfare and growth. Finally, the book explores recent developments in the theory of appropriate exchange rate regimes and management, and provides an overview of recent currency crises in emerging markets.

Table of Contents:
Part I. Overview: 1. Macroeconomics and development; Part II. A Benchmark Macroeconomic Model for an Emerging Economy: 2. Equilibrium in the domestic labor and goods markets; 3. Equilibrium in the financial markets; 4. Short-run macroeconomic equilibrium; 5. Medium-term macroeconomic equilibrium; Part III. Public Finance and Macroeconomic Performance: 6. The intertemporal budget constraint of the public sector; 7. Consequences of insolvency I: high inflation; 8. Consequences of insolvency II: public sector debt and economic growth; 9. Measures for achieving fiscal credibility I: central bank independence; 10. Measures for achieving fiscal credibility II: privatization; Part IV. The Financial Sector and Macroeconomic Performance: 11. Finance, welfare, and growth; 12. Financial repression; 13. Financial reform, public policy, and financial crises; 14. Financial openness and the sequencing of financial reform; 15. Coping with capital inflows; Part V. Exchange Rate Management: 16. Equilibrium real exchange rates: 17. Exchange rate regimes; 18. Managing an officially-determined rate; 19. Banking crises and exchange rate crises; 20. Domestic macroeconomic management in emerging economies: lessons from the crises of the nineties.

Review :
'The principles of macroeconomics are universal. The details are not. With their weak financial systems and their often poor fiscal control, emerging countries need tailored macroeconomic policies, be it fiscal policy or exchange rate regimes. To understand the issues, and help analyze policies, there can be no better way than to read this book. Based on his considerable expertise, and writing with unusual clarity, Peter Montiel has written what is likely to become the standard reference in the field.' Olivier Blanchard, Massachusetts Institute of Technology 'Peter Montiel brings to this fine textbook the rarest of combinations of superb research, teaching skill, and practical experience in emerging markets. The book is a masterpiece of analytic thinking and appealing intuition. This will be the text of choice for the many students who want to understand the macroeconomic crises that continue to plague emerging markets.' Bill Easterly, New York University 'A masterful, lucid tour through the wild and woolly world of development macroeconomics. Researchers, policy makers, upper-level undergraduate and graduate students will all appreciate the logical structure of the book, the critical surveys of the empirical literature, and the patient, non-technical exposition of theory. Macroeconomics for Emerging Markets is essential reading for anyone interested in the big issues that dominate the debate on policy reform in today's less developed countries.' Ed Buffie, Indiana University 'Peter Montiel has written a wonderful book. It is comprehensive, accessible and rigorous. This volume fills a major gap in the economics literature, and should be read by everyone interested in the emerging nations. I am definitely planning to use it in my MBA courses!' Sebastian Edwards, University of California, Los Angeles 'A tour de force. It combines a rigorous analytical framework with a comprehensive and insightful discussion of monetary, fiscal, and exchange rate policy issues in emerging economies. It should be in high demand - not only as a leading text for courses in macroeconomics but also as a practical guide for policymakers.' Morris Goldstein, Institute for International Economics, Washington, DC 'Macroeconomics for Emerging Markets fulfills a very important role in bridging the wide gulf between the 'standard macroeconomics textbook' and the issues, problems, and policy challenges that emerging market economies encounter on a day-to-day basis. With their focus squarely on the developed economies, in standard macroeconomics textbooks monetary and fiscal policy are always countercyclical and devaluations are always expansionary; this book helps the reader understand why things may not quite work out that way in emerging markets. Montiel provides us with a clear and simple framework that can be used to analyze a variety of the complex issues that emerging markets face - ranging from debt problems to high inflation and lack of credibility. In chapter after chapter the analysis crystallizes why emerging markets may face a different set of challenges than the developed economies. Montiel deserves high praise for writing a clear, accessible, comprehensive well-researched book, with an excellent mix of theory with facts and evidence. This book will be invaluable as a teaching tool and a great reference for scholars and policymakers.' Carmen Reinhart, International Monetary Fund 'The presentation of the arguments in the book is admirably clear and complete … The argumentation is rigorous, uses little mathematics and is very accessible. This book is an excellent source for mainstream thought on macroeconomic policy for emerging markets.' Development and Change