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Kenneth Rogoff

Bio: Kenneth Rogoff is an academic researcher from Harvard University. The author has contributed to research in topics: Exchange rate & Debt. The author has an hindex of 107, co-authored 390 publications receiving 75971 citations. Previous affiliations of Kenneth Rogoff include International Monetary Fund & University of California, Berkeley.


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BookDOI
TL;DR: This Time Is Different as mentioned in this paper presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes.
Abstract: Throughout history, rich and poor countries alike have been lending, borrowing, crashing--and recovering--their way through an extraordinary range of financial crises. Each time, the experts have chimed, "this time is different"--claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. With this breakthrough study, leading economists Carmen Reinhart and Kenneth Rogoff definitively prove them wrong. Covering sixty-six countries across five continents, This Time Is Different presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes--from medieval currency debasements to today's subprime catastrophe. Carmen Reinhart and Kenneth Rogoff, leading economists whose work has been influential in the policy debate concerning the current financial crisis, provocatively argue that financial combustions are universal rites of passage for emerging and established market nations. The authors draw important lessons from history to show us how much--or how little--we have learned. Using clear, sharp analysis and comprehensive data, Reinhart and Rogoff document that financial fallouts occur in clusters and strike with surprisingly consistent frequency, duration, and ferocity. They examine the patterns of currency crashes, high and hyperinflation, and government defaults on international and domestic debts--as well as the cycles in housing and equity prices, capital flows, unemployment, and government revenues around these crises. While countries do weather their financial storms, Reinhart and Rogoff prove that short memories make it all too easy for crises to recur. An important book that will affect policy discussions for a long time to come, This Time Is Different exposes centuries of financial missteps.

4,595 citations

Journal ArticleDOI
TL;DR: The authors compared the performance of various structural and time series exchange rate models, and found that a random walk model performs as well as any estimated model at one to twelve month horizons for the dollar/pound, dollar/mark, dollar /yen and trade-weighted dollar exchange rates.

3,621 citations

Journal ArticleDOI
TL;DR: In this article, it is shown that the ideal central bank should place a large, but finite, weight on inflation, and a new framework for choosing among alternative intermediate monetary targets is proposed.
Abstract: Society can sometimes make itself better off by appointing a central banker who does not share the social objective function, but instead places "too large" a weight on inflation-rate stabilization relative to employment stabilization. Although having such an agent head the central bank reduces the time-consistent rate of inflation, it suboptimally raises the variance of employment when supply shocks are large. Using an envelope theorem, we show that the ideal agent places a large, but finite, weight on inflation. The analysis also provides a new framework for choosing among alternative intermediate monetary targets. I. INTRODUCTION It is now widely recognized that even if a country has a perfectly benevolent central bank (one that attempts to maximize the social welfare function), it may suffer from having an inflation rate which is systematically too high.' Suppose, for example, that a distortion (such as income taxation) causes the market rate of employment to be suboptimal. Then inflation can arise because wage setters rationally fear that the central bank will try to take advantage of short-term nominal rigidities to raise employment systematically. Only by setting high rates of wage inflation can wage setters discourage the central bank from trying to reduce the real wage below their target level. This paper considers some institutional responses to the timeconsistency problem described above. In particular, we examine the practice of appointing "conservatives" to head the central bank, or of giving the central bank concrete incentives to achieve an intermediate monetary target. Our analysis of intermediate monetary targeting is quite different from conventional analyses in which the central bank is rigidly constrained to follow a particular feedback rule. Indeed, an important conclusion is that it is not generally optimal to legally constrain the central bank to hit its intermediate target (or follow its rule) exactly, or to choose

3,437 citations

Posted Content
TL;DR: A number of recent studies have weighed in with fairly persuasive evidence that real exchange rates (nominal exchange rates adjusted for differences in national price levels) tend toward purchasing power parity in the very long run as discussed by the authors.
Abstract: FIRST ARTICULATED by scholars of the ISalamanca school in sixteenth century Spain,1 purchasing power parity (PPP) is the disarmingly simple empirical proposition that, once converted to a common currency, national price levels should be equal. The basic idea is that if goods market arbitrage enforces broad parity in prices across a sufficient range of individual goods (the law of one price), then there should also be a high correlation in aggregate price levels. While few empirically literate economists take PPP seriously as a short-term proposition, most instinctively believe in some variant of purchasing power parity as an anchor for long-run real exchange rates. Warm, fuzzy feelings about PPP are not, of course, a substitute for hard evidence. There is today an enormous and evergrowing empirical literature on PPP, one that has arrived at a surprising degree of consensus on a couple of basic facts. First, at long last, a number of recent studies have weighed in with fairly persuasive evidence that real exchange rates (nominal exchange rates adjusted for differences in national price levels) tend toward purchasing power parity in the very long run. Consensus estimates suggest, however, that the speed of convergence to PPP is extremely slow; deviations appear to damp out at a rate of roughly 15 percent per year. Second, short-run deviations from PPP are large and volatile. Indeed, the one-month conditional volatility of real exchange rates (the volatility of deviations from PPP) is of the same order of magnitude as the conditional volatility of nominal exchange rates. Price differential volatility is surprisingly large even when one confines attention to relatively homogenous classes of highly traded goods. The purchasing power parity puzzle then is this: How can one reconcile the enormous short-term volatility of real exchange rates with the extremely slow rate at which shocks appear to damp out? Most explanations of short-term exchange rate volatility point to financial factors such as changes in portfolio preferences, short-term asset price bubbles, and monetary shocks (see, for example, Maurice Obstfeld and Rogoff forthcoming). Such shocks can have substantial effects on the real economy in the presence of sticky nominal wages and prices. I See Lawrence H. Officer (1982, ch. 3) for an extensive discussion of the origins of PPP theory; see also Dornbusch (1987).

2,901 citations

ReportDOI
TL;DR: In this paper, the authors argue that by explicitly introducing costs of international trade (narrowly, transport costs, but more broadly, tariffs, nontariff barriers, and other trade costs), one can go far toward explaining a great number of the main empirical puzzles that international macroeconomists have struggled with over twenty-five years.
Abstract: The central claim in this paper is that by explicitly introducing costs of international trade (narrowly, transport costs, but more broadly, tariffs, nontariff barriers, and other trade costs), one can go far toward explaining a great number of the main empirical puzzles that international macroeconomists have struggled with over twenty-five years. Our approach elucidates J. McCallum's home-bias-in-trade puzzle, the Feldstein-Horioka saving-investment puzzle, the French-Poterba equity-home-bias puzzle, and the Backus-Kehoe-Kydland consumption-correlations puzzle. That one simple alteration to an otherwise canonical international macroeconomic model can help substantially to explain such a broad range of empirical puzzles, including some that previously seemed intractable, suggests a rich area for future research. We also address a variety of international pricing puzzles, including the purchasing-power-parity puzzle emphasized by Rogoff, and what we term the exchange-rate disconnect puzzle. The latter cat...

2,639 citations


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TL;DR: The authors surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world, and presents a survey of the literature.
Abstract: This paper surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world.

13,489 citations

Journal ArticleDOI
TL;DR: Corporate Governance as mentioned in this paper surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world, and shows that most advanced market economies have solved the problem of corporate governance at least reasonably well, in that they have assured the flows of enormous amounts of capital to firms, and actual repatriation of profits to the providers of finance.
Abstract: This article surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world. CORPORATE GOVERNANCE DEALS WITH the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment. How do the suppliers of finance get managers to return some of the profits to them? How do they make sure that managers do not steal the capital they supply or invest it in bad projects? How do suppliers of finance control managers? At first glance, it is not entirely obvious why the suppliers of capital get anything back. After all, they part with their money, and have little to contribute to the enterprise afterward. The professional managers or entrepreneurs who run the firms might as well abscond with the money. Although they sometimes do, usually they do not. Most advanced market economies have solved the problem of corporate governance at least reasonably well, in that they have assured the flows of enormous amounts of capital to firms, and actual repatriation of profits to the providers of finance. But this does not imply that they have solved the corporate governance problem perfectly, or that the corporate governance mechanisms cannot be improved. In fact, the subject of corporate governance is of enormous practical impor

10,954 citations

Journal ArticleDOI
TL;DR: In this paper, the authors propose a theory of ratification in the context of domestic political games and international political games, which is applicable to many other political phenomena, such as dependency, legislative committees, and multiparty coalitions.
Abstract: Domestic politics and international relations are often inextricably entangled, but existing theories (particularly “state-centric” theories) do not adequately account for these linkages. When national leaders must win ratification (formal or informal) from their constituents for an international agreement, their negotiating behavior reflects the simultaneous imperatives of both a domestic political game and an international game. Using illustrations from Western economic summitry, the Panama Canal and Versailles Treaty negotiations, IMF stabilization programs, the European Community, and many other diplomatic contexts, this article offers a theory of ratification. It addresses the role of domestic preferences and coalitions, domestic political institutions and practices, the strategies and tactics of negotiators, uncertainty, the domestic reverberation of international pressures, and the interests of the chief negotiator. This theory of “two-level games” may also be applicable to many other political phenomena, such as dependency, legislative committees, and multiparty coalitions.

6,155 citations

Posted Content
TL;DR: This article showed that the gravity model usually estimated does not correspond to the theory behind it and showed that national borders reduce trade between the US and Canada by about 44% while reducing trade among other industrialized countries by about 30%.
Abstract: The gravity model has been widely used to infer substantial trade flow effects of institutions such as customs unions and exchange rate mechanisms. McCallum [1995] found that the US-Canada border led to trade between provinces that is a factor 22 (2,200%) times trade between states and provinces, a spectacular puzzle in light of the low formal barriers on this border. We show that the gravity model usually estimated does not correspond to the theory behind it. We solve the 'border puzzle' by applying the theory seriously. We find that national borders reduce trade between the US and Canada by about 44%, while reducing trade among other industrialized countries by about 30%. McCallum's spectacular headline number is the result of a combination of omitted variables bias and the small size of the Canadian economy. Within-Canada trade rises by a factor 6 due to the border. In contrast, within-US trade rises 25%.

6,043 citations