Macroeconomics in Emerging Markets [Paperback]

Peter J. Montiel (Author)

Book Description

Publication Date: April 21, 2003

This accessible textbook in macroeconomics is designed specifically for emerging economies. It provides a textbook model that upper-level undergraduate students use to understand economic events in their countries, and separate analysis of the key macroeconomic problem areas that these economies have confronted over the last two decades. These problem areas include fiscal deficits, financial sector reform, and exchange rate policies. The book differs from development textbooks in that it contains up-to-date macroeconomics.

Editorial Reviews

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. 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

Book Description

This is a relatively non-technical textbook in macroeconomics designed specifically for emerging economies. It provides a workhorse textbook model that upper-level undergraduate students can use to understand economic events in their countries, and provides separate analysis of the key macroeconomic problem areas that these economies have confronted over the last two decades: fiscal deficits, financial sector reform, and exchange rate policies. The book differs from the usual intermediate macroeconomics textbooks in that it is designed explicitly for emerging economies, and it differs from development textbooks in that it contains up-to-date macroeconomics.

See all Editorial Reviews

Product Details

• Paperback: 456 pages
• Publisher: Cambridge University Press (April 21, 2003)
• Language: English
• ISBN-10: 0521785510
• ISBN-13: 978-0521785518
• Product Dimensions: 9.6 x 6.6 x 1 inches
• Shipping Weight: 1.9 pounds
• Average Customer Review: 4.5 out of 5 stars  See all reviews (2 customer reviews)
• Amazon Best Sellers Rank: #1,738,643 in Books (See Top 100 in Books)

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11 of 11 people found the following review helpful:

4.0 out of 5 stars Readable and insightful, January 14, 2004

By 

Ralph de Haas - See all my reviews

This review is from: Macroeconomics in Emerging Markets (Paperback)

Although the title Macroeconomics in emerging markets seems rather straightforward at first sight, it makes one wonder whether the foundations of macroeconomics in emerging markets really differ from those in industrialised countries. Why a separate macroeconomics textbook for this category of countries? In this extremely lucidly written book, Peter Montiel easily convinces the reader that it is a useful complement to existing textbooks for at least two reasons. First, because the idiosyncrasies of many emerging economies - most notably their often weak financial and legal systems - may require a different macroeconomic management focus. While macroeconomic policies in industrialised countries often relate to business cycle developments, policy makers in emerging economies are compelled to spend much more time on irregular episodes of financial instability, which may require different types of action. Second, because some assumptions of standard theoretical models do not hold for most emerging economies. Market-determined floating exchange rates and a risk-free rate of return on short-term government debt do for instance not apply to many countries in the developing world.

The book is divided into four parts. The first one introduces a clear analytical model, to which later chapters refer when treating issues of macro-economic stabilisation. And although the author does not formally define the term "emerging market", the model developed in Chapters 2 and 3 shows that a typical emerging economy is characterised by real and financial openness (though with imperfect substitutability between domestic and foreign financial assets), an officially determined exchange rate regime, and a relatively strong reliance on monetary policies and stabilisation rather than fiscal policies (when compared to industrialised countries). Although the discussion of the model is clear, it would have benefited had the letters denoting the variables been more intuitively logical (e.g. why not use n to designate the nominal exchange rate rather than s?).

In the subsequent three parts the author gives an overview of specific areas of macroeconomic policy: fiscal management, management of the financial sector, and exchange-rate management. In general, the discussion of these themes is both comprehensive and profound. However, in my view the second part of the book, on financial sector policies, is somewhat unbalanced. The author discusses at length the literature on financial repression and financial liberalisation, but pays virtually no attention to the (more recent) so-termed legal view literature. The empirical results of this literature carry important implications for emerging economies, as they underline that the positive growth effect of financial system development mainly depends on the extent to which the financial system is rooted in an enforceable legal system. Only in Chapter 11 some oblique remarks are made with respect to the influence of the legal system on contract enforcement costs. Another omission is that, while dealing with the theoretical (dis)advantages of banks vs. financial markets, Chapter 11 does not discuss the empirical research into this matter, which basically shows that financial structure as such appears to be inconsequential for economic growth.

An important point in favour of the book is that, using the benchmark model from the first part, the author systematically shows that in emerging economies fiscal policy, financial sector issues, and exchange rate management are mutually interdependent. An interesting case in point is the very clear treatment of exchange rate management and currency crises in the last part of the book. Here, the differences between industrialised and emerging countries come clearly to the fore in a discussion of the ability of countries to perform moderate devaluations if a gap between the actual and equilibrium real exchange rate becomes apparent. While industrialised countries have been able to limit such devaluations, emerging economies have often experienced more extreme market reactions due to a lack of confidence. Paul Krugman already referred to this "double standard" of financial markets in The Return of Depression Economics (1999), but Peter Montiel elaborates on this theme, linking it to self-fulfilling liquidity crises and his discussion of financial sector fragility in earlier chapters.

All in all, this book provides for a readable and insightful analysis of macroeconomic management in emerging and transition economies, generally based on the state-of-the-art as regards theoretical and empirical research on this topic. Given the largely non-mathematical approach, the book may also serve well as an updated, more concise, and "light" version of Agénor and Montiel's second edition of Development Macroeconomics (1999). In doing so, this book also shows that clear and precise analytical writing on (macro)economics can be done without casting each and every argumentation into a mathematical mould.

1 of 1 people found the following review helpful:

5.0 out of 5 stars Just superb, January 8, 2012

By 

Ale (Europe) - See all my reviews

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This review is from: Macroeconomics in Emerging Markets (Paperback)

This is a textbook we badly needed, as there was an unmet demand for this type of book until Peter Montiel wrote this second edition. It is clear that it has been improved a great deal over the first edition. More graphical analysis, more streamline explanations, more useful material, etc. For example, a new chapter that presents a model with banks has been introduced. One can no longer assert that macroeconomics models without commercial banks are appropriate for explaining macroeconomics events in Emerging and Developing Economies, as financial intermediation in those rests more on banking rather than on their rudimentary securities markets. As well, the author develops a new chapter on floating exchange rates, since these are increasingly important in those countries.

It is a rigorous and detailed text (could be surely regarded as the very much acclaimed Agenor-Montiel "lite" Development Macroeconomics) that requires an important effort on the reader's part to work out the main model displayed in the first chapters (of the same spirit that those taught in intermediate macro - IS-LM-Phillips Curve -). But once the big effort has been made, you'll realize the gain experienced in reading it is an immense one, since the remainder of the book is based on that model and only expands on it.

There are 4 final chapters on EM crises that I view as an awesome way to understand, at leat partially, what it is currently happening in Europe, in addition to the chapter on Sovereign Risk Premia. And this leads me to the final statement about the book that I'd like to put forth: why study intermediate macroeconomics by using textbooks like Olivier Blanchard's, Mankiw's, Abel-Bernanke's, Dornbusch-Fischer-Startz's, etc...? The best avenue to learn macroeconomics at an advanced intermediate level should be to master Macroeconomics in Emerging Markets, by Peter J. Montiel.