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.
Reviews
Advance praise: '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
610 pages