Williamson (2008): Exchange Rate Economics

Williamson, John (2008): Exchange Rate Economics. Peterson Institute for International Economics, Working Papers No. 08-3.

In his latest working paper, John Williamson summarizes the current theory of how a floating exchange rate is determined, dividing the subject into what determines the steady state and what determines the transition to steady state. He examines the inadequacies of this model, and an alternative "behavioral" model, which recognizes that the foreign exchange market is populated by both fundamentalists and chartists, is presented.

Williamson argues that the main importance of understanding the foreign exchange market for development strategy is to permit a correct appraisal of the dangers of Dutch disease. Empirically it seems that from the standpoint of promoting development it is preferable to have a mildly undervalued rate. Williamson concludes the working paper by examining implications for exchange rate regimes.

Download: http://www.petersoninstitute.org/publications/wp/wp08-3.pdf

Hodgson (2007): "Evolutionary and Institutional Economics as the New Mainstream?"

Hodgson, G. (2007): "Evolutionary and Institutional Economics as the New Mainstream?", Evolutionary and Institutional Economics Review, 4(1): 7-25.

Absract: Mainstream economics has changed radically since the 1980s, offering greatly enhanced opportunities for intervention by evolutionary and institutional economics. This article surveys the extent of this transformation and the extent that mainstream economics has moved in an evolutionary and institutional direction. There are also signs of a possible gestalt shift in the social sciences, where rules are seen as constitutive of social relations and social reality. This contrasts with the former emphasis in mainstream economics on incremental change and equilibria. On the other hand, mainstream economics has a preoccupation with technique over substance, and the barriers between disciplines impair appropriate conceptual developments.

Keywords: evolutionary economics, institutional economics, endogenous preferences, bounded rationality, mainstream economics

JEL: B0, B52, D0.

Download 1: http://www.geoffrey-hodgson.info/user/image/evinsteconnewmainstream.pdf
Download 2: http://www.jstage.jst.go.jp/article/eier/4/1/4_7/_article