International finance and macroeconomics.

• Position: National Bureau of Economic Research program meeting

The NBER's Program on International Finance and Macroeconomics held its spring meeting in Cambridge on March 19. Charles M. Engel, NBER and University of Washington, and acting Program Director Andrew K. Rose, NBER and University of California, Berkeley, organized this program:

Michael B. Devereux, University of British Columbia, and Charles M. Engel, "Fixed versus Floating Exchange Rates: How Price Setting Affects the Optimal Choice of Exchange Rate Regime" (NBER Working Paper No. 6867)

Discussants: Alan Stockman, NBER and University of Rochester, and Cedric Tille, Federal Reserve Bank of New York

Allan Drazen, NBER and University of Maryland, "Interest Rates' Defense against Speculative Attack under Asymmetric Information"

Discussants: Robert Flood, International Monetary Fund, and Carlos A. Veigh, NBER and University of California, Los Angeles

Robert J. Hodrick, NBER and Columbia University, and David Tat-Chee Ng and Paul Sengmueller, Columbia University, "An International Dynamic Asset Pricing Model" (NBER Working Paper No. 7157)

Discussants: John Y. Campbell, NBER and MIT, and Kenneth A. Froot, NBER and Harvard University

V. V. Chari, University of Minnesota, and Patrick Kehoe, Federal Reserve Bank of Minneapolis, "Hot Money" (NBER Working Paper No. 6007)

Discussants: Jonathan Eaton, NBER and Boston University, and Enrique G. Mendoza, NBER and Duke University

Aart Kraay, World Bank, and Jaume Ventura, MIT, "Comparative Advantage and the Cross-section of Business Cycles"

Discussants: Fabrizio Perri, New York University, and Marianne Baxter, NBER and University of Virginia

Devereux and Engel investigate the welfare properties of fixed and floating exchange rate regimes. The optimal exchange rate regime may depend on whether prices are set in the currency of producers or the currency of consumers. Under floating exchange rates, the variance of home consumption is not influenced by foreign monetary variance when prices are set in consumers' currency. If prices are set in producers' currencies, or under fixed exchange rates, then there is transmission of foreign disturbances. The authors show that the exchange rate regime affects not just the variance of consumption and output but also their average levels. When prices are set in producers' currency, as in the traditional framework, there is a trade-off between floating and fixed exchange rates. Under floating rates, exchange rate adjustment allows for a lower variance of consumption. But...