Macroeconomic stabilization in emerging economies calls for managing both internal and external balance within a policy space constrained by global capital flows and debt sustainability pressures. Emerging East Asia has crafted an approach to meeting this challenge that involves the exchange rate as policy instrument. But while the economics of the system have proven effective, the politics can run afoul of US strictures on "currency manipulation". This is a source of ongoing tension. Viewing East Asian exchange rate policy through the framework of this text, the macroeconomic motivation for the policy behavior is clear. And motivation is determinative for establishing "currency manipulation" under IMF rules. Advantaging exports through a depressed currency is a side effect of, not the motivation for, accumulating foreign reserves to back exchange rate stabilization. A broad pattern of leaning against currency volatility through both buying and selling of foreign exchange is evident in Emerging East Asia. Countries elsewhere would do well to learn from this model.

It is hard to overstate the importance of agriculture in economic development. If one takes a long-term view, the gradual change from hunter-gatherer societies to sedentary food production created a food surplus and enabled people to spend time on other activities than the daily hunt for food. This extra time could be used for innovation in the agricultural sector itself, but also for other activities.

Money is created by the banking system issuing liabilities against itself. Under a fiat money system, nothing of intrinsic value backs the money supply. Viability of the system depends on shared faith. Central banks issue liabilities in the form of currency and deposits held by commercial banks in exchange for acquiring assets in the form of domestic government securities, foreign securities, or loans to commercial banks. These central bank liabilities constitute the monetary base. Commercial banks issue liabilities in the form of demand deposits held by the public in exchange for making loans. Commercial banks are constrained in money creation by the need to hold reserves with the central bank at a required ratio relative to demand deposits. The central bank must manage growth in the monetary base to maintain economic balance: too slow keeps the economy from performing at its potential while too fast causes inflation to rear up. To keep the economy on an even course, the monetarist school, led by Milton Friedman, advocates steady growth in the money supply. A pattern of inflation falling with slowing money growth shows up for Emerging East Asia between the 1990s and the 2000s.

This chapter describes the structure and dynamics of the magnetosphere including describing the main regions and the Dungey convection cycle driven by magnetic reconnection. Geomagnetic disturbances such as storms and substorms are introduced. The motion of charged particles in the system and the role of pressure in determining the shape and size of the magnetosphere are discussed.

The book is motivated by the need for a different approach to macroeconomics for Emerging East Asia than the one offered by standard US texts. The US is unique in printing the world’s reserve currency, freeing it from concerns about currency valuation, international payments imbalances, or debt sustainability, all of which matter a great deal for Emerging East Asia. In the emerging market setting, the exchange rate is a key factor in stabilization policy. Failure to appreciate this has resulted in contention over "currency manipulation", most vociferously against China coming from the US. This text establishes a framework for viewing foreign exchange market intervention in an appropriate light.

This chapter paints a broad picture of the current state of economic development. Section 1.2 provides a brief overview of the World Bank classification in global regions. Section 1.3 discusses the importance of countries in terms of (agricultural) land area and population. Section 1.4 does the same for income levels and evaluates the differences between domestic product and national income. This section also points out the importance of correcting for price differences when comparing income levels between countries. On that basis, section 1.5 analyzes the differences in income per capita in more detail for a large range of countries. Section 1.6 briefly reviews trade flows of goods and services and evaluates the size of imports relative to exports. Section 1.7 provides an overview of the range of issues which are important for determining the global competitiveness of a country. Section 1.8 concludes.

One measure of (gains in) human health is life expectancy at birth. At the world level, male life expectancy at birth rose from 50.7 years for men and 54.6 years for women in 1960 to 70.4 years for men and 74.9 years for women, a rise of about 20 years in both cases. There are, however, substantial differences across countries and over time. In 2018, for example, male life expectancy for men in the Central African Republic was 50.6 years, while it was 87.7 years (that is, 37.1 years higher!) for women in Hong Kong in the same year. The highest rise in life expectancy from 1960 to 2018 was for women in the Maldives (from 37.4 to 80.5 years, a rise of 43.1 years) and the lowest rise was for men in Ukraine (from 65.6 to 66.7 years, a rise of 1.0 year). It thus matters a great deal where you live and if you are a man or a woman, both for life expectancy at a point in time and gains over time.

U.S. security interests intensified with the early Cold War. The high ideals of the Good Neighbor Policy rapidly disappeared and after the 1954 invasion of Guatemala, U.S. policy makers could not credibly claim to reject armed intervention. The United States became more openly supportive of dictatorships and authoritarian governance in order to fight against Communist infiltration. Power was once again central. The predominance of security over all else bred dissatisfaction in Latin America. In part to counter U.S. influence, Latin American governments supported the creation of hemispheric pacts and organizations. Latin American citizens protested against poverty and U.S. domination. U.S. policy makers targeted reformist movements because they assumed that they were too weak to resist Communist domination and they threatened business interests. Revolutionary fervor with a distinctly anti-U.S. bent was developing during the early Cold War, though it would not fully flower until the Cuban revolution. This chapter examines how the early Cold War brought national security and self-interest once again squarely to the fore.

Economic activity is unevenly distributed across space (see, for example, Chapters 1, 10, and 17). A visible manifestation of this uneven distribution is the rising share of the number of people living in cities. According to the World Urbanization Prospects (UNDESA 2019), this share rose from 30 percent in 1950 to 56 percent in 2020 and will continue to rise to 68 percent in 2050 (see Figure 16.1). In terms of the number of people involved, the rise is enormous: from 750 million people living in cities in 1950 to 4.4 billion in 2020. This number is expected to rise further to 6.7 billion in 2050. As a result of global urbanization, the rural population is rising more slowly: from 1.8 billion in 1950 to 3.4 billion in 2020. The rural population is currently (2020) at its peak; it is expected to decline to 3.1 billion in 2050.

Part II consists of five chapters and shifts focus from geo-human interaction to human interaction, which becomes relatively more important as time progresses. Chapter 5 provides an overview of globalization and economic development from a longer-run perspective (2,000 years). The chapter covers different types of globalization, price wedges, and trade-, migration-, and capital flows. Chapter 6 focuses on a better understanding of the causes and consequences of trade flows between nations. It covers comparative advantages based on differences in technology and factor abundance, as well as competitive advantages related to intra-industry trade flows, imperfect competition, and firm heterogeneity. Chapter 7 continues with an overview of the main causes of economic growth and development based on (human) capital accumulation, total factor productivity, knowledge flows, and endogenous growth, as well as the dynamic costs of trade restrictions. Chapter 8 analyzes institutions and contracts, with a discussion of the nature of the firm, social costs, property rights, and the relationship between institutions and economic development (do institutions cause growth?). Chapter 9 concludes, outlining money and finance issues, with a particular focus on exchange rates, forward markets, interest parity, the policy trilemma, and the links between finance, investment, and development.

The economies of Emerging East Asia differ greatly with respect to size, level of development, engagement in international trade and finance, and the roles of state versus market. Yet, broadly speaking, a common framework for macroeconomic analysis applies even as particulars differ. Notably, all economies of the region must contend with shocks by instituting policy mechanisms aimed at maintaining balance. The economic features described in this chapter have a bearing on the particular forms these mechanisms take.

In the first half of the twentieth century, Latin America was a region of immigration, where people moved from one country to another and/or people came from other continents, mostly from Europe. But by the 1960s, when many Latin American countries were suffering economic downturns, and the 1970s and 1980s, when state repression intensified, immigration turned to emigration, and many began making their way to the United States. Today, Latin Americans continue to migrate to the United States; people from all over the globe migrate to Latin America; and people move within the region. It is one of the most complex challenges confronting the United States and Latin America, and remains a very divisive issue in most countries of the region, especially the United States. This chapter looks at the push and pull factors that lead people to move from their home countries to resettle elsewhere.

Macroeconomic models provide a framework for relating key aggregates. Classical and Keynesian models diverge as to how quickly prices and wages adjust to eliminate the twin excess supplies of a downturn – a glut in product markets and unemployed workers in labor markets. The aggregate demand / aggregate supply model is a model of equilibrium in the Classical spirit in which prices adjust to clear markets and the economy rebounds spontaneously from shocks to recover its potential growth path. In contrast, the income–expenditure model, based on the work of Keynes, depicts an economy that is prone to sustained sub-optimal performance. In this model, wages and prices fail to adjust to achieve full employment in any timely fashion, and aggregate demand thus falls short of inducing production at potential. Finally, the IS–LM (interest/saving-liquidity/money) model elaborates on the Keynesian framework to highlight the role of the interest rate in policy, and the Mundell–Fleming extension of the model brings in a foreign sector with a role for the exchange rate.

This chapter describes the Earth’s upper atmosphere including the ionosphere and its effect on radio propagation. The density and thermal structure of the neutral thermosphere is described with respect to energy deposition as a function of altitude and hydrostatic equilibrium determining the scale height. The structure of the partially ionized ionosphere is described as well as the physical process responsible for the aurorae. Supplements give more details on photochemistry that give rise to excited atoms and molecules that emit auroral photons.