Globalization and Its Challenges

I stand here with deeply conflicting emotions. I am honored to be delivering this prestigious lecture. I am profoundly sad that Rudi Dornbusch, who should have delivered the Ely Lecture, died in July last year and that I am here in his place. So I would like to start by talking about Rudi. Rudi was born and grew up in Krefeld, Germany. He was an undergraduate at the University of Geneva, and completed his Ph.D. at the University of Chicago in 1971, which is where we met. He was a student of Robert Mundell, and both the subject matter – the development of the Mundell-Fleming model – and the elegance and insights of his early work reflected Mundell’s influence. He taught at the University of Rochester and at the University of Chicago before accepting an offer from MIT in 1975. In 1976, soon after coming to MIT, Rudi wrote his most famous and influential theoretical article, “Expectations and Exchange Rate Dynamics”. As Ken Rogoff said in his celebratory lecture on the 25 th anniversary of its publication, “The ‘overshooting’ paper … marks the birth of modern international macroeconomics.” From the late 1970s, Rudi became increasingly interested in policy issues. Within