Rudiger Dornbusch, an internationally renowned macroeconomist who made fundamental contributions to economic science and to international economic policy design, died of cancer at his home in Washington, D.C., on July 25. He was 60.
Dornbusch was the Ford International Professor of International Economics at MIT, where he held joint appointments in the Department of Economics and the Sloan School of Management.
A memorial service will be held Sunday, Oct. 6 at 2:30 p.m. in the Wong Auditorium in MIT's Tang Center (corner of Wadsworth and Amherst streets). A reception will be held at 4:30 p.m. across the street at the Faculty Club in the Sloan Building (Wadsworth Street and Memorial Drive).
Dornbusch - Rudi to his friends - was widely acclaimed for his seminal research on the theory of exchange rate determination and international economic policy. In a mid-1970s paper on exchange rate dynamics that has become one of the most cited economic contributions of the last half century, Dornbusch showed that shocks to a country's monetary policy could lead to larger exchange rate movements in the short run than in the longer run. In calculating the amount by which short run exchange rate movements would "overshoot" the long run adjustment, Dornbusch developed a solution method for dynamic economic models that has found wide application in many economic contexts.
Kenneth Rogoff (Ph.D. 1980), a Dornbusch student who is now a Harvard professor and the current economic counselor and director of the IMF Research Department, identified "overshooting" as Dornbusch's key and lasting contribution to international economics. He described the 1976 paper as "elegant," "path-breaking," and a "perfect illustration of why the search for abstract beauty can sometimes yield a large practical payoff for both policy makers and graduate students."
Dornbusch was well known at MIT for his devotion to students and for his demanding classroom style. In 27 years on the MIT faculty, he was the dissertation adviser for more than 125 doctoral students. He trained many of today's leading international economic policy scholars and practitioners. His students have taught at leading universities, and have served in high-ranking posts in finance ministries and central banks around the world.
Professor James Poterba, one of Dornbusch's colleagues, recalled that Dornbusch stood out among faculty advisors: "Other faculty held luncheon meetings with their advisees, but Rudi held a weekly breakfast and demanded that his students arrive on time at 8 o'clock - an unknown hour for many students! - to participate in discussions of ongoing research." Poterba noted that in spite of the hour, the students "would not have missed the breakfasts for the world."
Dornbusch recently received the Frank Perkins Award for Graduate Student Advising, which is presented annually by the MIT Graduate Student Association. At a celebration of Dornbusch's 60th birthday last month, Professor Olivier Blanchard, head of the MIT Department of Economics and a former Dornbusch student himself, presented Dornbusch with a collection of letters from many of his past students. Many of the letters cited Dornbusch's boundless enthusiasm for research and policy analysis as a critical factor in the author's decision to specialize in international economics, and praised his demanding standards as an advisor. Many also commented that his joy for life had taught them not just about economics, but about how to live life to its fullest.
NO ANSWER AT 1-800-BAILOUT
Dornbusch's high expectations of his students arose from years of research and commentary in the very high-stakes world of international economics. He was one of the leading experts on "economic crisis management," and he carried out detailed analysis of many historical episodes of hyperinflation, debt default and related economic maladies.
Consistently direct, candid and rigorous, whether writing for an academic journal or offering his opinions in an op-ed piece about how to solve an emerging market crisis, Dornbusch peppered his commentary with wit. In 1998, for example, in arguing that the International Monetary Fund should not pour money into Brazil to stave off an economic crisis, he commented dryly, "When they [Brazil] call 1-800-BAILOUT, just let it ring. Say our operators are busy." Dornbusch had a rare talent for making the global economy comprehensible to broad audiences outside economics, and his wit and humor made him an extremely popular public speaker.
Dornbusch was widely regarded as one of the most astute and insightful analysts of the world economic situation, and his advice was widely sought by business groups and participants in financial markets.
John Reed, retired chairman of Citigroup and a life member of the MIT Corporation, described Dornbusch as a "this is what the facts are" economist. "He never let fad or emotion obscure the fundamental realities of the economic situation." He was, for example, one of the first to point out that Mexico's economic circumstances in the mid-1990s were not sustainable.
Dornbusch was a contributor to Business Week magazine for many years. In 1997, he co-founded FDO Partners, a firm that provided investment advice and managed funds invested in emerging markets. Until just a few weeks before his death, he remained actively involved in analyzing economic policy in developing nations, most recently working with MIT colleague Professor Ricardo Caballero to offer suggestions for fiscal and monetary reform in Argentina.
Dornbusch was born on June 8, 1942, in Krefeld, Germany. He received his undergraduate training at the University of Geneva, graduating in 1966. He received the M.A. in economics in 1966 and the Ph.D. in 1971, both from the University of Chicago.
Dornbusch joined the MIT faculty in 1975 and was promoted to full professor in 1978. He was appointed to the Ford professorship in 1984. Before coming to MIT, Dornbusch held positions at the University of Chicago and the University of Rochester. He was recently named a Distinguished Fellow of the American Economics Association, where he had served in the past as vice president. He was a Fellow of the American Academy of Arts and Sciences and of the Econometric Society.
Shortly after he arrived at MIT, Dornbusch and MIT colleague Stanley Fischer collaborated to write "Macroeconomics," a textbook that became a standard reference for a generation of graduate and undergraduate students. The book broke ground in emphasizing the role of international capital markets in determining macroeconomic outcomes. It has been translated into more than a dozen languages and is still in widespread use.
Dornbusch is survived by his wife, Sandra Masur of Boston and Washington, and a brother, Paul Josef Dornbusch, of Krefeld.
A version of this article appeared in MIT Tech Talk on August 14, 2002.