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Outline and syllabus
(Student presentations are market with a star *)
Introductory
Lectures: Underlying Theoretical Framework and Stylized Facts on the
Global Economy
1. Theory:
A . Balance of Payments Accounts, identities, budget constraints,
and relations between the key variables.
Overview of BoP Accounts; Definition of the net foreign asset ratio;
Changes to the value of net foreign assets due to exchange rate changes
(trade balance and valuation effects); Sustainability of Net Foreign
Assets (debt sustainability)
Lecture
notes linked here. Students should be familiar with Burda and
Wyplosz chapters 2 and 3.
B. Current Account Determination 1: The Elasticities
and the Absorption approaches. Based on lecture
notes.
C. Current Account Determination 2: The Intertemporal
Approach to the Current Account. The Stages of Current Account and Why
current account deficits are not necessarily bad. Ricardian equivalence.
Lecture notes on the
intertemporal approach here, and graphs here. The
class
is based on Obsfeld and Rogoff, International Macroeconomics, Chapters
1 and 2.
D. Current Account Determination 3: The Mundel
Flemming Model
-The effect of fiscal policy on the current account balance
-The root cause of a CA deficit and implications for CA adjustment and
the exchange rate
-Fixed exchange rates and sterilization of capital inflows.
Lecture notes linked
here (graphs missing here, but handed out in class)
Topic 1. Current Account Determination
and the US Current Account Deficit
a. Stylized facts, based on Martin Wolf (2006)
b. Student presentations on the prevailing theories to explain
these facts
* The “bearish” view, Presenter:
Maria:. Discussant: Stantcho.
i. Roubini,
Nouriel and Brad Setser, 2004, The US as a Net Debter: The
Sustainability of the US External Imbalances.
ii. Roubini,
Nouriel and Brad Setser, 2005, Will the Bretton Woods 2 Regime Unravel
Soon? The Risk of a Hard Landing in 2005-2006. Mimeo, Stern School of
Business, New York University
* The “bullish” “Deutche Bank View”, Presenter:
Salvatore. Discussant: Yeong-Mee:
i. Dooley, Michael
P., Folkerts-Landau, David and Garber, Peter, 2003, An Essay on the
Revived Bretton Woods System, National Bureau of Economic Research,
Inc, NBER Working Paper 9971
ii. Dooley,
Michael P., Folkerts-Landau, David and Garber, Peter, 2005, Direct
Investment, Rising Real Wages and the Absorption of Excess Labor in the
Periphery. NBER Working Paper 10626
*Another bullish view: Presenter:
Caroline. Discussant: Katya:
Cooper,
Richard N., 2006, Living with Global Imbalances: A Contrarian view.
Further reading:
Obstfeld, M. and K. Rogoff, 2004, The Unsustainable US Current Account
Position Revisited, NBER Working Paper no. 10869
(http://papers.nber.org/papers/w10869.pdf)
Blanchard, Olivier, Francesco Giavazzi and Filipa Sa, 2005, The U.S.
Current Account and the Dollar, NBER Working Paper No. 11137
(http://www.nber.org/papers/W11137)
Devereux, M. and H. Genberg (2006)
Topic 2. The role of fiscal
policy in resolving global macroeconomic imbalances, twin deficits,
etc. (2 presentations)
Two student presentations under this topic:
* Absence of twin deficits. Presenter:
Vania. Discussant: Dominic:
Corsetti, G. and G Mueller, 2006, Twin Deficits: Squaring theory
evidence and common sense. Economic Policy, Vol. 21, Issue 48, pp.
597-638. http://www.iue.it/Personal/corsetti/research/tdh.pdf
* Presence of twin deficits: Presenter:
Marianne. Discussant: Laura:
Kumhof,
M. D. Laxton and D. Muir, 2005, “Consequences of Fiscal Consolidation
for the U.S. Current Account,” United States—Selected Issues,
IMF Country Report No.05/258 (Washington, D.C.: International Monetary
Fund). pp. 66-84
Background reading:
-Frankel, Jeffrey, 2006, “Twin Deficits and Twin Decades,”
in the Macroeconomics of Fiscal Policy, Richard Kopcke, Geoffrey, Tootell
and Robert Triest, Eds. (MIT Press), pp.321-335. http://ksghome.harvard.edu/%7Ejfrankel/WequassetTwinDeficitsPub.pdf
-Funke, Katja and Christiane Nickel, 2006, Does Fiscal Policy
Matter for the Trade Account? A Panel Cointegration Study, IMF WP 06/147
-Cavallo, Michelle, 2005, Understanding the Twin Deficits: New
Approaches, New Results, FRBSF Economics Letter, Nov 2005.
(http://www.frbsf.org/publications/economics/letter/2005/el2005-16.pdf)
-Christopher J. Erceg; Luca Guerrieri; Christopher Gust, 2005,
Expansionary Fiscal Shocks and the Trade Deficit, International Finance
Discussion Paper, 2005-825 (January) (http://www.federalreserve.gov/pubs/ifdp/2005/825/default.htm)
Further reading:
Twin Deficits, Growth and Stability of the US Economy, Special Issue of
the Journal of Policy Modeling, edited by Dominick Salvatore, 28, no.6,
September 2006. (http://www.sciencedirect.com/science/journal/01618938)
Topic 3. International
Financial Architecture (4 presentations)
1. Exchange-rate surveillance, policy coordination and IMF reform.
Background readings:
IMF,
2006, Article IV of the Fund's Articles of Agreement - An Overview of
the Legal Framework.
IMF,
2006, Report of the Managing Director to the International Monetary and
Financial Committee on the IMF's Policy Agenda
IMF,
2006, Report of the Managing Director to the International Monetary and
Financial Committee on IMF Quota and Voice Reform
Swoboda,
Alexander K., 2006, “International Monetary and Financial Architecture
in an Integrating World Economy,”mimeo.
2 student presentations:
*Swoboda, Alexander K.,
2006, “Policy coordination and future IMF surveillance,”
Central Banking, August. Presenter: Vivek. Discussant: Salvatore:
*Goldstein, Morris, 2006, “Paulson’s First Challenge,” The
International Economy.
http://www.international-economy.com/TIE_Su06_Goldstein.pdf. Presenter: Yose. Discussant: Andrew:
2. Odious Debt
*Michael Kremer and Seema Jayachandran, 2002, Odious Debt,
NBER Working
Paper No. 8953. http://www.nber.org/papers/w8953. Presenter: Jennifer. Discussant: Inna:
*The Debate: Presenter:
Sophia. Discussant: Tania:
(Raghuram’s view):
http://www.imf.org/external/pubs/ft/fandd/2004/12/pdf/straight.pdf
(Feinerman):
http://www.law.georgetown.edu/international/documents/Feinerman.pdf
Topic 4. Measuring
financial globalization and the Feldstein Horioka Puzzle (3
presentations)
Student presentations:
*Measures of financial integration: Presenter:
Alexandra. Discussant: Vania:
-Section II of Prasad, Eswar, Kenneth Rogoff, Shang-Jin Wei, and M.
Ayhan Kose (2003) Effects of Financial Globalization on Developing Countries:
Some Empirical Evidence, International Monetary Fund Occasional Paper
220. http://www.imf.org/external/np/res/docs/2003/031703.pdf
-Pages 24-32 of Krogstrup, Signe, 2003, Are Capital Taxes Racing to
the Bottom in the European Union? HEI Working Paper 2003/1 http://hei.unige.ch/sections/ec/pdfs/Working_papers/HEIWP01-2003.pdf
*The Feldstein Horioka Puzzle and Possible Explanations: Presenter: Juan. Discussant: Marianne:
Feldstein,
Martin and Horioka, Charles, 1980, Domestic Savings and International
Capital Flows, The Economic Journal, Vol. 90, (June 1980)
Baxter, Marianne and Mario Crucini, 1993, “Explaining Saving-Investment
Correlations,” American Economic Review, 83 (3) June, 416-36.
http://web.ebscohost.com/ehost/pdf?vid=5&hid=111&sid=51b3d9ac-7c67-4a46-9207-29b6744064f0%40sessionmgr107
*Is financial globalization different today from the first wave 100 years
ago? Presenter: Inna.
Discussant: Vivek:
Frankel,
Jeffrey, “Comment on Bordo, Eichengreen and Irwin: ‘Is Globalization
Today Really Different Than Globalization a Hundred Years Ago?’”
-Bordo, Michael D., Eichengreen, Barry J. and Irwin, Douglas A., "Is
Globalization Today Really Different than Globalization a Hundred Years
Ago?" (June 1999). NBER Working Paper No. W7195. Available at SSRN:
http://ssrn.com/abstract=171076
Further readings:
Obstfeld and Rogoff, 2004, The Six Major Puzzles in
International Macroeconomics: Is There a Common Cause?
(http://129.3.20.41/eps/it/papers/0012/0012003.pdf)
Topic 5. Financial
globalization and corporate tax competition (2 presentations)
Background readings:
Krogstrup,
2004, A Synthesis of Recent Developments in the Theory of Capital Tax
Competition. EPRU Working paper, University of Copenhagen.
Student presentations:
*For an international tax organization: Presenter: Tania. Discussant: Yose:
Avi-Yonah, Reuven S., "Bridging the North/South Divide: International
Redistribution and Tax Competition". Available at SSRN:
http://ssrn.com/abstract=572172 or DOI: 10.2139/ssrn.572172.
*For Free markets: Presenter:
Laura. Discussant: Jennifer:
Chapters 1-8 and 13 of “Teather, Richard, 2005, "The Benefits of Tax
Competition" . IEA Hobart Paper No. 153 Available at SSRN:
http://ssrn.com/abstract=878438.”
Further readings:
-Barysch, Katinka, 2004, Is tax competition bad? CER Bulletin, Issue
37. http://www.cer.org.uk/articles/37_barysch.html
-Sorensen, Peter Birch,
"Can Capital Income Taxes Survive? And Should They?" (August 2006).
CESifo Working Paper Series No. 1793
-Obstfeld, M., 1998, The global capital market: benefactor or menace?
Journal of Economic Perspectives 12(4)
http://www.jstor.org/view/08953309/di014716/01p0069n/0?frame=frame&userID=81c20849@unige.ch/01cce4405e00501b0ba72&dpi=3&config=jstor
-Nicoleme, Gaetan, 2006, Tax competition in the European Union: What do
we know, where do we stand? Economics Papers No. 250, June 2006.
European Commission.
http://ec.europa.eu/economy_finance/publications/economic_papers/2006/ecp250en.pdf
- The European Commission’s Business Tax Agenda. Speech by Commissioner
Kovacs, March 2006.
http://www.rgemonitor.com/redir.php?sid=1&tgid=10000&clid=3386&cid=125328
Topic 6. Financial
globalization and global imbalances (3 presentations)
Student presentations:
*The exorbitant privilege: Presenter:
Katya. Discussant: Sofia:
Gourinchas, Pierre-Olivier and Hélène Rey, 2005b, From
World Banker to World Venture Capitalist: The US External Adjustment
and The Exorbitant Privilege, Working Paper, University of Princeton.
(http://www.princeton.edu/~hrey/exorbprivilegedec05.pdf)
*Dark matter: Presenter:
Dominic. Discussant: Alexandra:
-Hausmann, Ricardo and Federico Sturzenegger, 2005, US and Global
Imbalances: Can Dark Matter prevent a Big Bang? Less technical version
of the reference below.
http://www.cid.harvard.edu/cidpublications/darkmatter_051130.pdf
-Hausmann, Ricardo and Federico Sturzenegger, 2006, Global Imbalances
or Bad Accounting? The Missing Dark Matter in the Wealth of Nations,
CID Working Paper 124, Harvard University
(http://www.cid.harvard.edu/cidwp/pdf/124.pdf)
*The debate: Presenter:
Yeong-mee. Discussant: Juan:
-Setser’s blog on the topic of dark matter.
http://www.rgemonitor.com/blog/setser/126311
-Daniel Gros on the topic of dark matter:
http://shop.ceps.be/BookDetail.php?item_id=1319
Further readings:
-Gourinchas, Pierre-Olivier and Hélène Rey, 2005a,
International Financial Adjustment. Working Paper, University of
Princeton. (http://www.princeton.edu/%7Ehrey/ifa_2005.pdf)
-Warnock, Francis E., 2006, How Might a Disorderly Resolution of Global
Imbalances Affect Global Wealth? IMF WP 06/170
(http://www.imf.org/external/pubs/cat/longres.cfm?sk=19357)
-Lane, Philip and GianMaria Milesi-Ferretti, 2005, A Global Perspective
on External Positions, NBER Working Papers 11589
(http://www.nber.org/papers/w11589.pdf). sections I-III.
Topic 7. Financial
globalization and growth (1 and possibly more presentations)
Student presentations:
1. Financial globalisation is good for growth. Presenter: Andrew. Discussant: Maria:
2. Financial globalisation is bad for growth: Presenter: Stantcho. Discussant: Caroline.
Both presentations should be based on arguments to be found in:
*M. Ayhan Kose, Eswar Prasad, Kenneth Rogoff, and Shang-Jin Wei, 2006,
Financial Globalization: A Reappraisal; IMF Working Paper 06/189
http://www.imf.org/external/pubs/ft/wp/2006/wp06189.pdf
See also their earlier paper (2003) at : http://www.imf.org/external/np/res/docs/2003/031703.htm,
and
Gourinchas, Pierre Olivier and Olivier Jeanne, The Elusive Gains from
International Financial Integration, http://www.imf.org/external/pubs/cat/longres.cfm?sk=17263
Other background and useful readings:
Mishkin's speech:
http://www.federalreserve.gov/boarddocs/speeches/2006/20061012/default.htm
Transcript of IMF forum on the topic of financial intergration and
growth: http://www.imf.org/external/np/tr/2006/tr061110.htm
Another IMF note on the topic:
http://www.imf.org/external/pubs/ft/fandd/2002/03/hausler.htm
References, further
reading and background literature
· Blanchard, Olivier, Francesco Giavazzi and Filipa Sa,
2005, The U.S. Current Account and the Dollar, NBER Working Paper No.
11137 (http://www.nber.org/papers/W11137)
· Blanchard, Olivier and Francesco Giavazzi, 2004, Improving the
Stability and Growth Pact Through Proper Accounting of Public
Investment, CEPR Discussion Paper No. 4220
(http://www.cepr.org/pubs/new-dps/dplist.asp?dpno=4220&action.x=8&action.y=6&action=ShowDP)
· Burda and Wyplosz, Macroeconomics, a European Text, Second
Edition. Textbook.
· Buiter, William and Anne Siebert, 2005, How the Eurosystem's
Treatment of Collateral in its Open Market Operations Weakens Fiscal
Discipline in the Eurozone (and what to do about it), CEPR Discussion
Paper No. 5387
(http://www.cepr.org/pubs/new-dps/dplist.asp?dpno=5387&action.x=12&action.y=6&action=ShowDP)
· Cheung, Yin-Wang, Menzie Chin and Eiji Fujii, 2005, Why the
Renminbi Might be Undervalued (But Probably Isn’t), Paper presented to
conference on External Imbalances and Adjustment in the Asia Pacific
Region, Federal Reserve Bank of San Fransisco, September 22-23.
· Croke, Hilary, Steven B. Kamin and Sylvain Leduc, 2005,
Financial Market Developments and Economic Activity during Current
Account Adjustments in Industrial Economies, International Financial
Discussion Papers No. 827
(http://www.federalreserve.gov/pubs/ifdp/2005/827/ifdp827.pdf)
· De Gregorio, Jose, 2005, Global Imbalances and Exchange rate
Adjustment, Comment on Gourinchas and Rey (2005b), presented at NBER
conference on G7 Current Account Imbalances: Sustainability and
Adjustment, June 1-2, 2005.
(http://www.nber.org/books/curracct/degregorio9-22-05comment.pdf)
· Dooley, Michael P., Folkerts-Landau, David and Garber, Peter,
2003, An Essay on the Revived Bretton Woods System, National Bureau of
Economic Research, Inc, NBER Working Paper 9971
(http://papers.nber.org/papers/w9971.pdf)
· Dooley, Michael P., Folkerts-Landau, David and Garber, Peter,
2004, The Revived Bretton Woods System: The Effect of Periphery
Intervention and Reserve Management on Interest Rates and Exchange
Rates in Center Countries, National Bureau of Economic Research, Inc,
NBER Working Papers: 10332 (http://papers.nber.org/papers/w10332.pdf)
· Dooley, Michael P., Folkerts-Landau, David and Garber, Peter,
2005, Direct Investment, Rising Real Wages and the Absorption of Excess
Labor in the Periphery. NBER Working Paper 10626
(http://papers.nber.org/papers/w10626.pdf)
· Edwards, Sebastian, 2005, The End of Large Current Account
Deficits, 1970-2002: Are There Lessons for the Unites States? NBER
Working Paper 11669 (http://papers.nber.org/papers/w11669.pdf)
· Eichengreen, B. and C. Wyplosz, 1998, The Stability and Growth
Pact: More than a minor nuisance? Economic Policy
(http://www.blackwell-synergy.com/doi/pdf/10.1111/1468-0327.00029)
· Frankel, Jeffrey A., 2003, Experiences of, and Lessons from,
Exchange Rate Regimes in Emerging Economies, NBER Working Paper No.
10032
(http://unpan1.un.org/intradoc/groups/public/documents/APCITY/UNPAN022208.pdf)
· Freund, Caroline, 2000, Current Account Adjustment in
Industrialized Countries, International Finance Discussion Paper no.
692, Board of Governors of the Federal Reserve System.
(http://www.federalreserve.gov/pubs/ifdp/2000/692/ifdp692.pdf)
· Freund, Caroline, and Warnock, 2005, Current Account Deficits
in Industrial Countries: The Bigger They Are, The Harder They Fall?
NBER Working Paper 11823 (http://papers.nber.org/papers/w11823.pdf)
· Funke, Michael and Jorg Rahn, 2005, Just how undervalued is
the Chinese Renminbi? The World Economy 28(4).
(http://www.blackwell-synergy.com/doi/pdf/10.1111/j.1467-9701.2005.00688.x)
· Genberg, Hans, 2006, Exchange Rate Arrangements and Financial
Integration in East Asia: On a Collision Course? Mimeo, HKMA
· Genberg, Hans, Robert McCauley, Yong Chul Park and Avinash
Persaud, 2005, Official Reserves and Currency Management in Asia: Myth,
Reality and the Future, Geneva Reports on the World Economy 7, ICMB and
CEPR
· Goldstein, Morris, 2005, Renminbi Controversies, Paper
Prepared for the Conference on Monetary Institutions and Economic
Development, Cato Institute, November 3. Washington DC.
(http://www.iie.com/publications/papers/goldstein1205.pdf)
· Goldstein, Morris, 2004, Adjusting China’s Exchange Rate
Policies, paper presented at the IMF’s seminar on China’s Foreign
Exchange System, Dalian, China, May 26-27, 2004
(http://www.iie.com/publications/wp/wp04-1.pdf)
· Gourinchas, Pierre-Olivier and Hélène Rey,
2005a, International Financial Adjustment. Working Paper, University of
Princeton. (http://www.princeton.edu/%7Ehrey/ifa_2005.pdf)
· Gourinchas, Pierre-Olivier and Hélène Rey,
2005b, From World Banker to World Venture Capitalist: The US External
Adjustment and The Exorbitant Privilege, Working Paper, University of
Princeton. (http://www.princeton.edu/~hrey/exorbprivilegedec05.pdf)
· Hausmann, Ricardo and Federico Sturzenegger, 2006, Global
Imbalances or Bad Accounting? The Missing Dark Matter in the Wealth of
Nations, CID Working Paper 124, Harvard University
(http://www.cid.harvard.edu/cidwp/pdf/124.pdf)
· Lane, Philip and GianMaria Milesi-Ferretti, 2005, A Global
Perspective on External Positions, NBER Working Papers 11589
(http://www.nber.org/papers/w11589.pdf)
· Mckinnon, Ronarld and Gunther Schnabl, 2003, China: A
Stabilizing of Deflationary Influence in East Asia? The Problem of
Conflicted Virtue. Mimeo
(http://www.stanford.edu/~mckinnon/papers/China.pdf)
· McKinnon, Ronald, 2003, China’s exchange rate, Asian
Wallstreet Journal, 27th June.
(http://www.stanford.edu/~mckinnon/briefs/WSJopedrev.pdf)
· Meyer, Laurence H., Brian M. Doyle, Joseph E. Gagnon and Dale
W. Henderson, 2002, International Coordination of Macroeconomic
Policies: Still Alive in the New Millenium? International Finance
Discussion Papers no. 723. Board of Governors of the Federal Reserve
System. (http://www.federalreserve.gov/pubs/ifdp/2002/723/ifdp723.pdf)
· Mundel, Robert, 2003, Globalization and the RMB Exchange Rate,
presentation made at the Renmin University of China, Beijing, October
31.
· Mussa, Michael, 2005, Exchange Rate Adjustment Needed to
Reduce Global Payments Imbalances. In Bergsten (ed.) Dollar Adjustment:
How Far? Against What? Institute for International Economics,
Washington D.C.
· Obstfeld, M. and K. Rogoff, 2004, The Unsustainable US Current
Account Position Revisited, NBER Working Paper no. 10869
(http://papers.nber.org/papers/w10869.pdf)
· Prasad, Eswar, Thomas Rumbaugh and Quing Wang, 2005, Putting
the Cart Before the Horses? Capital Account Liberalization and Exchange
Rate Flexibility in China, IMF Policy Discussion Paper 05/1
(http://www.imf.org/external/pubs/cat/longres.cfm?sk=17967.0)
· Roubini, Nouriel, 2005, A Contemporary Rasmonian Tale with
Five Interpretations. Blog posted 1 May 2005 on Roubini Global
(http://www.rgemonitor.com/blog/roubini/91200/).
· Roubini, Nouriel and Brad Setser, 2004, The US as a Net
Debter: The Sustainability of the US External Imbalances.
(http://pages.stern.nyu.edu/%7Enroubini/papers/Roubini-Setser-US-External-Imbalances.pdf)
· Roubini, Nouriel and Brad Setser, 2005, Will the Bretton Woods
2 Regime Unravel Soon? The Risk of a Hard Landing in 2005-2006. Mimeo,
Stern School of Business, New York University
(http://www.frbsf.org/economics/conferences/0502/Roubini.pdf)
· Tille, Cédric, 2003, The Impact of Exchange Rate
Movements on U.S. Foreign Debt, Federal Reserve Bank of New York
Current Issues in Economics and Finance, vol. 9, number 1, January 2003
(http://www.newyorkfed.org/research/current_issues/ci9-1.pdf)
· Tille, Cédric, 2005, The Income Implications of Rising
U.S. International Liabilities, With Matthew Higgins and Thomas
Klitgaard, Federal Reserve Bank of New York Current Issues in Economics
and Finance, vol. 11, number 12, December 2005
(http://www.ny.frb.org/research/current_issues/ci11-12.pdf)
· Tille, Cédric, 2005b, Financial Integration and the
Wealth Effect of Exchange Rate Fluctuations, Federal Reserve Bank of
New York Staff Report 226, October 2005
(http://www.ny.frb.org/research/staff_reports/sr237.pdf)
· Williamson, J., 2001, The Case for a Basket, Band and Crawl
(BBC) Regime for East Asia, in Future Direction for Monetary Policy in
East Asia, edited by Collignon, Pisany-Ferry and Park, London:
Routledge
(http://www.rba.gov.au/PublicationsAndResearch/Conferences/2001/williamson.pdf)
· Wyplosz, Charles, 2006, European Monetary Union: The Dark
Sides of a Major Success. Forthcoming, European Policy, April.
(http://hei.unige.ch/~wyplosz/emu_EP.pdf)
· Wyplosz, Charles, 2002, Fiscal Policy: Institutions vs. Rules,
CEPR Discussion Paper No. 3238
(http://www.cepr.org/pubs/new-dps/dplist.asp?dpno=3238&action.x=11&action.y=11&action=ShowDP)
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