International
Macroeconomic
Policy:
Theory
and Evidence from
Recent
Financial Crises
B30.2380.01,
B30.2380.10
and
Global Macroeconomics
C70.0230.01
Fall
2009
(*) denotes a required reading
(x) denotes a reading available in the reading and case packet
I. AN OVERVIEW OF THE WORLD ECONOMY
I. 1. Macroeconomic Performance during and after
the Global and Economic Financial Crisis of 2008-2009
I. 2. Current Account, External Debt and Financial
Crises:
Emerging Market Economies and Advanced Economies
- Roubini
and Setser "Bailouts or Bail-ins? Responding to Financial Crises in
Emerging
Economies", Chapter 2. (*)
- Roubini and Backus, Lectures
in Macroeconomics, Chapter 1. (*)
- "Survey.
The
Global Economy: The New Titans" The Economist Sep 2006)
(*)
- "The
Balance Sheet Approach to Financial Crises", by Mark Allen, Brad
Setser,
Christian Keller. Nouriel Roubini and Christoph Rosenberg, IMF, Dec 2002
- Roubini "Global Imbalances: A
Contemporary Rashomon Saga", Jan 2007; to be distributed
via email (*)
- Roubini
and Setser "The U.S. as a Net Debtor: The Sustainability of the US
External
Imbalances", Sep 2004. (*)
- "The world economy: Capital markets are hindering, not
helping, global economic adjustment", The Economist, Aug 18, 2005
(*)
- "Survey:
The World Economy" The Economist, Sep 22, 2005 (requires Economist
subscription) (*)
- Roubini Will
the Bretton Woods 2 (BW2) Regime Collapse Like the Original Bretton
Woods Regime Did? The Coming End Game of BW2 July 2008 (*)
Other Background Readings and
Materials (not required readings):
- IMF
World Economic Outlook, April 2009
- IMF
World Economic Outlook Update, July 2009
- World
Bank:
Global Economic Prospects and the Developing Countries 2009
- World
Bank: Global Economic
Prospects and the Developing Countries 2010 (to be published in the
winter of
2009)
- Link to the RGE page on Is
the U.S. Current Account Deficit Sustainable?
- Link to the RGE page on
Emerging Markets
I. 3. International Indicators: Exchange Rates
and Interest Parity Conditions
- Chapter
13 of Student Resources in Krugman and Obstfeld's textbook web site
- "A Much Devalued Theory", The Economist, Jan 20, 1996. (*) (x)
- "In defence of deficits", The Economist, Dec 16, 1995. (*) (x)
- Feldstein "Global capital flows: too little, not too much", The
Economist,
Jun 24, 1995. (*) (x)
II. EXCHANGE RATES AND FINANCIAL CRISES
II. 1. Exchange Rates in the Short-Run and Long
Run
- Roubini and Backus, Lectures
in Macroeconomics, Chapters 7. (*)
- Krugman and Obstfeld, Chapter 14 and Chapter
15. (*)
- The
Big Mac Index home page from The Economist
- "Saturated solution", The Economist, Jul 27, 2000 (*) (x)
- "New solutions, new questions", The Economist, Aug 3,
2000 (*) (x)
II. 2. Money, Interest Rates and Exchange Rates
II. 3. Fixed Exchange Rates and the Dynamics of
Currency Crises
- Roubini
and Setser "Bailouts or Bail-ins? Responding to Financial Crises in
Emerging
Economies", Chapter 2. (*)
- Roubini and Backus, Lectures
in Macroeconomics, Chapter 8 (*)
- Survey:
Global Finance - Cruel sea of capital by Clive Crook, The Economist May
1, 2003 (*)
- Krugman and Obstfeld Chapter 17 (*)
- The Mexican Peso Crisis", IMF, 1995; in case package. (*) (x)
- "Getting out of a fix", The Economist, Sep 20, 1997.
(*) (x)
- "Are crashes catching ?", The Economist, Aug 31, 1996.
(*) (x)
- Link to the RGE page on Asia's
Economic and Currency Crisis.
II. 4. Financial crises in
the
1990s and their resolution (the Bail-in vs. Bailout Debate)
- Roubini
and Setser "Bailouts or Bail-ins? Responding to Financial Crises in
Emerging
Economies", Chapters 1, 6, 8. (*)
- Krugman and Obstfeld, Chapters 17 and 22 (*)
- Report
on the Evaluation of the Role of the IMF in Argentina 1991-2001
Independent
Evaluation Office, IMF, June 30, 2004.(basic material for the
Assignment
#4: Argentina's Financial Crisis and Default)
- "Currency
Dilemmas", The Economist, Nov 18, 2000 (*) (x)
- "Emerging
markets: How the bug can spread", The Economist, Jul 19, 2001 (*)
III. CURENT POLICY
ISSUES
(See Roubini Global Economics (RGE) Monitor Web
Site
(http://www.rgemonitor.com)
for many other materials and basic readings on these topics)
III. 1 The Right Exchange
Rate
Regime
for Emerging Markets and Advanced Economies:
Triffin's Inconsistent Trinity Principle
Fixed versus Flexible Exchange Rates: Which is Best?
Currency Boards (Hong Kong, Bulgaria, Estonia)
Dollarization (Panama, Ecuador, El Salvador)
Monetary Unions (European Monetary Union)
A global currency?
Asian Dollar Standard and Asian Monetary Integration Initiatives
A Bretton Woods Two regime?
- Krugman and Obstfeld, Chapters 18, 19, 20 (*)
- Roubini, Notes on Dollarization (to be distributed via email)
- Roubini, Notes on Currency Boards (to be distributed via email)
- Wikipedia, Impossible
Trinity
- Andie Xie "New
Bubble Threatens V-Shaped Rebound" August 2009 (*)
- Roubini, Asia
is Learning the Wrong Lessons from Its 1997-98 Financial Crisis: The
Rising Risks of a New and Different Type of Financial Crisis in Asia,
May 2007 (*)
- Roubini Will
the Bretton Woods 2 (BW2) Regime Collapse Like the Original Bretton
Woods Regime Did? The Coming End Game of BW2 July 2008 (*)
- "Survey of
the
Global Economy" The Economist (to be issued in October 2009)
(*)
- "Currency
Dilemmas", The Economist, Nov 18, 2000 (*) (x)
- "Floating
with an anchor", The Economist, Jan 27, 2000 (*) (x)
- "Soft or Hard", The Economist, Apr 20, 2000, (*) (x)
III. 2. Current Global Macro and Financial Issues:
Global economy: on the way to a sharp slowdown/recession or
sustained growth?
US economy, its prospects, the dollar and the current account
imbalance
What will the the Fed do and implications for the bond and stock
market
European economic performance and the European Monetary Union
Japan's economic prospects
China: Soft or Hard Landing after Overheating?
Prospects and risks for emerging market economies, including Brazil,
Argentina and East Asia
The oil price shock and its impact on the global economy
Euro prospects and implications for the dollar and yen
III.3. Open Issues in International Macroeconomic
policy
The 2008-2009 global financial crisis
Reform of the Regime of Supervision and Regulation of the
Financial
System in a World of Financial Globalization
Sustainability of global external imbalances
Bretton Woods Two and its likely unraveling
Housing Bubbles and Busts
Asset bubbles and monetary policy
Systemic risk and financial crises
Asset and Credit booms and busts
Deflation and inflation
Stagflation
Capital mobility, hot money and capital controls
Hedge funds and their regulation
The emergence of the BRICs (Brazil, Russia, India, China) in the
global economy and their impact on the advanced economies
Implications of the foreign exchange accumulation by emerging market
economies
The emergence of Sovereign Wealth Funds and their Implications
Offshore outsourcing
Political risk and policy risk
Trade protectionism and the collapse of Doha
Asset/Financial protectionism and risks of restrictions to Foreign
Direct
Investment
Backlash against globalization?
Transportation Costs and Unflattening of the World
- Roubini
and Setser "Bailouts or Bail-ins? Responding to Financial Crises in
Emerging
Economies", Chapters 1 and 9 (*)
- Krugman and Obstfeld, Chapters 18, 21 (*)
- Roubini Notes and handouts to be distributed in class (*)
- VoxEu.org
The Global
Financial Crisis (read some
selected readings) (*)
- Vox "The First Financial
Crisis of the 21th Century" 2009 (read some
selected readings) (*)
- Nouriel Roubini
"Financial
Crises, Financial Stability, and Reform" Chapter 1.3 of the WEF
Financial Development Report, 2008 (*)
- IMF
Global Financial Stability Report update, July 2009 (*)
- BIS Annual
Report June 2009 (*)
- RGE Monitor
- BIS Asset Prices,
Monetary and Financial Stability: Exploring the Nexus, 2002
- "Dreaming With BRICs: The Path to 2050 (Brazil,
Russia, India, China)", Goldman Sachs, October 2003
- Survey:
Global Finance - Cruel sea of capital by Clive Crook, The Economist,
May
1, 2003 (*)
- "Through
fire and troubled waters", The Economist Aug 31, 2000 (*) (x)
- Krugman and Obstfeld, Chapter 21 (*)
- "When
the sea dries up" The Economist, Sep 23 1999 (*) (x)
- "Finance
on the loose", The Economist, May 15, 1999 (*) (x)