http://www.courses.fas.harvard.edu/~ec2530b/
v.
There is no text. However, a significant
number of readings for the course are taken from
All other core readings for the course will
be available on-line via links from the course webpage site. The required readings will also be available on reserve at Littauer Library (in alphabetical order, in two binders).
The following outline gives a
guide to the material that will be covered in the course and a planned class
schedule. Updates to the class schedule will be given on the online version of
this syllabus, which will be maintained on a regular basis. The main readings
for the class are listed first (readings from OR are always main readings
unless otherwise stated). Recommended secondary readings are clearly marked.
Wed. 2/4: History of thought in international finance and
perspective on recent research debates
Maurice Obstfeld,
Mundell-Fleming Lecture: "International
Macroeconomics: Beyond the Mundell-Fleming
Model", IMF Staff Papers, Vol. 47 Special Issue, 2001.
Maurice Obstfeld,
Jay Shambaugh and Alan Taylor, "The Trilemma in History: Policy Choices for Exchange Rates, Monetary
Policies, and Capital Mobility" mimeo, UC Berkeley, November 2003.
Mon 2/9: The Purchasing Power Parity Puzzle
Charles Engel, "Accouting for US Real Exchange Rate Changes," Journal
of Political Economy 107(3), June 1999, 507-538.
Kenneth Rogoff,
"The
Purchasing Power Parity Puzzle," Journal of Economic Literature 34,
June 1996, 647-68.
Jean Imbs,
Haroon Mumtaz, Morton O. Ravn, Helene Rey, "PPP Strikes Back: Aggregation and the
Real Exchange Rate," NBER WP9372 December 2002.
Alan Taylor and Mark Taylor ,
"The Purchasing Power Parity Debate” mimeo UC Davis, November 2003. Available only as
hard copy in binder on Reserve at Littauer Library.
Shiu-Sheng Chen and Charles Engel, "Does
`Aggregation Bias’ Explain the PPP Puzzle?" , manuscript, February
2004,
Supplementary
Charles Engel and John Rogers,
"How Wide Is the Border," American
Economic Review, 86, December 1996, 1112-1125.
Pierre-Olivier Gourinchas, "Exchange Rates and Jobs: What
Do We Learn from Job flows?" NBER Marcoeconomics
Annual, 1998, 153-208.
Kenneth Froot
and Kenneth Rogoff, "Perspectives on PPP and
Long-Run Real Exchange Rates," in Handbook of International Economics
vol. 3, Gene Grossman and Kenneth Rogoff (eds.),
(Amsterdam: Elsevier Science Publishers B.V., 1995): 1647-88. NBER Working Paper 4952.
Penny K. Goldberg and Michael Knetter, "Goods Prices and Exchange Rates: What Have
We Learned?" Journal of
Economic Literature 35 (September 1997): 1243-72.
Alan M. Taylor,.
"Potential Pitfalls for the Purchasing-Power Parity Puzzle? Sampling and
Specification Biases in Mean-Reversion Tests of the Law of One Price," Econometrica 69 (March 2001): 473-98; also NBER Working Paper No. 7577,
February 2000.
Wed 2/11: PPP puzzle continued; The consumption correlations
puzzle and the home bias in equities puzzle
Obstfeld and Rogoff, chapter 5.
Backus, David K., Patrick
Kehoe and Finn Kydland, 1992, “International Real
Business Cycles,” Journal of Political Economy, 100 (4) August,
745-775.
Richard Portes
and Helene Rey, " The Determinants of
Cross Border Equity Flows," mimeo, revised 2003.
Supplementary
Marianne Baxter, Urban Jermann, and Robert King "Nontraded
goods, nontraded factors and international nondiversification," Journal of
International Economics 44(2), April 1998, 211-229. (Also NBER Working paper 5175, 1995.)
Karen Lewis (1996), "What
can explain the apparent lack of consumption risk sharing?" Journal of
Political Economy 104 (April): 267-97.
Philippe Martin and Helene Rey, "Financial
Super-Markets: Size Matters for Asset Trade," mimeo,
Mon 2/16: President’s Day: Harvard closed
Tues 2/17: SUBSTITUTE CLASS (for March 22 and
24) LITTAUER M-16,
Exchange rate regimes in developing countries
Carmen Reinhart and Kenneth Rogoff, "The Modern History of Exchange Rate
Arrangements: A Reinterpretation," Quarterly Journal of Economics,
forthcoming 2004. NBER Working Paper
No. 8963, May 2002.
Kenneth Rogoff, Aasim Husain,
Ashoka Mody, Robin Brooks,
and Nienke Oomes, “The
Evolution and Performance of Exchange Rate Regimes,” IMF Working Paper WP/03/243,
December 2003 (83 pages), forthcoming as an IMF Occasional Paper. Lecture notes.
Sebastian Edwards
(UCLA) "Current
Account Imbalances: History, Trends, and Adjustment Mechanisms"
presented as the Fourth Mundell-Fleming Lecture,
International Monetary Fund, November 2003.
Wed 2/18: A Unified Explanation?
Maurice Obstfeld
and Kenneth Rogoff, "The Six Major Puzzles in
International Macroeconomics: Is there a Common Cause?" in Ben Bernanke and Kenneth Rogoff
(eds.), NBER
Macroeconomics Annual 2000 (
Supplementary
Tesar, Linda, "Savings, investment
and international capital flows," Journal of International
Economics 31(1-2): 55-78, August 1991.
Jaume Ventura, "Towards a Theory of Current
Accounts," The
World Economy 26(4), April 2003, 483-512.
Jaume Ventura, "A Portfolio View of the
US Current Account Deficit," Brookings Papers on Economic Activity,
Olivier Blanchard and
Francesco Giovazzi, “Current Account Deficits
in the Euro Area: The End of the Feldstein–Horioka
Puzzle?” Brookings Papers on Economic Activity, Fall 2002(2),
147-209.
Mon 2/23: Reputation for repayment models of international debt
versus direct sanction models
OR page 349-379.
Amador, Manuel, "A Political Economy Model of
Sovereign Debt Repayment," mimeo,
Supplementary readings (unless otherwise stated, you can find complete cites
in OR):
The classic article is Eaton
and Gersovitz (ReStud, 48( April) 1981, 289-309). Another seminal
paper is Sachs, "Theoretical Issues in International Borrowing"
Princeton Studies in International Finance, 54 (July) 1984; also available as NBER Working Paper No. 1189.
Among other things, this paper was the first to articulate the analogy between
Diamond-Dybvig-type bank runs and runs on short-term
country debt. The Eaton and Fernandez survey, "Sovereign Debt," Handbook
of International Economics, Vol. 3, eds. Grossman and Rogoff
(which also appeared as an NBER
working paper) is also useful.
C. Klingen,
B. Weder, and J. Zettelmeyer,
"How
Private Creditors
Fared in Emerging Debt Markets, 1970-2000,” mimeo,
International Monetary Fund, November 2003.
Wed 2/25 Debt continued
Wed 3/1: Currency Unions
Andrew Rose, "One Money, One
Market: Estimating the Effects of a Common Currency on Trade" Economic
Policy 15(30), April 2000, 7-45. Rose finds that the effects of currency
unions on trade are remarkably large, on the order of 300 percent.
Supplementary
Alberto Alesina, Robert Barro and Silvana Tenreyro, “Optimal Currency Areas,” in NBER Macroeconomics Annual 2002, Mark Gertler and Kenneth Rogoff, eds., pp. 301-356 (including discussions by Rose and Dornbusch). NBER Working Paper No. 9072, July 2002.
Wed 3/3: Basic models and empirical issues: Salant-Henderson-Krugman
model, multiple equilibria ("generation 2")
models, empirical anomalies:
OR, pp. 558-67, 576-78, 648-653.
Stephen
Morris and Hyun Song Shin, "Unique Equilibrium
in a Model of Self-Fulfilling Currency Attacks," American Economic
Review 88 (June 1998), 587-97.
See also the correction to Morris and Shin's theorem 2 in Frank Heinemann, "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks: Comment," American Economic Review 90 (March 2000), 316-18.
Supplementary
Ilan Goldfajn and Rodrigo
Valdes, "Are
Currency Crises Predictable?" European Economic Review
42(1998), 873-85. Also IMF Working
Paper No. 97/159.
Graciela Kaminsky and Carmen Reinhardt, "The Twin Crises: The Causes of Banking and Balance of Payments Problems," American Economic Review 89, June 1999, 473-500. Click here for access to data base.
Mon 3/8: speculative
attacks continued
Fernando
Broner, “Discrete
Devaluations and Multiple Equilibria in a First
Generation Model of Currency Crises,” mimeo,
Ivan
Pastine, "Speculation and the
Decision to Abandon a Fixed Exchange Rate Regime," Journal of International Economics 57(1), June 2002, 197-229.
Supplementary readings:
Olivier Jeanne, "Debt
Maturity and the Global Financial Architecture," CEPR Discussion Paper No.
2520, August 2000.
Wed. 3/10 The Dornbusch Model and
Empirical Exchange Rate Modeling
Obstfeld and Rogoff, chapter 9,
605-634.
Kenneth
Rogoff, "Dornbusch’s
Overshooting Model After Twenty-Five Years," IMF Staff Papers
49, Special Issue, 2002, pp. 1-35. ). (A
slightly earlier version that will give you a higher quality printout is
available at http://www.courses.fas.harvard.edu/~ec2530b/Papers/
.)
Supplementary
readings:
Martin Eichenbaum
and Charles Evans, 1995, “Some Empirical
Evidence on the Effects of Shocks to Monetary Policy on Exchange Rates,”
Quarterly Journal of Economics, 110 (4), November, 975-1009.
Richard Meese
and Kenneth Rogoff, "The Out-of-Sample
Failure of Empirical Exchange Rate Models: Sampling Error or Misspecification?"
in Jacob Frenkel (ed.), Exchange Rates and
International Macroeconomics (NBER and University of Chicago Press, 1983),
67-105.
Mon 3/15: Extensions of Generation 1 models and Generation 2
models:
Phillippe Aghion, Philippe Bacchetta, and Abhjit Banerjee, "Financial Development and the Instability
of Open Economies," NBER Working Paper No. 10246. Journal of Monetary Economics, forthcoming 2004.
Wed 3/17:
Paul R. Bergin and Reuven Glick, "Endogenous
Tradability and Macroeconomic Implications," manuscript,
Mon 3/22: No class—substitute class evening February 17
Wed 3/24: No class—substitute class evening February 17
Mon. 3/29 and Wed. 3/31: Spring Break, Harvard closed
Mon 4/5: Sustainability
Carmen M. Reinhart, Kenneth Rogoff and Miguel A. Savastano,
"Debt
Intolerance," in William Brainard and George
Perry (eds.), Brookings Papers on Economic Activity 1: 2003, 1-74.
International Monetary Fund, World
Economic Outlook September 2003, Chapter III: " Public
Debt in Emerging Markets: Is It Too High?"
Supplementary
Kenneth Rogoff, "Institutions for Reducing Global Financial Instability," Journal of Economic Perspectives 13, Fall 1999, 21-42.
Jeremy Bulow
and Kenneth Rogoff, "Cleaning Up
Third-World Debt Without Getting Taken To the Cleaners," Journal of
Economic Perspectives 4 (Winter 1990), 31-42.
Kenneth Rogoff
and Jeromin Zettelmeyer,
"Bankruptcy Procedures for Sovereigns: A History of Ideas,
1976-2001," IMF Staff
Papers Volume 49, Number 3, 2002..
Obstfeld and Rogoff, 407- 419.
Externalities to Human
Capital: Robert E. Lucas, 1988, “Why Doesn’t Capital Flow from Rich to Poor
Countries?” American
Economic Review, May 1990, pp. 92-96.
Mark Gertler and Kenneth Rogoff, "North-South Lending and Endogenous Domestic Capital Market Inefficiencies," Journal of Monetary Economics 26, October 1990, 245-266.
Carmen Reinhart and Kenneth Rogoff, "Serial
Default And The “Paradox” Of Rich To Poor Capital Flows," forthcoming
(with revisions) American Economic Review 94, May 2004.
Wed 4/7: Capital Controls
Eswar S. Prasad, Kenneth Rogoff, Shang-Jin Wei, and M. Ayan Kose, "Effects
of Financial Globalization on Developing Countries: Some Empirical Evidence"
IMF Occasional Paper No. 220,
2003. Lecture Notes.
Kristin Forbes, “Capital Controls: Mud in the Wheels of
Market Discipline,” NBER Working Paper No. 10284, February 2004.
Supplementary
Pierre-Olivier Gourinchas and Olivier Jeanne, "The Elusive Gains from International
Financial Integration," NBER WP9684 May 2003.
Kristin J. Forbes, "One Cost of the Chilean Capital Controls: Increased Financial Constraints for Small Traded Firms," NBER WP9777 June 2003.
Sebnem Kalemli-Ozcan, Bent E.
Sorenson, and Oved Yosha,
"Risk
sharing and Industrial Specialization: Regional and International Evidence,"
American Economic Review 93(3), June 2003, 903-918.
Mon 4/12
Roberto Chang and Andres
Velasco, “A Model
of Financial Crises in Emerging Markets,” (with R. Chang), Quarterly
Journal of Economics 116(2) 2001, 489-517.
Wed 4/14:
Maurice Obstfeld and Kenneth Rogoff, "New Directions in Stochastic Open Economy Models," Journal of International Economics 48 (February 2000), 117-153. Also NBER WP 7313.
Corsetti, Giancarlo and Paolo Pesenti,
“Welfare
and Macroeconomic Interdependence,” Quarterly Journal of Economics
116(2), 2001, 421-445.
Bergin, Paul, and Reuven Glick, “Endogenous Nontradability and Macroeconomic Implications,”
National Bureau of Economic Research Paper 9739, June 2003.
Supplementary
OR,
chapter 10
Paola Caselli,
"Fiscal
Consolidations under Fixed Exchange Rates," European Economic
Review 45(3), March 2001, 425-450.
See also Brian Doyle’s New Open Economy
Macroeconomics Homepage.
Mon 4/19:
Clarida, Richard, Jordi Gali, and Mark Gertler, "Optimal Monetary
Policy in Open versus Closed Economies: An Integrated Approach," American Economic Review Papers and
Proceedings 91 (2), May 2001, pp. 248-252.
"Global
Implications of Self-Oriented National Monetary Rules," (with Maurice Obstfeld), Quarterly Journal of Economics 117, May
2002, 503-36.
Maurice Obstfeld, “Pricing-to-Market,
the Interest-Rate Rule, and the Exchange Rate,” unpublished manuscript,
University of California at Berkeley, April 2004.
Supplementary
Paul Bergin and Robert Feenstra, "Pricing to Market,
Staggered Contracts, and Real Exchange Rate Persistence." NBER
Working Paper 7026, revised February 2000.
Second Short
Report Due
Wed 4/21: New generation of Empirical Models
Douglas Laxton and Paolo Pesenti, “Monetary
Rules for Small, Open, Emerging Economies,” Carnegie Rochester
Conference Series on Public Policy, forthcoming.
Supplementary
Paolo Pesenti (
Mon 4/26:
Sebnem Kalemli-Ozcan, Bent E.
Sorenson, and Oved Yosha,
"Risk
sharing and Industrial Specialization: Regional and International Evidence,"
American Economic Review 93(3), June 2003, 903-918.
Wed 4/28:
V.V. Chari, Patrick
Kehoe, and Ellen McGrattan, “Can Sticky Price
Models Generate Volatile and Persistent Exchange Rates?” Review of
Economic Studies 69(3), August 2002, 533-563.
Mon 5/3: PPP continued
Wed
5/5:
Pierre-Olivier Gourinchas and Olivier Jeanne, "The Elusive Gains from International
Financial Integration," NBER WP9684, May 2003.