Preliminary Reading List

Transcription

1 International Monetary Economics Economics 746 Fall, 2013 Office: BA 110A Betty Daniel Office Hours: TT 4:05-5:05 and by appointment This course surveys the growing field of open economy macroeconomics. It will acquaint you with a large body of theoretical and empirical work, and it will bring you to the research frontier in some areas. The course is designed to orient you toward thinking about research topics. A research paper is required. Textbook: Maurice Obstfeld and Kenneth Rogoff, Foundations of International Economics (MIT Press: Cambridge, MA) Martin Uribe, Open Economy Macroeconomics May Requirements: Final Exam 30% Paper and Presentation 30% Midterm Exam 30% Homework and participation 10% Preliminary Reading List I. The Current Account of the Balance of Payments Obstfeld and Rogoff, Chs Uribe, Martin, Lecture Notes, Chs. 2, 3. Schmitt-Grohe, Stephanie and Martin Uribe, Closing Small Open-Economy Models. Journal of International Economics 61 (October 2003), Helene Rey and P. O. Gourinchas, International Financial Adjustment, Journal of Political Economy 115 (August 2007),

2 II. International Financial Markets Obstfeld and Rogoff, Ch. 5 Lewis, Karen K. Why do Stocks and Consumption Imply such Different Gains from International Risk Sharing? Journal of International Economics 52 (October 2000) Heathcote, Jonathan and Bavrizio Perri. The International Diversification Puzzle Is Not As Bad As You Think. NBER Working Paper # (October 2007). III. Real Business Cycle Models of Open Economies Uribe, Martin, Lecture Notes, Chs. 1, 4. Mendoza, Enrique. Real Business Cycles in a Small Open Economy, American Economic Review 81, (1991), Aguiar, Mark, and Gita Gopinath, Emerging Market Business Cycles: The Cycle is the Trend, Journal of Political Economy (115), 2007, Garcia-Cicco, Javier, Roberto Pancazi, and Martin Uribe, Real Business Cycles in Emerging Countries?, American Economic Review (100), December 2010, Backhus, David, Patrick Kehoe, and Finn Kydland. International Real Business Cycles, Journal of Political Economy 100 (August 1992) Stockman, Alan and Linda Tesar. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Co-movements." American Economic Review 85 (1995) IV. Debt Crises Obstfeld and Rogoff, Ch. 6 Uribe, Martin, Lecture Notes, Chs. 8,9. Eaton, Jonathan and Raquel Fernandez, "Sovereign Debt." in Gene M. Grossman and Kenneth Rogoff, eds., Handbook of International Economics, vol.3 (Amsterdam: North Holland), Cole, Harold and Timothy Kehoe, "A Self-fulfilling Model of Mexico's Debt Crisis," Journal of International Economics 41 (November, 1996). 2

3 Reinhart, Carmen and Kenneth Rogoff, This Time is Different: A Panoramic View of Eight Centuries of Financial Crises. NBER Working Paper # (March 2008). Reinhart, Carmen and Kenneth Rogoff, Banking Crises: An Equal Opportunity Menace. NBER Working Paper # (December 2008). V. Money and Nominal Exchange Rates A. Background B. Monetary union Obstfeld and Rogoff, Chs. 8 and 9. Sims, Christopher The Precarious Fiscal Foundations of EMU, Paul Bergin, Fiscal Solvency and Price Level Determination in a Monetary Union. Journal of Monetary Economics 45(1) (Feb 2000) C. Empirical Exchange Rate Models Meese, Richard A. and Kenneth Rogoff. Empirical Exchange Rate Models of the Seventies: Do They Fit Out of Sample? Journal of International Economics 14 (February, 1983) Charles Engel and Kenneth West, Exchange Rates and Fundamentals. Journal of Political Economy June 2005, Charles Engel, Nelson C. Mark, and Kenneth D. West, Exchange Rate Models Are Not as Bad as You Think, NBER Macroeconomics Annual 2007, VI. Currency Crises A. Generation one models Krugman, Paul, "A Model of Balance of Payments Crises," Journal of Money, Credit, and Banking 11 (August 1979) Flood, Robert and Peter Garber. Collapsing Exchange Rate Regimes: Some Linear Examples. Journal of International Economics 17 (August 1984)

4 Burnside, Craig, Martin Eichenbaum, and Sergio Rebelo. "Prospective Deficits and the Asian Currency Crisis. Journal of Political Economy 109 (2001), B. Generation two models Obstfeld, Maurice, "Models of Currency Crisis with Self-fulfilling Features," European Economic Review 40 (April 1996). Bensaid and Olivier Jeanne, "The Instability of Fixed Exchange Rate Systems When Raising the Nominal Interest Rate Is Costly," European Economic Review (1997). Morris, Stephen and Hyun Song Shin, "Unique Equilibrium in a Model of Self-fulfilling Currency Attacks," American Economic Review 88 (June 1998) C. Financial fragility Chang, Roberto and Andres Velasco. Financial Fragility and the Exchange Rate Regime. Journal of Economic Theory, 92(1) (2000), 1-34 (NBER Working Paper 6469). Chang, Roberto and Andres Velasco. Financial Crises in Emerging Markets: A Canonical Model. NBER Working Paper 6606 (1998). Flood, Robert and Nancy Marion. Perspectives on the Recent Currency Crisis Literature. International Journal of Finance and Economics 4 (January 1999), Krugman, Paul, "Balance Sheets, The Transfer Problem, and Financial Crises," International Tax and Public Finance 6, (January 1999) Calvo, Guillermo and Carmen Reinhart. Fear of Floating. The Quarterly Journal of Economics 112(2) (May 2002) D. Fiscal Theory of the Price Level and Financial Crises Daniel, Betty C. A Fiscal Theory of Currency Crises. International Economic Review 42 (October, 2001), Daniel, Betty C. Exchange Rate Crises and Fiscal Solvency. Journal of Money, Credit, and Banking, 42 (September 2010),

5 E. Empirical Causes of Crises Kaminsky, Graciela, and Carmen Reinhart. Twin Crises: Causes of Banking and Balance of Payments Problems. American Economic Review 89(4) (June 1999), Berg, Andrew and Catherine Pattillo, Are Currency Crises Predictable? IMF Staff Papers 46(2) (June 1999), VII. Purchasing Power Parity and the Real Exchange Rate Obstfeld and Rogoff, Ch. 4 Uribe, Martin, Lecture Notes, Ch. 7 Lucas, Robert. "Interest Rates and Currency Prices in a Two-Country World." Journal of Monetary Economics 10 (1982) Stockman, Alan C. "The Equilibrium Approach to Exchange Rates." Federal Reserve Bank of Richmond Economic Quarterly (March-April 1987) Engel, Charles M. Is Real Exchange Rate Variability Caused by Relative Price Changes? An Empirical Investigation, Journal of Monetary Economics 32 (August 1993), Rogoff, Ken, "The Purchasing Power Parity Puzzle." Journal of Economic Literature (June 1996) VIII. Sticky-price optimizing models Obstfeld and Rogoff, Chapter 10. Obstfeld, Maurice and Kenneth Rogoff. Exchange Rate Economics Redux. Journal of Political Economy (June 1995) Lane, Phillip R. The New Open Economy Macroeconomics: A Survey, Journal of International Economics 54 (August 2001) Obstfeld, Maurice and Kenneth Rogoff. New Directions for Stochastic Open Economy Models. Journal of International Economics 50 (2000),

6 Paper: During the semester, you are required to write an original paper of about ten to fifteen pages in the field of international monetary economics. A one page abstract of your paper topic, together with at least one primary academic reference, is due September 19. You are advised to consult with me about your paper topic before September 19. The final paper is due on November 26. You will present your papers in class at the end of the semester, so it is very important that you have your paper ready on time. Your ability to meet due dates is an important determinant of your grade. Papers received after the deadline will be downgraded one letter grade. Homeworks: You will receive homework assignments throughout the semester. You are encouraged to work together and to figure out answers together. However, each student is expected to write answers alone. Class Participation: Attendance and class participation in discussion is expected. Your grade is determined by your attendance and by the quality of your participation. I expect you to read the material we cover prior to class and, based on your knowledge, ask and answer questions on the material. 6