Objectif du cours
In this course we will study theoretical models for open-economy macroeconomics and international finance. Among the themes that we will touch: basic stochastic and deterministic models for the dynamic of aggregate variables under the open-economy assumption, models for capital flow, exchange rates, international asset prices, financial crises, sovereign debt.
The content and techniques used during the course of Macroeconomics 1 will be considered as established.
Lecturer : Giorgio Fabbri
This is a 8-week course, with 3 hours of lecture/workshop per week on open-economy macroeconomics and international finance. The focus of the lectures will be on theory but we will also see, especially during the workshops, empirical contributions and debates.
After an introduction to the course, the first lecture will be devoted to theory. Problem sets will be provided during lectures 1, 2, 3, 4, 5, 6 a selection of the problems will be corrected by the teacher during lectures 2, 3, 4, 5, 6, 7 (students are not supposed to return solution of the problems to teacher and in particular solution of problem sets are not graded). Lectures 2, 3, 4, 5, 6 and 7 will be divided into two parts: the first part of the lecture will discuss economic theory, while the second part will consist of exercise corrections. The eight and last lecture will be devoted to student presentations: (i) During the 2nd lecture the teacher will deliver a list of papers for presentations. The articles proposed will be mostly empirical oriented. (ii) Before the 4th lecture each student (or group of students depending on the number) will choose a paper to present (iii) Before the 5th lecture the teacher will assign two “discussants” for each presentation. Each of them will be asked to prepare a couple of questions (iv) Before the 7th course the slides of the presentations and the questions will be sent to the teacher. The presentations and the questions will be graded.
Course grade is determined as follows: 20+5% from the paper presentation and questions and 75% from final written exam.
Obstfeld, M. and Rogoff, K. (1996). Foundations of International Macroeconomics., MIT Press, October.
Obstfeld and Rogoff (1996) is probably the most standard reference for theory of “New open-economy macroeconomics”. Even if the book is not recent I think it remains the most solid source for theoretical models in Open-Economy Macro and international finance. We make use of many, but not all, chapters of the book. Students are advised to have a copy (electronic or in paper-format) at hand.
Three other book that could be interesting (not compulsory)
Uribe, M., and Schmitt-Grohé, S. (2017). Open economy macroeconomics. Princeton University Press
Schmitt-Grohé, Uribe abd Woodford International Macroeconomics (not yet published, a preprint version is available online)
These are a recent book on open-economy macroeconomics by recognized scholars of the subject. The first is a good reference for recent and up-dated empirical findings on some key questions on business on cycle, crisis and public debt sustainability. The second is a simpler reference.
Gandolfo, G. (2016). International Finance and Open-Economy Macroeconomics. Springer.
Gandolfo (2016) presents a mathematically rigorous approach to “classical” international macroeconomics whose conceptual (and ideological) framework is rather far from the one presented by Obstfeld and Rogoff (1996)
Articles and Papers - Presented by students
A definitive list of papers among which choosing a paper for the student presentations will be provided during the course. For illustrative purposes here are some articles that might be part of the list
Alfaro, L., Kalemli-Ozcan, S., and Volosovych, V. (2008). Why doesn't capital flow from rich to poor countries? An empirical investigation. The Review of Economics and Statistics, 90(2), 347-368.
Corsetti, G., Dedola, L., and Leduc, S. (2008). International risk sharing and the transmission of productivity shocks. The Review of Economic Studies, 75(2), 443-473.
Farhi, E., and Gabaix, X. (2015). Rare disasters and exchange rates. The Quarterly Journal of Economics, 131(1), 1-52.
Gourinchas, P.O. and Jeanne, O. (2006) “The Elusive Gains from International Financial Integration,” Review of Economic Studies, vol. 73(3).
Heathcote, J., and Perri, F. (2013). The international diversification puzzle is not as bad as you think. Journal of Political Economy, 121(6), 1108-1159.
Kose, M. A., Prasad, E. S., and Taylor, A. D. (2011). Thresholds in the process of international financial integration. Journal of International Money and Finance, 30(1), 147-179.
Kose, M. A., Prasad, E. S., and Terrones, M. E. (2005). Growth and Volatility in an Era of Globalization. IMF staff papers, 52(1), 31-63.
Rodrik, D. (2008). The real exchange rate and economic growth. Brookings papers on economic activity, 2008(2), 365-412.
Taylor, A. M., and Taylor, M. P. (2004). The purchasing power parity debate. Journal of economic perspectives, 18(4), 135-158.