SciencesPo - Master EPP: International Macroeconomics II- M2, Spring 2015
Prof. Nicolas Coeurdacier (SciencesPo) and Daniele Siena (Banque de France)
Syllabus:
The course deals with recent research on international macro and is a deepening of International Macroeconomics I.
The first part (Lectures 1-6 taught by Nicolas Coeurdacier) deals with international capital flows. It starts with international risk sharing, the international diversification of portfolios and asset prices. It provides the main stylized facts on international asset allocation across time, across countries and across assets. It also provides the technical tools to incorporate non-trivial portfolio choices in international macro models. The following lectures deal with recent models on capital flows, global imbalances and net foreign asset dynamics.
The second part (Lectures 7-12 taught by Daniele Siena) will focus on financial crisis and on the international transmission of shocks in a financially integrated world. Models are introduced as tools to understand the recent economic developments in the world. The course will start with a general introduction on financial crisis, which will present different types of crisis and will then analyze in details currency and sovereign debt crisis. The last part of the course will concentrate on the role of frictions in international financial markets for the transmission of shocks across countries.
Evaluation:
1 mid-term homework (25%) - to be handed back at lecture 8
1 student presentation by group of 3-4 in class of 15 min at the end of each lecture (25%) - paper to be chosen from the (*) in the syllabus
1 Final exam in class (50%)
Content and Readings (Preliminary)
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Lecture 7. Financial crisis and currency crisis - Slides
Barry Eichengreen and Andrew K. Rose, 1999, Contagious Currency Crises: Channels of Conveyance, NBER Chapters, in: Changes in Exchange Rates in Rapidly Developing Countries: Theory, Practice, and Policy Issues (NBER-EASE volume 7), pages 29-56, National Bureau of Economic Research, Inc.
Bordo, M.D., B. Eichengreen, D. Klingebiel, and M.S. Martinez-Peria, 2001, Is the Crisis Problem Growing More Severe? Economic Policy, April
Fischer, Stanley, 2001, Exchange Rate Regimes: Is the Bipolar View Correct? Journal of Economic Perspectives, 15, 2 (Spring), 3-24. (Reprinted in Stanley Fischer, IMF Essays from A Time of Crisis, MIT Press, 2004.)
Barry Eichengreen and Andrew K. Rose, 2003, Does It Pay to Defend against a Speculative Attack?, NBER Chapters, in: Managing Currency Crises in Emerging Markets, pages 61-86, National Bureau of Economic Research, Inc.
Fischer, Stanley, 2004, Experience of and Lessons from Exchange Rate Regimes in Emerging Economies, in Monetary and Financial Integration in East Asia: The Way Ahead, Vol. 2, edited by Asian Development Bank. New York: Palgrave Macmillan Press, 91-138.
Barry Eichengreen, 2008. Exchange Rate Regimes and Capital Mobility: How Much of the Swoboda Thesis Survives?, NBER Working Papers 14100, National Bureau of Economic Research, Inc.
Michael D. Bordo and John S. Landon-Lane, 2010, The Global Financial Crisis of 2007-08: Is it Unprecedented?, NBER Working Papers 16589, National Bureau of Economic Research, Inc.
Carmen M. Reinhart and Kenneth S. Rogoff, 2011. From Financial Crash to Debt Crisis, American Economic Review, American Economic Association, vol. 101(5), pages 1676-1706, August.
* Barry Eichengreen and Andrew K. Rose, 2011, Flexing Your Muscles: Abandoning a Fixed Exchange Rate for Greater Flexibility, NBER Chapters, in: NBER International Seminar on Macroeconomics 2011, pages 353-391, National Bureau of Economic Research, Inc.
Fabrizio Perri, 2012, Financial crisis – Lecture notes (Bocconi University)
Lecture 8. Models of currency crisis:
First Generation:
Henderson, D. and Salant, S. 1978, Market anticipations of government policies and the price of gold. Journal of Political Economy 86, 627–48.
Krugman, P. 1979, A model of balance of payments crises, Journal of Money, Credit and Banking 11, 311–25.
Flood, R., and Garber, P. 1984, Collapsing exchange rate regimes: some linear examples, Journal of International Economics 17, 1–13.
Flood, R. and Marion, N. 1999, Perspectives on the recent currency crisis literature, International Journal of Finance and Economics 4, 1–26.
* Burnside, C., Eichenbaum, M. and Rebelo, S. 2001. Prospective deficits and the Asian currency crisis. Journal of Political Economy 109, 1155-98.
Second Generation:
Obstfeld, M. 1994, The logic of currency crises, Cahiers Economiques et Monétaires 43, 189–213.
Obstfeld, M. 1996, Models of currency crises with self-fulfilling features. European Economic Review 40, 1037–47.
Jeanne, O. 1997, Are currency crisis self-fulfilling? A test, Journal of International Economics 43, 263-286.
* Morris, S. and Shin, H. S., 1998, Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks, American Economic Review, American Economic Association, vol. 88(3), pages 587-97
Barro, R. J. and Gordon, D. B., 1983. A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
Third Generation:
Krugman, Paul, 1999, Balance Sheets, the Transfer Problem, and Financial Crises, International Tax and Public Finance , 6, 459-472.
Eichengreen, B. and Hausmann, R. 1999, Exchange rates and financial fragility. Working Paper No. 7418. Cambridge, MA: NBER.
Burnside, C., Eichenbaum, M., and Rebelo, S. 2001, Hedging and financial fragility in fixed exchange rate regimes. European Economic Review 45, 1151–93.
* Aghion, Philippe, Bacchetta, Philippe, and Banerjee, Abhijit, 2004, A Corporate Balance-Sheet Approach to currency crises, Journal of Economic Theory, 119, 6-30.
Hausmann Ricardo and Panizza Ugo, 2011. Redemption or Abstinence? Original Sin, Currency Mismatches and Counter Cyclical Policies in the New Millennium, Journal of Globalization and Development, De Gruyter, vol. 2(1), pages 1-35.
Lecture 9. Sovereign Debt Crises with self-fullling features
G.A. Calvo, 1988, Servicing the public debt: The role of expectations. American Economic Review 78(4), 647–66.
Cole, H.L. and T. Kehoe, 2000, Self-fulfilling debt crises. Review of Economic Studies, 67(1), 91–116.
* Corsetti, G. and L. Dedola, 2012. "The “Mystery of the Printing Press” Monetary Policy and Self-fulfilling Debt Crises," Discussion Papers 1424, Centre for Macroeconomics (CFM), revised Aug 2014. (For presentation, focus on the monetary model)
* Lorenzoni, G. and I. Werning, 2013, Slow moving debt crises, mimeo.
Lecture 10. Asymmetric information, limited contract enforcement and no trade result
Eaton, Jonathan and Gersovitz, Mark, 1981. “Debt with Potential Repudiation: Theoretical and Empirical Analysis," Review of Economic Studies, Wiley Blackwell, vol. 48(2), pages 289-309, April.
Bulow, Jeremy and Rogoff, Kenneth, 1989. "Sovereign Debt: Is to Forgive to Forget?," American Economic Review, American Economic Association, vol. 79(1), pages 43-50, March.
Michael, Tomz and Mark L. J. Wright, 2007. "Do Countries Default in “Bad Times," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 352-360, 04-05.
*Mark Aguiar and Manuel Amador, 2013. "Sovereign Debt: A Review," NBER Working Papers 19388, National Bureau of Economic Research, Inc
Lecture 11 - Models with financial linkages between countries
Kollmann, Robert, Enders, Zeno and Muller, Gernot J.(2011). Global banking and international business cycles," European Economic Review, Elsevier, vol. 55(3), pages 407-426, April.
Luca Dedola & Giovanni Lombardo, 2012, Financial frictions, financial integration and the international propagation of shocks, Economic Policy, vol. 27(70), pages 319-359, 04.
*van Wincoop, Eric. 2013. "International Contagion through Leveraged Financial Institutions." American Economic Journal: Macroeconomics, 5(3): 152-89.
Perri, Fabrizio and Vincenzo Quadrini, 2014, International Recessions, mimeo.
*Maggiori, Matteo and Xavier Gabaix. “International Liquidity and Exchange Rate Dynamics.” Quarterly Journal of Economics (Forthcoming)