Lectures by Giancarlo Corsetti and Timothy Uy
1. Cross-border risk sharing: diversification and relative price adjustment
2. General equilibrium implications of cross-border risk sharing
2. Exchange Rate and Prices
3. An introduction to international dimensions of monetary policy: the New Open Economy Macroeconomics
5 Sovereign risk (Timothy Uy)
Readings
(required reading are starred)
1. The mechanisms of cross-border risk sharing
*** Lecture notes
*** Heathcote, J., F. Perri. 2013. "The International Diversification Puzzle Is Not As Bad As You Think," Journal of Political Economy, 121 (6), 1108-1159.
Baxter, M., U. Jermann. 1997. "The International Diversification Puzzle Is Worse Than You Think," American Economic Review, 87, 170-180.
2. Risk sharing and the international transmission of productivity shocks: trade elasticities, openness and risk sharing
*** Corsetti, G., L. Dedola, and S. Leduc. 2008. "International Risk Sharing and the Transmission of Productivity Shocks," Review of Economic Studies, 75(2), 443-473.
Stockman, A., L. Tesar. 1995. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," American Economic Review, 83, 473-486.
Raffo, A. 2008. "Net Exports, Consumption Volatility and International Business Cycle Models," Journal of International Economics, 75 (1), 14-29.
Real version of the model in: Corsetti G, L. Dedola and S. Leduc, Optimal monetary policy in open economies Corsetti Dedola and Leduc, in the Handbook of Monetary Economics, vol. III, Edited by Ben Friedman and Michael Woodford, 2010.
3. Exchange rate and prices
*** Corsetti G. and L. Dedola 2005 Macroeconomics of International Price Discrimination. JIE, the analytical section on the model.
Corsetti G., L. Dedola and S. Leduc 2009 High exchange rate volatility and low pass-through, JME (quantitative version of the CD model).
Atkeson A and A Burstein 2008, Pricing-to-Market, Trade Costs and International Relative Prices, American Economic Review, 1998-2031
Dornbusch R. 1987 Exchange Rates and Prices, American Economic Review
Burstein, Ariel, Martin Eichenbaum and Sergio Rebelo 2005 Large Devaluations and the Real Exchange Rate, Journal of Political Economy (local costs).
4. New Open-economy Macroeconomics (NOEM)
*** Corsetti G and P Pesenti (2008) The Simple Geometry of Transmission and Stabilization in Closed and Open Economies, with Paolo Pesenti, NBER International Seminar on Macroeconomics 2007, pages 65-116 National Bureau of Economic Research, Inc.
*** International Dimensions of Optimal Monetary Policy Journal of Monetary Economics, 52/2 pp 281-305, 2005
The introduction of the slides are from: New Open Economy Macroeconomics (January 2007). Entry for the New Palgrave Dictionary of Economics, 2nd edition
Advanced:
Corsetti G, L. Dedola and S. Leduc, Optimal monetary policy in open economies Corsetti Dedola and Leduc, in the Handbook of Monetary Economics, vol. III, Edited by Ben Friedman and Michael Woodford, 2010.
If you read this, focus on the introduction, and the overall comparison of optimal policy under Complete markets (PCP, LCP, Nash) and incomplete markets.
5 Sovereign risk
Arellano Cristina and Ananth Ramanarayanan (2012) Default and the Maturity Structure in Sovereign Bonds, April 2012, lead article, Journal of Political Economy
Arellano Cristina (2008) Default Risk and Income Fluctuations in Emerging Economies, March 2008, American Economic Review
Additional reading
International business cycle models
A reading guide to IRBC with tables for the last part
One good model
Backus, D.K., P.J. Kehoe (1992), "International Evidence on the Historical Evidence of Business Cycles", American Economic Review, 82 (4), 864-888
* Backus, D.K., P.J. Kehoe (1992), "International Real Business Cycles", Journal of Political Economy, 100 (4), 755-775
Backus, D.K., P.J. Kehoe and F.E. Kydland, (1993), "International Business Cycles: Theory vs. Evidence", Quarterly Review, Federal Reserve Bank of Minneapolis.
* Baxter, M, (1995). International Trade and Business Cycles. In: Gene Grossman and Kenneth Rogoff (eds.), Handbook of International Economics, vol.3, North Holland, 1995.
Baxter, M., and M.J. Crucini, (1993). Explaining Saving-Investment Correlations. American Economic Review, 83, 416-36.
Two-good model
* Backus, D.K., P.J. Kehoe and F.E. Kydland, (1994), `Dynamics of the Trade Balance and the Terms of Trade: the J-curve ", American Economic Review.
* Heathcote, J. and F. Perri, (2002), "Financial Autarky and International Business Cycles", Journal of Monetary Economics.
Kehoe, Patrick, and Fabrizio Perri (2003), "International Business Cycles with Incomplete Markets", Econometrica.
Andrea Raffo, Net Exports, Consumption Volatility and International Business Cycle Models Journal of International Economics, 75 (1), 14-29.Stockman-Tesar
Add nontradables
* Stockman A.C. and L. Tesar TOCKMAN, (1995), “Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements”, American Economic Review, 83, 473–486.
** Corsetti, G., L. Dedola and S. Leduc "International Risk Sharing and the Transmission of Productivity Shocks", Review of Economic Studies 2008
Stationarity with incomplete markets
* Martin Uribe Closing Small Open Economy Models (with Stephanie Schmitt-Grohe), Journal of International Economics, 61, October 2003, Pages 163-185