M2, Spring 2023, Master in Economics, Prof. Thierry Mayer and Nicolas Coeurdacier
Part 1 --- International Trade (Prof. Thierry Mayer)
Modern approaches to Ricardo
Trade with increasing returns, monopolistic competition and the Home Market Effect
A primer on the welfare consequences of trade
Part 2 --- International Macroeconomics (Prof. Nicolas Coeurdacier)
Financial integration, growth and capital flows
Risk-sharing and the international transmission of shocks
Problem sets (50%) and final examination (50%).
International Economics: Homework 2 ---- Data ----- Correction
Due date for Homework 2: April 7th at 10.15am.
There will be no single set text, but there will be frequent citations from the following textbook:
Handbook of International Economics, Volume 4, 1st Edition, 2014, by Gita Gopinath, Elhanan Helpman, Kenneth Rogoff
For the second part of the course, possible to refer to: M. Obstfeld and K. Rogoff, Foundations of International Macroeconomics (MIT Press, 1996)
see Prof. Thierry Mayer's website [link]
* denotes compulsory readings.
2.1. Financial integration, growth and capital flows
Capital flows and the intertemporal approach to the current account [slides]
Obstfeld M. and K. Rogoff, Intertemporal Trade and the Current Account Balance, Chapter 1.
Nason and Rogers, The Present-Value Model of the Current Has Been Rejected: Round up the Usual Suspects, Journal of International Economics 68, 159-187, 2006
A. Kraay et J. Ventura, Current Accounts in Debtor and Creditor Countries, Quarterly Journal of Economics, November 2000
Global imbalances, international adjustment and valuation effects [slides]
*Gourinchas, P. O., Rey, H., 2014, External Adjustment, Global Imbalances and Valuation Effects, Handbook of International Economics, Chaper 10, 585-640.
Caballero, R.J., E. Farhi, and P. O. Gourinchas. 2008. An Equilibrium Model of ‘Global Imbalances’ and Low Interest Rates, American Economic Review 98(1): 358–93.
Coeurdacier, N., S. Guibaud and K. Jin. 2015. Credit Constraints and Growth in a Global Economy, American Economic Review, 105(9), 2838-81.
A. Auclert, H. Malmberg, F. Martenet, and M. Rognlie. 2021. Demographics, Wealth, and Global Imbalances in the Twenty-First Century. Mimeo Stanford.
Gourinchas PO and H. Rey, International Financial Adjustment, Journal of Political Economy, 115(4), August 2007.
Lane, P. and G.M Milesi-Feretti, 2007, The External Wealth of Nations Mark II, Journal of International Economics.
P-O Gourinchas, Valuation effect and external adjustment: a review, mimeo Central Bank of Chile, 2008.
Gourinchas, P. O., Rey, H., 2007. From World Banker to World Venture Capitalist: U.S. External Adjustment and the Exorbitant Privilege. G7 Current Account Imbalances: Sustainability and Adjustment.
Capital flows and welfare gains from financial integration [slides]
M. Ayhan Kose, Eswar Prasad, Kenneth S. Rogoff, Shang-Jin Wei, 2006, Financial Globalization: A Reappraisal, NBER Working Paper No. 12484
Peter Blair Henry, 2007. Capital Account Liberalization: Theory, Evidence, and Speculation, Journal of Economic Literature, vol. 45(4), pages 887-935, December
Bekaert, Harvey and Lundblad, Does Financial Liberalization Spur Growth?, Journal of Financial Economics 77, 2005, 3-55.
Lucas R., 1990. Why Doesn’t Capital Flow from Rich to Poor Countries? American Economic Review, 80(2), 92-96
*Caselli, F. and Feyrer, J., 2007, The Marginal Product of Capital. Quarterly Journal of Economics.
*P.-O. Gourinchas and O. Jeanne, The Elusive Gains of International Financial Integration, 2006, Review of Economic Studies 73, pp. 715-741 [simplified version details]
Going beyond. Capital flows: assessing long-run efficiency [if time permits]
Heathcote, J. and Perri, F., 2014, Assessing International Efficiency. Sections 2 and 3. Hanbook of International Economics.
Gourinchas, P-O, and Jeanne, O., 2013. Capital Flows to Developing Countries: The Allocation Puzzle, Review of Economic Studies.
Alfaro, L., Kalemli-Ozcan S., and Volosovych V., 2014. Sovereigns, Upstream Capital Flows and Global Imbalances. Journal of the European Economic Association, vol. 12(5).
2.2. Risk-sharing and the international transmission of shocks
Baseline one-good model [slides]
Obstfeld and Rogoff Chapter 5
Complete markets
*Backus, D., P. Kehoe and F. Kydland, ''International Business Cycles: Theory and Evidence'', quarterly review, fall 1993 (1st part)
Backus, D., P. Kehoe and F. Kydland, ''International Real Business Cycles'', Journal of Political Economy, Aug. 1992, 100(4), 745-775
Incomplete markets: risk-free bond-only economy
Kollmann, R., 1996, Incomplete Asset Markets and the Cross-Country Consumption Correlation Puzzle, Journal of Economic Dynamics and Control, Vol.20, pp.945-962.
Baxter, M. and Crucini, M., 1995. Business Cycles and the Asset Structure of Foreign Trade, International Economic Review.
Empirical evidence [if time permits --- slides]
Kalemli-Ozcan, Papaioannou and Peydro, 2013. Financial Regulation, Financial Globalization and the Synchronization of Economic Activity, Journal of Finance.
Multiple goods [slides]
*Heathcote, J. and Perri, F., 2014, Assessing International Efficiency. Section 4. Hanbook of International Economics.
Terms-of-trade and risk-sharing with complete markets
Backus, D., P. Kehoe and F. Kydland, ''International Business Cycles: Theory and Evidence'', quarterly review, fall 1993 (2nd part)
Backus, D. ,P. Kehoe and F. Kydland, ''Dynamics of the trade balance and the terms of trade: the J curve ?'' American Economic Review, Mar 1994, 84(1), 84-103
Incomplete markets
Cole H. and M. Obstfeld, 1991. Commodity Trade and International Risk Sharing: How much do Financial Markets Matter?", Journal of Monetary Economics 28 (August): 3-24.
Heathcote, J. and F. Perri, 2002. Financial Autarky and International Business Cycles. Journal of Monetary Economics, 49 (3), 601-627.
Corsetti G., Dedola L. and Leduc S., 2007, International Risk Sharing and the transmission of productivity shocks, Review of Economic Studies
Empirical evidence [if time permits --- slides]
Devereux , M.B. and Hnatkovska, V., 2020. Borders and Nominal Exchange Rates in Risk-Sharing. Journal of the European Economic Association. [link to working paper version]
Price rigidities and the international transmission of monetary shocks [if time permits]
Obstfeld M. and K. Rogoff, 1995. Exchange Rate Dynamics Redux. Journal of Political Economy, 103 (3), 624-660.
Lane, P., 2003, The New Open Economy Macroeconomics: a Survey, Journal of International Economics, 54 (2), 235-266.