AmherstCollegeDepartment of Economics
Fall 2010Professor A. Honig
Economics 37: Financial Globalization, Growth and Crises
Office: Hours:
312 ConverseMonday 3:30-5:00, or by appointment
542-5032
Class: M,W 2:00-3:20
Prerequisites: Economics 11
Course Materials:
N. Gregory Mankiw, Macroeconomics 6th or7th edition. Available at Amherst Books. We will only be covering a few chapters in the book. Therefore, you might prefer to borrow the book from a friend when you need it. However, since this is the textbook used in EC 53, you will need it anyway if you take that course. You are welcome to buy the 6th edition as well. The chapters we will be covering are the same in both editions.
All course materials, except for the text and some of the readings, are available on the ECON 37 course page in CMS. If you pre-registered for the course you should already be “enrolled” on the course page.
Course Grading:
Your grade will be based on four problem sets, which will account for 20%, and on two exams (40% each). Each exam will be given only at the scheduled time, Monday, October 25, and Wednesday, December 15(last class). Should an emergency prevent you from taking either exam, if you notify me in advance and if the emergency is verified by the Dean of Students, your grade will be based on the other work in the course. If you miss an exam without notifying me in advance or without providing verification from the dean’s office, you will receive a grade of zero for the missed exam.
Attendance policy: Class attendance is entirely optional. Your grade will be based solely on your graded assignments. Regular attendance, however, is strongly recommended since many of the lecture notes are my own and are not based on any textbook.
All readings are required. Class will meet every Monday and Wednesday, whether or not there is an assignment listed for that date.
Course Policy on the Statement of Intellectual Responsibility:
Iexpect you to abide by Amherst College’s Statement of Intellectual Responsibility. While I encourage you to discuss the course material with other students, all written work, whether performed in or out of the classroom, must be your own. Violations of the Statement of Intellectual Responsibility will result in a course grade of F and will be reported to the Dean of Students, in addition to any non-grade penalty imposed by the Dean for Student Conduct.
Course Schedule
Week 1
MondayNO CLASS
WednesdayIntro to Financial Globalization (FG)
Week2
MondayIntro (contd.)
Reading:
Mankiw section 5-1
World Bank Research Report 2002 – Chapter 1: The New Wave of Globalization and Its Economic Effects – course website
WednesdayIntro to Growth
Reading:
Mankiw Chapter 3, sections 3-1 to 3-3
Percentage change rules – course website
Mankiw - Appendix to Chapter 8
A Beginner’s Guide to Growth Accounting – course website
Week 3
MondayHow can FG increase growth?
Reading:
Prasad, Rogoff, Wei, Kose 2004 - Financial Globalization, Growth and Volatility in Developing Countries. Sections I-intro, IA, IB, II, IIIA
Prasad, Rogoff, Wei, Kose 2008 - Financial Globalization: A Reappraisal. Section VIIA,VIIC, VIII .
WednesdayHow do basic institutions contribute to growth?
Reading:
IMF World Economic Outlook April 2003 Chapter 3
“Roots of Development” – Economist 10/5/2002- E-reserves
Week 4
MondayHow does FG improve basic institutions?
WednesdayHow does the financial system contribute to growth?
Week 5
MondayWhat helps the financial system develop?
WednesdayHow does FG lead to financial system development
Reading:
Reread Prasad, Rogoff, Wei, Kose 2008 - Financial Globalization: A Reappraisal. Section VIIIA
Week 6
MondayNO CLASS
WednesdayEvidence that FG increases growth
Reading:
Prasad, Rogoff, Wei, Kose 2004 - Financial Globalization, Growth and Volatility in Developing Countries. SectionIII-B, C
Prasad, Rogoff, Wei, Kose 2008 - Financial Globalization: A Reappraisal. Section VIIB, IX.
Week 7
MondayEvidence that FG increases growth, Effect of FG on consumption volatility
Reading:
Prasad, Rogoff, Wei, Kose 2004 - Financial Globalization, Growth and Volatility in Developing Countries. Sections I-C and IV.
WednesdayGoods market in the long run and the Money market
Reading:
Mankiw Chapter 3 – reread 3-1 to 3-3 and then read rest ofchapter
Changes in linear equations – course website
Mankiw Chapter 4(excluding the Appendix)
Week 8
MondayFIRST EXAM
WednesdayClosed economy model of AD.
Reading:
SR: Chapter 7.1 – IS curve
SR: Chapter 7.2 – Money Market and Monetary Policy
SR: Chapter 7.3a – Monetary and Fiscal Policy in the short run
SR: Chapter 7.4 – IS curve in the long run and Summary
Problem Set 1 due
Week 9
MondayOpen economy model of AD
Reading:
Readings:
Ch 5 (Including the Appendix) & Appendix to Ch 12
SR: The Open Economy Goods Market with Flexible and Fixed Exchange Rates
WednesdayOpen economy model of AD
Problem Set 2 due
Week 10
MondayIntro to financial crises, currency crises
Reading:
Academic literature on currency crises – course website
Wednesday Banking/financial crises and links with currency crises
Reading:
Mishkin, Frederic. (1996), “Understanding Financial Crises: A Developing Country Perspective” Don’t read section III or VI.
Kaminsky, Graciela and Carmen Reinhart (1999). “The Twin Crises: The Causes of Banking and Balance-of-Payments Problems,” American Economic Review, 89(3): 473-500. Read Introduction and Section 1a – pp 1-6 - E-reserves
Problem Set 3 due
Week 11
MondayHow does FG lead to financial crises?
Wednesday Recovering from crises, financial policies to prevent crises
Reading:
Mishkin, Frederic, 2001, “Financial Policies and the Prevention of Financial Crises in Emerging Market Countries” Just read sections 5 and 6 .
Problem Set 4 due
THANKSGIVING BREAK
Week 12
MondayFinancial policies to prevent crises, other policies to prevent crises
Wednesday General institutions and crises, capital controls, proper sequencing
Reading:
Prasad, E., Rajan, R. 2008. A pragmatic approach to capital account liberalization. 17-21 (section on “Approaches to Restricting and Liberalizing Capital Flows”)
Week 13
MondayRole of IMF and advanced countries
Reading:
“Supersizing the fund” Economist 2/7/2009- E-reserves
Wednesday Role of IMF and advanced countries (contd.)
Week 14
MondayConclusion to course and evaluations.
WednesdaySECOND EXAM
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