Korea University, Graduate School of International Studies
Year 2015 1st(Spring) Semester
European Economy: Economic governance and macroeconomic analysisYoo-Duk Kang (Part 1)[1]
Seongman Moon (Part 2)[2]
Course Description and Objectives:
This course discusses economic governance of the European Union and member countries’ economies from macroeconomic perspective. In order to analyze economic situation of European countries, it is indispensable to examine both economic data and policy framework due to highly integrated markets by trade and financial linkage and their institutional set-up in European economic governance.
This course will be taught by two instructors, one focusing institutional aspect of European economies (Yoo-Duk Kang) and the other on macroeconomic analysis (Seongman Moon).
The main purpose of this course is to enable students to conduct economic analysis based on macroeconomic data on European economies and to provide to improve ability of student to frame and analyze economic policy in coherent fashion.This course does not necessarily aim to cultivate an academic scholar but provide relevant expertise and analytical tools for a future specialist in European affairs. In addition to knowledge at relevant level required for Master course in EU studies, students will/should learn how to interpret economic indicators provided by Eurostat, OECD statistics and IMF.
Prerequisites:
This course does not require a high level of economic expertise, such as advanced microeconomics and econometrics. However, basic knowledge of macroeconomics, international trade and – to a lesser extent –microeconomics will be a lot helpful. During classes, instructors may ask student to bring their laptop computer and conduct to exercise, using MS Excel. If students feel lack of some theoretical foundations on some course contents such as economic and international knowledge, additional references will be provided and it requires students to fill gap during classes.
Requirements:
Students are required to complete the readings, attend class sessions, participate actively and write a research paper on issues related to the European Union. The term paper is due at the end of the term (by mid-June).
Your grade will be based on following several elements.
Evaluation:
- Presentation:50%
During entire sessions, each student (or group, it depend on the number of student) is expected to conduct at least two presentations, one for short presentation (5~10min) based on current issues (i.e. newspaper) and the other for long presentation (20min+10min discussion). It is highly recommended to distribute a presentation material or use PPT (or other presentation tools) for presentation.
- Discussion :10%
- Final exam:40%
Final exam will have tenquestions on issues that student learn during classes. Within 2 hours, you can organize your answers to four out of ten questions with logical explanation.
Textbooks:
There are no particular manuals for this course. However, the following books will be repeatedly referred as references:
Economic Policy and macroeconomics of the EU
-Baldwin, Richard and Charles Wyplosz. 2009. The Economics of European Integration. 3rd edition. McGraw-Hill. (Most used book for Economic integration in Europe)
-Robert J. Barro, Vittorio Grilli. 2007. European Macroeconomics. Palgrave Macmillan.
General introduction of European political system
-Simon, Hix. 2011. The Political System of the European Union. 3rd Edition. Palgrave Macmillan. (This book is quasi-manual of European Political System. Highly recommended to read)
Development of the EMU
-Apel. Emmanuel. 1998. European Monetary Integration 1958-2002. Routledge. (This book is plainly written and easy to understand. Highly recommended to read the entire book.)
-Chown, John. 2003 A History of Monetary Unions. Routeledge.
EU’s governance in financial market
-From Fragmentation to Financial Integration in Europe. 2014. International Monetary Fund
-Financial Crisis: Causes, Consequences and Policy Responses. 2013. International Monetary Fund.
Course schedule
Week 1: Development of the European Monetary Union(Kang)
1. Exchange rate system, Werner Report, European Monetary System (EMS), Pound and Lira crisis in early 1990s.
2. Institutional set-up of European economic governance
Reference
-Baldwin, Richard and Charles Wyplosz. 2009. The Economics of European Integration. 3rd edition. McGraw-Hill. (Chap 16)
-Gros, Daniel. 1999. European Monetary Integration. 2nd edition. Longman Publishing.
-Apel. Emmanuel. 1998. European Monetary Integration 1958-2002. Routledge.
-Simon, Hix. 2011. The Political System of the European Union. 3rdEdition. Palgrave Macmillan. (Chap. 1-4)
Week 2: Introduction of European Macroeconomy (Moon)
1. Market economy and role of government
2. Classical economists vs. Keynesian economists
3.Business cycles vs. economic growth
Week 3: Introduction of the Euro and its development(Kang)
1. Optimal Currency Area (OCA), Maastricht criteria, Stability and Growth Pact
2. Economic effects of the Euro
Student presentation
Reference
-Baldwin, Richard and Charles Wyplosz. 2009. The Economics of European Integration. 3rd edition. McGraw-Hill. (Chap 11: OCA, Chap 17: EMU )
-Mongelli, Francesco Paolo. 2002. "New Views on the Optimum Currency Area Theory: What is EMU Telling Us?" ECB Working Paper No. 138. This article is a rather long survey article on OCA theory and its relevance to Euro.
-Jonung, Lars and Eoin Drea. 2009. “The euro: It can’t happen, It’s a bad idea, It won’t last. US economists on the EMU, 1989-2002.” European Economy - Economic Papers, No. 395.
-European Central Bank(ECB). 2009. The international role of the euro. July.
Week 4: European Real Sector Analysis(Moon)
1. Analysis on aggregate demand
2.Analysis on Inflation
3.Forecasting the real sector
Student presentation
Week 5: European Central Bank (ECB)(Kang)
1. Inflation, Policy-mix, monetary policy, role of central bank
2. Global financial crisis, response of central banks
3. Comparative studies on ECB and Federal Reserve
Student presentation
Reference
-European Central Bank. 2008. 10th Anniversary of the ECB. Monthly Bulletin
-Scheller, Hanspeter. 2004. The European Central Bank: History, Role and Functions.
-Hetzel, Robert. 2002. German Monetary History in the Second Half of the Twentith Centrury: From the Deutsche Mark to the Euro
-Issing, Otmar. 2010. The Development of Monetary Policy in the 20th Century – Some Reflections
-Szcerbowicz, Urszula. 2012. The ECB unconventional monetary policies: have they lowered market borrowing costs for the banks and governments?
-Cour-Thimann and Winkler. 2013. The ECB’s Non-standard monetary policy measures: the Role of Institutional Factors and Financial Structure.
Week 6: European Real Sector Analysis (Moon)
1. Analysis on aggregate demand
2.Analysis on Inflation
3.Forecasting the real sector
Student presentation
Week 7: Development of European Financial Market(Kang)
1. Structure of European Financial Market, Liberalization of capital market
2. Financial integration, Financial Service Action Plan, Lamfalussy Report
3. Principles of financial regulation in the EU
Student presentation
Reference
-European Central Bank(ECB). 2007. EU Banking Structure (October).
-European Central Bank(ECB). 2003. The integrationof Europe’s financial markets” (October 2003)
-European Commission. 2008, 2009. European Financial Integration Report.
-European Commission. 2001. “Final Report of the Committe of the Wise Men on the Regulation of European Securities Market.” February.
-Borio, Claudio. 2003. “Towards a Macro-prudential Framework for Financial Supervision and Regulation?” BIS Working Paper. No.128. February.
Week 8: European External Sector Analysis (Moon)
1. Current account
2. Capital and financial accounts
3. Exchange rate regimes
Student presentation
Week 9: Global Financial Crisis in 2008~09(Kang)
1. Cause of subprime crisis, contagion effect
2. Fiscal stimulus, Quantitative easing
3. Larosière Report, Macro-prudential, European System of Financial Supervisors, Student presentation
Reference
-Economic Crisis in Europe: Causes, Consequences and Responses. European Economy 7. 2009. Economic Crisis in Europe: Causes, Consequences and Responses. European Economy 7.
-Francesco Paolo Mongelli. 2010. The Transformational Impact of EMU and the Global Financial Crisis CEPS Policy Paper. No. 228/December.
-Dabrowski. Marek. 2009. “The Global Financial Crisis: Lessons for European Integration.” CASE: Network Studies and Analyses, No. 384.
Week 10: European External Sector Analysis (Moon)
1. Current account
2. Capital and financial accounts
3. Exchange rate regimes
Student presentation
Week 11: Debt crisis in Eurozone: causes and development(Kang)
1. Causes and development, fiscal deficit, internal imbalance
2. EFSF/ESM, European Semester, Macroeconomic imbalance
3. Response of the ECB (SMP, LTRO, OMT, etc)
Student presentation
Reference
-McDonnell, Tom. 2012. The Euro Crisis: Causes and Solutions.
-Dadush, Uri. 2010. Paradigm Lost: The Euro in Crisis. Carneigie Endowment.
-Belkin, Paul, Derek E. Mix, and Martin A. Weiss. 2012. “The Eurozone Crisis: Overview and Issues for Congress.” CRS Report for Congress.
-Baldwin, Richard and Daniel Gros. 2010. “Introduction: The Euro in Crisis – What to do?” Baldwin, Richard, Daniel Gros, and Luc Leuven eds. Completingthe Eurozone Rescue: What more needs to be done? A VoxEU.org Publication.
-Heise, Arne. 2012. “Governance without government or: The Euro Crisis and what went wrong with European Economic Governance?” Discussion Papers, Zentrum für Ökonomische und Soziologische Studien, No. 32.
-Knedlik, Tobias and Gregor von Schweinitz. 2012. “Macroeconomic Imbalances as Indicators for Debt Crises in Europe.” Journal of Common Market Studies, Vol. 50, No. 5.
-Holinski, Nils, Clemens Kool, and Joan Muysken. 2012. “Persistent Macroeconomic Imbalances in the Euro Area: Causes and Consequences”, Federal Reserve Bank of St. Louis Review, January/February 2012, 94(1), pp. 1-20.
-Gros, Daniel. 2012. “Macroeconomic Imbalances in the Euro Area: Symptom or cause of the crisis?” Centre for European Policy Studies. No. 266, April.
Week 12: European Fiscal Sector Analysis(Moon)
1. Fiscal accounts
2.Fiscal analysis
3.Forecasting the fiscal sectorStudent presentation
Week 13: Economic adjustment of the Eurozone(Kang)
1. Reviews of macroeconomic data of the Eurozone countries
2. Reform in economic governance in Eurozone
3. Spain, Ireland and Greece
Student presentation
Reference
-International Monetary Fund (2013). Greece: Ex Post Evaluation of Exceptional Access under the 2010 Stand-ByArrangement.
-Bibow, Jörg. 2012. “The Euro Debt Crisis and Germany’s Euro Trilemma.” Working Paper, No. 721. Levy Economics Institute of Bard College; M. Nelson, Rebecca.
Week 14: European Monetary Sector Analysis(Moon)
1. Review of monetary accounts
2.Monetary analysis
3.Forecasting monetary aggregates
Week 15: EU’s reforms in financial regulation(Kang)
1. Credit rating agency: Sovereign risk, Method of evaluating risks
2. Financial transaction tax: Free movement of capital, Tax Tobin
3. Banking Union
Student presentation
Reference
-Tichy, Gunther et al. Credit Rating Agencies: Part of the Solution orPart of the Problem?Intereconomics 2011.
-Katz, Laura F. 2008. Rating Agencies and Their Methodologies. S&P.
-Suvanto, Antti. 2001. "Currency Trade, Capital Flows and the Tobin Tax." The Finnish Economy and Society 3. pp. 62-69.
-Schwert, William, and Paul J. Seguin. 1993. "Securities Transaction Taxes: an Overview of Costs, Benefits and Unresolved Questions." Financial Analysts Journal 49, 27-35.
-Pisani-Ferry, Jean and Andre Sapir, Nicoals Veron and Guntram B. Wolff. "What Kind of European Banking Union?" Policy Contribution 2012/12.
-Pisani-Ferry, Jean and Guntram B. Wolff. 2012. "The Fiscal Implications of a Banking Union", Policy Brief 2012/02. Buregel.
-European Commission. 2012. A Roadmap towards a Banking Union.
Week 16: European Monetary Sector Analysis/ Final Exam(Moon)
1. Review and exercise
2. Final exam
Useful website
Information sources for European affairs
independent voice on EU news and affairs
European Public Opinion Centre
Spiegel (German Newspaper) English version
Central Bank
Eurostat (Statistic Authority of the EU)
Centre for European Policy Studies, European Think-tank
European online newspaper
European information
1
[1] Head of Europe Team, KIEP, Tel: 044-414-1123, Email:
[2] Head of International Macroeconomics, KIEP, Tel: 044-414-1141, Email: