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</o:shapelayout></xml><![endif]--> </head> <body lang=EN-US style='tab-interval:.5in'> <div class=WordSection1> <p class=MsoNormal align=center style='mso-margin-top-alt:auto;mso-margin-bottom-alt: auto;text-align:center'><b>ECO 7716--International Money Fall 2010</b></p> <p class=MsoNormal align=center style='mso-margin-top-alt:auto;mso-margin-bottom-alt: auto;text-align:center'><b><span style='font-size:11.0pt'>Dr. <span class=SpellE>Cem</span> <span class=SpellE>Karayalcin</span></span></b><span style='font-size:11.0pt'><o:p></o:p></span></p> <p align=center style='text-align:center'><b><span style='font-size:11.0pt'>Office Hours: T &amp; <span class=SpellE>Th</span> 1:00-2:00pm</span></b><span style='font-size:11.0pt'><o:p></o:p></span></p> <p align=center style='text-align:center'><b>Tentative Syllabus</b></p> <p>This course is a graduate-level introduction to the main issues in modern open economy macroeconomics and finance. The topics to be covered (with varying degrees of depth of coverage, of course) include <span class=SpellE>intertemporal</span> consumption and investment, government spending and budget deficits, international capital market integration, inflation and <span class=SpellE>seignorage</span>, real and nominal exchange rate determination, determination of the current account, etc. </p> <p><span class=GramE>Most of the time we will be using discrete time dynamic models, so you may want to brush up on your knowledge of the relevant techniques.</span> Two good and relatively easy books that deal with this topic <span class=GramE>is</span> Chiang's <i>Fundamental Methods of Mathematical Economics</i> and <span class=SpellE>Dixit's</span> <i>Optimization in Economic Theory</i>. </p> <p>The textbook for the course is <b>Foundations of International Macroeconomics</b> (FIM) by <i>Maurice <span class=SpellE>Obstfeld</span> </i>and <i>Kenneth <span class=SpellE>Rogoff</span>.</i> This book is available from the University Bookstore. We will use several chapters of it. Students are also expected to read a few chapters by themselves and refresh their memory of some fundamental macroeconomic concepts. As you will see below, in addition to the chapters in the textbook, you are strongly recommended to read additional articles many of which contain the classic expositions of the issues we will discuss. </p> <p>There will be two midterm exams and one final exam, with respective weights of 20%, 30%, and 40%. Occasional <span class=SpellE>homeworks</span> and class participation carry a weight of 10%. </p> <p align=center style='text-align:center'><b><span style='font-size:13.5pt'>PLAN OF THE COURSE</span></b></p> <p><b>1. <span class=SpellE>Intertemporal</span> Trade and the Current Account Balance</b> </p> <p>Ch. 1, FIM </p> <p><span class=SpellE><span class=GramE>Karayalcin</span></span><span class=GramE>, <span class=SpellE>Cem</span> (1996), &quot;<span class=SpellE>Stockmarkets</span>, adjustment costs, and international transmission of shocks&quot; <span class=SpellE><i>Economica</i></span>, 599-610.</span><br> &nbsp;</p> <p><b>2. Dynamics of Small Open Economies</b> </p> <p>Ch. 2, FIM </p> <p>Sachs, J. (1981), &quot;The current account in the macroeconomic adjustment in the 1970's,&quot; <i>Brookings Papers on Economic Activity</i> 1: 201-268. </p> <p><span class=GramE>Sachs, J. (1982), &quot;The current account in the macroeconomic adjustment process,&quot; <i>Scandinavian Journal of Economics</i> 84: 147-159.</span> </p> <p>Blanchard, Olivier J. and Stanley Fischer (1990), <i>Lectures on Macroeconomics</i>, MIT Press. </p> <p><span class=SpellE>Karayalcin</span>, <span class=SpellE>Cem</span> (1994), &quot;Adjustment costs in investment, time preferences, and the current account,&quot; <i>Journal of International Economics</i> 37: 81-95.<br> &nbsp;</p> <p><b>3. Fiscal Policy and the Current Account</b> </p> <p>Ch. 3, FIM </p> <p>Feldstein, Martin, and Charles <span class=SpellE>Horioka</span> (1980), &quot;Domestic savings and international capital flows,&quot; <i>Economic Journal</i> 90: 314-329. </p> <p><span class=SpellE><span class=GramE>Buiter</span></span><span class=GramE>, Willem (1981), &quot;Time preference and international lending and borrowing in an overlapping-generations model,&quot; <i>JPE</i> 89: 769-97.</span> </p> <p><span class=SpellE>Obstfeld</span>, Maurice (1986), &quot;Capital mobility in the world economy: Theory and evidence,&quot; <i>Carnegie-Rochester Conference Series on Public Policy </i>(Spring) 55-104. </p> <p><span class=SpellE><span class=GramE>Karayalcin</span></span><span class=GramE>, <span class=SpellE>Cem</span> (1995), &quot;Capital income taxation and welfare in a small open economy,&quot; <i>Journal of International Money and Finance</i> 14: 785-800.</span> </p> <p><span class=SpellE><span class=GramE>Karayalcin</span></span><span class=GramE>, <span class=SpellE>Cem</span> (1995), &quot;Government spending and cyclical adjustment in a small open economy,&quot; <i>Journal of Economic Integration</i> 10: 454-474.</span> </p> <p><span class=SpellE>Karayalcin</span>, <span class=SpellE>Cem</span> (1996), &quot;Redistributive Taxation in a Small Open Economy,&quot; <i>Canadian Journal of Economics</i>, XXIX: 688-698.<br> &nbsp;</p> <p><b>4. The Real Exchange Rate and the Terms of Trade</b> </p> <p>Ch. 4, FIM </p> <p><span class=SpellE>Dornbusch</span>, <span class=SpellE>Rudiger</span> (1983), &quot;Real interest rates, home goods, and optimal external borrowing,&quot; <i>JPE </i>91: 141-153. </p> <p><span class=SpellE>Obstfeld</span>, Maurice (1982), &quot;Aggregate spending and the terms of trade: Is there a <span class=SpellE>Laursen</span>-Metzler Effect?&quot; <i>QJE</i> 97: 251-270. </p> <p><span class=SpellE><span class=GramE>Sen</span></span><span class=GramE>, <span class=SpellE>Partha</span> (1994), &quot;Savings, investment, and the current account,&quot; in Frederick van der <span class=SpellE>Ploeg</span>, ed., <i>The Handbook of International Macroeconomics</i>, Oxford, Basil Blackwell.</span> </p> <p><span class=SpellE>Karayalcin</span>, <span class=SpellE>Cem</span> (1995), &quot;Heterogeneous households, the distribution of wealth, and the <span class=SpellE>Laursen-Meztler</span> effect&quot; <i>Review of International Economics</i> 3: 86-103.<br> &nbsp;</p> <p><b>5. Uncertainty and International Capital Markets</b> </p> <p>Ch. 5 FIM </p> <p><span class=SpellE>Turnovsky</span>, Stephen (1995), <i>Methods of Macroeconomic Dynamics</i>, Ch.<i> </i>15, MIT Press </p> <p><span class=SpellE>Svensson</span>, Lars (1988), &quot;Trade in risky assets&quot; <i>AER</i> 78: 375-394. </p> <p><span class=SpellE><span class=GramE>Obstfeld</span></span><span class=GramE>, Maurice (1994), &quot;Risk taking, global diversification, and growth,&quot; <i>AER</i> 85: 1310-1329.</span> </p> <p>Devereux, Michael and <span class=SpellE>Gregor</span> Smith (1994), &quot;International risk sharing and economic growth,&quot; <i>IER</i> 35: 535-550. </p> <p><span class=SpellE>Karayalcin</span>, <span class=SpellE>Cem</span>, K. <span class=SpellE>McCollister</span> and <span class=SpellE>Devashish</span> <span class=SpellE>Mitra</span> (2002)  Infrastructure, Returns to Scale and Sovereign Debt , <i>Journal of International Trade and Economic Development</i> 11:267-278 (2002).<span style='font-family:"Arial","sans-serif"'><br> </span><span class=SpellE><span class=GramE>Karayalcin</span></span><span class=GramE>, <span class=SpellE>Cem</span> and K. <span class=SpellE>McCollister</span> (2005)  Income distribution, sovereign debt and public investment, <i>Economics and Politics, </i>forthcomin<i>g.</i></span></p> <p><b>6. Money and Exchange Rates under Flexible Prices</b> </p> <p>Ch. 8, FIM </p> <p><span class=SpellE>Frenkel</span>, Jacob (1976), &quot;A monetary approach to the exchange rate: Doctrinal aspects and empirical evidence,&quot; <span class=SpellE><i>ScJE</i></span> 78: 200-224. </p> <p><span class=SpellE><span class=GramE>Calvo</span></span><span class=GramE>, Guillermo (1978), &quot;On the time inconsistency of optimal policy in a monetary economy,&quot; <span class=SpellE><i>Econometrica</i></span> 46: 1411-1428.</span> </p> <p><span class=SpellE><span class=GramE>Krugman</span></span><span class=GramE>, Paul (1979), &quot;A model of balance of payment crises,&quot; <i>JMCB</i> 11: 311-325.</span><br> &nbsp;</p> <p><b>7. Basic open Economy Models of Nominal Price Rigidities</b> </p> <p>Ch. 9, FIM </p> <p><span class=GramE>Fleming, Marcus (1962), &quot;Domestic financial policies under fixed and floating exchange rates,&quot; <i>IMF Staff Papers</i> 9: 369-379.</span> </p> <p><span class=SpellE><span class=GramE>Mundell</span></span><span class=GramE>, Robert (1963), &quot;Capital mobility and stabilization policy under fixed and flexible exchange rates,&quot; <i>CJE&amp;PS</i> 29: 475-485.</span> </p> <p><span class=SpellE>Mundell</span>, Robert (1963), &quot;A reply: Capital mobility and size,&quot; <i>CJE&amp;PS</i> 30: 421-431. </p> <p><span class=SpellE><span class=GramE>Dornbusch</span></span><span class=GramE>, <span class=SpellE>Rudiger</span> (1976), &quot;Expectations and exchange rate dynamics,&quot; <i>JPE </i>84: 1161-1176.</span><br> &nbsp;</p> <p><b>8. Imperfections in Capital Markets</b> </p> <p>Ch. 6, FIM </p> <p>Sachs, Jeffrey (1984), <i>Theoretical Issues in International Borrowing</i>, Princeton Studies in International Finance 54. </p> <p>Bulow, Jeremy and Kenneth <span class=SpellE>Rogoff</span> (1989), &quot;Sovereign debt: Is to forgive to forget?&quot; <i>AER </i>79: 43-50. </p> <p><span class=SpellE>Ozler</span>, <span class=SpellE>Sule</span> (1993), &quot;Have commercial banks ignored history?&quot; <i>AER</i> 83: 608-620. </p> <p><span class=GramE>Cole, Harold and Patrick Kehoe (1995), &quot;The role of institutions in reputation models of sovereign debt,&quot; <i>JME</i> 35: 45-64.</span><br> &nbsp;</p> <p><b>9. Sticky Price Models of Exchange Rate Determination</b> </p> <p>Ch. 10, FIM </p> <p><span class=SpellE>Obstfeld</span>, Maurice and Kenneth <span class=SpellE>Rogoff</span> (1995), &quot;Exchange rate dynamics <span class=SpellE>redux</span>,&quot; <i>JPE</i> 103: 624-660. </p> <p><span class=SpellE>Svensson</span>, Lars and <span class=SpellE>Sweder</span> van <span class=SpellE>Wijnbergen</span> (1989), &quot;Excess capacity, monopolistic competition, and international transmission of monetary disturbances,&quot; <i>EJ</i> 99: 785-805. </p> </div> </body> </html>