PA 854: Macroeconomic Policy and International Financial Regulation

This site provides resources for students in PA 854 at the University of Wisconsin, Madison for Spring 2006 Semester

Instructor
Professor Menzie Chinn
Office Hours: MW 1-2
Office: 7418 Social Sciences Bldg.
Phone: (608) 262-7397
email: mchinn@lafollette.wisc.edu
Home Page

Course Syllabus

This course surveys international macroeconomics, with special reference to international monetary policy and international financial market architecture. Topics include the structure of international financial markets; the role of central banks; exchange-rate systems; the determination of balance of payments and exchange rates; macroeconomics of open economies; policy analysis for open economies; policy coordination; the International Monetary Fund; and financial crises. The aim of this course is to provide an analytical background for those who plan to go into government service, international organizations and agencies, businesses involved in the global economy, nongovernmental organizations with international foci, and consulting firms analyzing international policy issues.

The textbook is Caves, Frankel and Jones, World Trade and Payments 9th Edition, available at the University Bookstore. Additional assigned readings will be available in a readings packet, and on the Web (via links on this website).

Important Dates

• Midterm 1, 2/27.
• Midterm 2, 4/19.
• Term paper due Monday, 5/8.

Course Materials and Sources of Economic Information

Downloadable Course Materials

• PA854 Spring 2005 Website.
• More on Exchange Rates handout of 1/25/06.
• Notes on the Elasticities Approach handout of 1/30/06, rev'd 1/30.
• The Keynesian Model of Equilibrium and the Trade Balance handout of 1/30/06, rev'd 2/1.
• Problem Set 1 due 2/8.
• Expenditure Switching/Reducing and the IS-LM Model handout of 2/8/06.
• Spring 2005 Midterm 1
• Problem Set 1 Answers due 2/8.
• Two Country Model and the Keynesian Multiplier 2/8/06.
• Problem Set 2 due 2/22.
• Devaluation in the IS-LM-TB=0 Model handout of 2/20/06.
• Problem Set 2 Answers corrected 2/26.
• Midterm 1 Answers rev'd 3/5.
• Midterm 1 Statistics/Grade Curve
• The IS-LM-BP=0 Model (Mundell-Fleming) under Fixed Exchange Rates handout of 3/1/06.
• The IS-LM-BP=0 Model (Mundell-Fleming) under Floating Exchange Rates handout of 3/6/06.
• Tables from OECD WP 306 (2001).
• Problem Set 3 due 3/27.
• Aggregate Demand-Aggregate Supply Handout of 3/8/06.
• Purchasing Power Parity and Interest Rate Parity Handout of 3/22/06. (corrected 3/27)
• Term Paper Assignment Handout of 3/22/06.
• Problem Set 3 Answers handed out in lecture 3/27.
• Problem Set 4 due 4/12.
• Notes on the Monetary Model of Exchange Rates handed out in lecture 4/3.
• Covered and Uncovered Interest Parity Handout of 4/10/06.
• Portfolio Balance Model of the Risk Premium Handout of 4/12/06.
• Problem Set 4 Answers due 4/12.
• Spring 2005 Midterm 2
• Bubbles Handout of 4/17/06.
• Lecture 4 from Kiel Advanced Studies Program course on Exchange Rates (Risk premium and CAPM, General Equilibrium Models).
• Midterm 2 Answers.
• Midterm 2 Statistics/Grade Curve

Required Readings

• IMF, World Economic Outlook, 2005, Chapter 1 and Chapter 2..
• G. Galati and M. Melvin, 2004, “Why has global FX trading surged? Explaining the 2004 triennial survey,” Quarterly Review (Basle: BIS, December).
• M. Chinn, 2004, “Incomes, Exchange rates and the U.S. trade deficit, once again,” International Finance 7(3): 451-469.
• Chapter 1 of White House Council of Economic Advisers, The Economic Report of the President, 2006
• Chapter 6 of White House Council of Economic Advisers, The Economic Report of the President, 2006
• M. Pakko and P. Pollard, 2003, “Burgernomics: a big Mac guide to purchasing power parity,” Federal Reserve Bank of St. Louis Review 85(6): 9-28.
• T. Dalsgaard, C. André and P. Richardson, 2001, “Standard shocks in the OECD Interlink model,” Economics Department Working Paper No. 306 (Paris: OECD, September).
• M. Chinn, 2005, "The Rehabilitation of Interest Rate Parity in the Floating Rate Era: Longer Horizons, Alternative Expectations, and Emerging Markets," mimeo (January).
• M. Hutchison, 2003, “Is official foreign exchange intervention effective,” FRBSF Economic Letter 2003-20 (July 18).
• J. Frankel, 2003, “Experience of and lessons from exchange rate regimes in emerging economies,” mimeo (Cambridge: Harvard University, September).
• J. Frankel and N. Roubini, 2001, The Role of Industrial Country Policies in Emerging Market Crises,” NBER Working Paper No. 8634 (December).

News Reports and Additional Optional Readings

• "Oil and the global economy: Counting the cost,"Economist, Aug. 25
• "Global Agenda: Reluctant party-poopers," Economist online, Sep. 21
• "First on Bernanke's To-Do List: Tame Inflation," NY Times, October 25, 2005
• "Bernanke's Models, and Their Limits," NY Times, October 30, 2005
• CBO, Economic and Budget Outlook, January 2006, Chapters 1 and 2 (note: entire PDF file is 2mb)
• "Economists fail to reach consensus on global outlook," FT, January 25, 2006
• "China’s booming economy pushes UK to fifth place," FT, January 25, 2006
• "China to ease foreign exchange accumulation," FT, January 25, 2006
• "What Growth? Economy Is Getting Worse Under Bush, Americans Say," Bloomberg, January 27, 2006
• "U.S. Treasury Notes Head for Weekly Drop; Growth May Spur Rate Increases," Bloomberg, January 27, 2006
• "Greenspan Will Leave Legacy of Rising Prosperity Burdened by Soaring Debt," Bloomberg, January 26, 2006
• "Greenspan tees up last rate rise," BBC online, January 31, 2006
• "Challenges ahead for US economy," BBC online, January 2, 2006
• "Deficits could harm Greenspan's legacy," BBC online, January 29, 2006
• "US growth suffers sharp slowdown," BBC online, January 27, 2006
• "US jobs growth less than forecast," BBC online, February 4, 2006
• "US government near to debt limit," BBC online, March 6, 2006
• "U.S. Stocks Slide for Third Day, Year's Longest Losing Streak," Bloomberg online, March 6, 2006
• "US gasoline, diesel fuel retail prices soar: gov't," Reuters online, March 7, 2006
• "Treasury yields at 21-month peak," FT.com, March 6, 2006
• Readings on RMB Misalignment
• "WashingtonPost Fed Coverage"

News Sources

• Financial Times online Subscription form for student rate.
• New York Times online Free registration required.
• Washington Post online
• BBC news online
• Reuters online
• Bloomberg online
• The Economist

Other

• PA856 "Trade, Competition and Governance in the Global Economy" homepage.
• G-5 Current Account Sustainability webpage.
• Santa Cruz Center for International Economics (SCCIE) homepage.
• Center for World Affairs and the Global Economy (WAGE) homepage.

Weblogs

• Brad DeLong (UC Berkeley) blog
• David Altig (UChicago B-school & Cleveland Fed) blog
• Econbrowser (UCSD and UW-Madison) blog
• SF Fed "FedViews"
• Nouriel Roubini's WebPage on Global Macro Issues
• Brad Setser's blog
• Morgan Stanley Global Economic Forum Commentary on international macro issues.

Economics and Economic Policy Links

• Resources for Economists Extensive links to data sources, working papers and organizations.
• American Enterprise Institute Right of center think tank.
• Brookings Institution Moderate/left of center think tank.
• Institute for International Economics
• Institute for International Finance Think tank associated with international banks.
• Economic Policy Institute Left of center labor-oriented think tank.

International Organizations

• International Monetary Fund
• Bank for International Settlements Central banks' central bank.
• Organization for Economic Cooperation and Development Developed country research organization.

U.S. Government Agencies

• White House Council of Economic Advisers
• U.S. Department of the Treasury
• Congressional Budget Office Nonpartisan analytical agency of the Congress.
• Federal Reserve Board

Current and Historical Data

• White House Economic Briefing Room Contains current economic data.
• Economic Indicators Publication of CEA and Congressional Joint Economic Committee contains recent economic data.
• Bureau of Economic Analysis, Dept. of Commerce Data on GDP and components (the national income and product accounts) as well as other macroeconomic data.
• Bureau of the Census, Dept. of Commerce Data on the characteristics of the US population as well as of US firms.
• Bureau of Labor Statistics, Dept. of Labor Data on wages, prices, productivity, and employment and unemployment rates.
• Energy Information Agency, Dept. of Energy Data on on energy (electricity, gas, petroleum) production, consumption and prices.
• Statistical Abstract of the US A compilation of statistics about the US, from government and nongovernment sources.
• UN Public Administration Network databases Links to many UN databases.
• IMF World Economic Outlook database.
• Economic Report of the President, various years. The back portion of this annual publication contains about 70 tables of government economic data.
• St. Louis Fed economic database Thousands of time series on economic activity, in an easily downloadable form.
• Economic Time Series page A large collection of economic time series.
• NBER Data Specialized economic databases created by economists associated with the National Bureau of Economic Research.
• NBER listing of economic releases Compendium of links to economic releases, and archived releases.
• Pacific Exchange Rate Service.
• Federal Reserve Board data Monetary, financial and output data collected by the Nation's central bank.
• Penn World Tables Annual GDP and other data for over a hundred countries, expressed in dollars, after adjusting for differing price levels.