Kiel Advanced Studies Program: Exchange Rate Economics (Spring 2005)
Downloadable Course Materials and Information Sources |
Professor Menzie Chinn
Syllabus in PDF file updated 2/9/05.
This course surveys exchange rate economics, with special reference to the theoretical or empirical modeling of exchange rates.
The textbook is Obstfeld and Rogoff, Foundations of International Macroeconomics (MIT, 1996).
- 7.3: Introduction to financial markets, parity concepts
- 8.3: Monetary models
- 9.3: Bubbles; portfolio balance models
- 10.3: Equilibrium models
- 11.3: Empirics, forecasting, policy
Downloadable Course Materials
Lecture 1: Financial Markets and Parity Conditions
Lecture 2: Monetary Models of the Exchange Rate
- Lecture 1.
- Problem Set 1.
- Problem Set 1 Answers.
- * BIS, 2004, Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity in April 2004: Preliminary global results, (BIS: Basle, September).
- * Gabriel Galati and Michael Melvin, 2004, “Why has FX trading surged? Explaining the 2004 triennial survey,” BIS Quarterly Review (BIS: Basle, December): 67-74.
- * Alan Taylor and Mark Taylor, 2004, “The Purchasing Power Parity Debate,” Journal of Economic Perspectives 18(4) (Fall): 135-158.
- * Menzie Chinn and Guy Meredith, 2004, “Monetary Policy and Long Horizon Uncovered Interest Parity,” IMF Staff Papers 51(3) (November): 409-430.
- r Menzie Chinn and Eiji Fujii, 2001, “Fin de Siecle Real Interest Parity,” Journal of International Financial Markets, Institutions and Money 11(3/4) (Sept.): 289-308.
- Menzie Chinn, 2005, “The Rehabilitation of Interest Rate Parity: Longer Horizons, Alternative Expectations and Emerging Markets,” mimeo (January 2005).
- Big Mac Index, Economist. Compilation of links; includes Big Mac index, the Starbucks index.
- Big Mac Index, Economist December 16, 2004. Latest take on Big Mac index.
- David C. Parsley and Shang-Jin Wei, "A Prism into the PPP Puzzles: The Micro-foundations of Big Mac Real Exchange Rates," NBER Working Paper #10074 (November 2003).
- Holger Wolf and Jonathan Haskel, "The Law of One Price: A Case Study," NBER Working Paper #8124 (February 2001). Ikea and the LOOP.
- Michael Pakko and Patricia Pakko,
"Burgernomics: A Big Mac™ Guide to Purchasing Power Parity,"St. Louis Fed Review. Discusses the Penn World Tables in relation to the Big Mac index.
Lecture 3: Bubbles and Portfolio Balance Models
Lecture 4: The Risk Premium, Equilibrium Models and the New Open Economy Macroeconomics
- Lecture 3 Part 1 Notes
- Lecture 3 Part 2 Notes
- Problem Set 3.
- Problem Set 3 Answers.
- Carlos Alfredo Rodriguez, 1980, "The Role of Trade Flows in Exchange Rate Determination: A Rational Expectations Approach,"
The Journal of Political Economy, Vol. 88, No. 6. (Dec.), pp. 1148-1158.
- * Pierre-Olivier Gourinchas and Helene Rey, "International Financial Adjustment," mimeo (UC Berkeley and Princeton, February).
- * Philip R. Lane and Gian Maria Milesi-Ferretti, "Financial Globalization and Exchange Rates," Working Paper 05/03 (IMF, January).
- Oliver Blanchard, Francesco Giavazzi, Filipa Sa, "The U.S. Current Account and the Dollar," NBER Working Paper #11137 (February 2005).
Lecture 5: Empirics, Forecasting and Policy
- Lecture 4.
- Charles Engel, 1996, "The Forward Discount Anomaly and the Risk Premium: A Survey of Recent Evidence," NBER WP 5312. All you wanted to know about the risk premium, per popular request
- Problem Set 4.
- Problem Set 4 Answers.
- * Alan Stockman, 1987, "The Equilibrium Approach to Exchange Rates," Federal Reserve Bank of Richmond Economic Review. 73(2) (March/April): 12-30..
- * Jeffrey Frankel and Andrew Rose, 1994, "A Survey of Empirical Research on Nominal Exchange Rates." In Gene Grossman and Kenneth Rogoff (editors) Handbook of
International Economics, Volume 3 (North-Holland, 1995).
- Working paper version available as NBER Working PaperNo. 4865
- Resolving Stock and Flow Explanations for Dollar Decline: Excerpts from Blanchard et al. (2005).
- Lecture 5.
- Problem Set 5.
- Problem Set 5 Answers.
- * Yin-Wong Cheung, Menzie Chinn and Antonio Garcia Pascual, forthcoming, Empirical Exchange Rate Models of the 1990's: Are Any Fit to Survive?, JIMF. Revised version of NBER Working Paper #9393 (Dec. 2002).
- r Chinn, Menzie and Richard Meese, 1995, "Banking on Currency Forecasts: How
Predictable Is Change in Money?" Journal of International Economics 38(1/2): 161-178.
- Nelson Mark, 1995, "Exchange Rates and Fundamentals: Evidence on Long-Horizon
Predictability," American Economic Review 85(1): 201-218.
- * Nelson Mark and Dongyu Sul, 2001, "Nominal Exchange Rates and Monetary Fundamentals: Evidence from a Small Post-Bretton Woods Panel," Journal of International Economics 53(1): 29—52.
- * Charles Engel and Kenneth D. West, forthcoming, “Exchange Rates and Fundamentals,"
Journal of Political Economy.
Comments on test material.
Final Exam Answers posted 10.4.2005
Final Exam Statistics and Grade Distribution posted 11.4.2005
News Reports and Additional Readings
- "Central banks shift reserves away from US," FT Jan 24
- Chris Swann, "US trade gap mars boom in demand,"
FT Jan 28
- "China's exchange rate: Cock-a-doodle-doo," Economist, Feb. 3
- "The world economy: Still gushing forth," Economist, Feb. 3
- Paul Blustein, "Greenspan: Trade Deficit 'Poised to Stabilize',"
Washington Post, February 4
- John Harris, "Deficit Worries Threaten Bush Agenda GOP Lawmakers, Others Say War and Recession No Longer Justify Mounting Debt,"
Washington Post, February 6
- Edmund Andrews, "Trim Deficit? Only if Bush Uses Magic,"
NYT, February 6
Economic Policy Links
Current and Historical Data
- White House Economic Briefing Room Contains
current 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.
- 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.
- J.P. Morgan This site provides world financial data.
- NBER Data Specialized economic databases created by
economists associated with the National Bureau of Economic Research.
- 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.
Exchange Rate Economics / Kiel Institute for World Economics / firstname.lastname@example.org / 11 April 2005