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International Finance

Опубликовано на портале: 30-10-2007
Факультет: Economic Department
Год: Spring 2001
Язык: Английский
Тематические разделы: Экономика, Международная экономика, Международная экономика: Международная макроэкономика и международные финансы

Курс читается в магистратуре Гарвардского университета. Основного учебника не предлагается, но большинство обсуждаемых тем содержится в Foundations of International Macroeconomics, by Maurice Obstfeld and Kenneth Rogoff (MIT Press, October 1996)
Требования курса: "Graduate Macro". Необходимая математическая подготовка: высшая математика, эконометрика на уровне магистратуры.
В курсе обсуждаются актуальные проблемы международных финансов.



v. April 24, 2001

Economics Department, Harvard University, Spring 2001

Graduate International Finance, Economics 2530b

Professor Kenneth Rogoff Office hours: Mondays 12:00-1:30 PM or by appointment

Economics Department, Littauer Center, Harvard University, Cambridge, MA 02138-3001, krogoff@fas.harvard.edu

Assistant: Jane Trahan, jtrahan@harvard.edu

Course time and location: The course meets Mondays and Wednesdays from 10:00 to 11:30 am in Littauer M-15.


There is no text. However, a significant number of readings for the course are taken from

Foundations of International Macroeconomics, by Maurice Obstfeld and Kenneth Rogoff (MIT Press, October 1996; available at Harvard Coop). The solution manual is available online.

All other core readings for the course will be available on-line via links from the course webpage site. Reading packets will be made available on request.

Course requirements:

  1. Periodic short assignments (10%). These may be problems but will mostly consist of answering short questions related to course readings, especially those about to be covered in class. You are encouraged to work with your classmates, and may give answers in groups of three or less.
  2. Two short reports, due March 12 and April 16: Class participants will be asked to work through two of a selection of assigned papers. Depending on the paper, you will be asked to either provide critical missing intermediate steps, check on core empirical results, or recalibrate a simulation model. These assignments -- intended to be written up in at most 10-12 double-spaced pages each -- may be done as part of a small group of 2-3 persons. You are urged to try to use your last one to two pages to critique the paper (in the manner of a referee's report) and try to assess its value-added to the literature. (45% each)


The following outline gives a guide to the material that will be covered in the course and a planned class schedule. Updates to the class schedule will be given on the online version of this syllabus, which will be maintained on a regular basis. The main readings for the class are clearly stated (readings from OR are always main readings unless otherwise stated), as are recommended secondary readings. Papers listed as "supplementary reading" will be summarized in class, and you may want to at least skim them before or after class, but you do not absolutely need to read them closely. Articles listed as "further readings" are not required but may be of special interest to those of you interested in pursuing the topic further.

1. An overview

Jan. 31: This lecture will give an overview of some of the research questions that international finance aims to address, both those on which there is active academic research, and those in which there is so-called "policy research" but as yet no serious academic research.


Feb 5: History of thought in international finance and perspective on recent research debates

Main Reading: Obstfeld, Maurice, "International Economics: Beyond the Mundell-Fleming Puzzle," Mundell-Fleming lecture, International Monetary Fund, December 2000.


2. International Debt

This is a broad topic on which one can give an entire course. Our primary focus will be on fundamental (and very difficult to answer) questions such as "why do countries repay" and what do optimal implicit country debt contracts look like. There are a host of interesting policy issues, but these will be treated as subsidiary to primary research questions.

Feb. 7: Reputation for repayment models of international debt versus direct sanction models:

Main Reading: OR page 349-379.

Further readings (unless otherwise stated, you can find complete cites in OR): The classic article is Eaton and Gersovitz (ReStud, 48( April) 1981, 289-309). Another seminal paper is Sachs "Theoretical Issues in International Borrowing," (Princeton Studies in International Finance, 54 (July) 1984). Among other things, this paper was the first to articulate the analogy between Diamond-Dybvig-type bank runs and runs on short-term country debt. The Eaton and Fernandez survey, ("Sovereign Debt," Handbook of International Economics, Vol. 3, eds. Grossman and Rogoff, which also appeared as an NBER working paper) is also useful.

Feb. 12: A deeper look at reputation for repayment models:

Main Readings: Kenneth Rogoff and Jeremy Bulow, "Sovereign Debt: Is to Forgive to Forget?" American Economic Review 79 (March 1989), 43-50.

Hal Cole and Patrick Kehoe, "Reviving Reputation Models of International Debt," Federal Reserve Bank of Minneapolis Quarterly Review (Winter 1997).

Supplementary Reading: English, William, "Understanding the Costs of Sovereign Default: American State Debts in the 1840's" American Economic Review 86 (March 1996): 259-275.

Further reading: Philip Lane and Gian Maria Milesi-Ferretti, "The External Wealth of Nations: Measure of Foreign Assets and Liabilities for Industrial and Developing Countries," International Monetary Fund Working Paper WP/99/115, August 1999.

February 14: Investment and Debt Repayment, Moral Hazard and Debt, Bargaining and Debt:

Main Readings: OR: 379-88, 407-17, 419-22 (appendix A)

J. Bulow and K. Rogoff, "A Constant Recontracting Model of Sovereign Debt," Journal of Political Economy 97 (February 1989), 155-78.

Mikhail Klimenko, "Trade Interdependence and the Evolution of the International Financial Institutions' Role in Rescheduling Sovereign Debt" mimeo, UC San Diego, November 2000.

Supplementary Reading: Lane, Philip, "Empirical Perspectives on Long-Term Debt," mimeo, Trinity College, Dublin.

 Further reading: Andrew Warner (1992), "Did the debt crisis cause the investment crisis?" Quarterly Journal of Economics 107 (November): 1161-86.


February 19: President's Day. No class. 


3. Speculative Attacks on Exchange Rates

Again, this is a booming literature and we will be able to cover only certain aspects of it.

February 21: Basic models and empirical issues: Salant-Henderson-Krugman model, multiple equilibria ("generation 2") models, empirical anomalies:

Main Readings: OR, pp. 558-67, 576-78, 648-653.

Pastine, Ivan, "Speculation and the Decision to Abandon a Fixed Exchange Rate Regime," mimeo, Bilkent University, December 2000.

Supplementary Readings: Ilan Goldfajn and Rodrigo Valdes, "Are Currency Crises Predictable?", European Economic Review 42(1998), 873-85.

Graciela Kaminsky and Carmen Reinhardt, "The Twin Crises: The Causes of Banking and Balance of Payments Problems," American Economic Review 89, June 1999, 473-500.

Pierre-Olivier Gourinchas, Rodrigo Valdes, and Oscar Landerretche, "Lending Booms, Some Stylized Facts," mimeo, Princeton University.


February 26: Extensions of Generation 1 models and Generation 3 models:

Main Readings: Roberto Chang and Andres Velasco, "A Model of Financial Crises in Emerging Markets," forthcoming, Quarterly Journal of Economics.

Phillippe Aghion, Philippe Bacchetta, and Abhjit Banerjee, "Capital Markets and Instability of Open Economies," mimeo, Harvard University, November 2000.

Supplementary reading: Roberto Chang and Andres Velasco, "Liquidity Crises and Emerging Markets: Theory and Policy" Federal Reserve Bank of Atlanta WP 99-15, NBER Macroeconomics Annual 1999, pp. 11-58. 

"Fire-Sale FDI, by Paul Krugman, mimeo, MIT, Feb. 1998

Phillippe Aghion, Philippe Bacchetta, and Abhjit Banerjee, "A Simple Model of Monetary Policy and Currency Crises" European Economic Review 44(4-6), 2000, 728-738.

Phillippe Aghion, Abhjit Banerjee and Thomas Piketty, "Dualism and Macroeconomic Volatility," Quarterly Journal of Economics 114(4), November 1999, 1359-1397.

Further readings: Enrica Detriagache, "Bank Fragility and International Capital Mobility," International Monetary Fund Working PaperWP/99/113, August 1999.


February 28: Contagion:

Main Reading: Reuven Glick and Andrew K. Rose, "Contagion and Trade: Why are Currency Crises Regional?" Journal of International Money and Finance 18(4) 1999, 603-617.

Supplementary Reading: Forbes, Kristin J., "Are Trade Linkages Important Determinants of Country Vulnerability to Crises? NBER WP# W8194, March 2001.


March 5: Towards a new financial architecture:

Main Readings: Stephen Morris and Hyun Song Shin, "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," American Economic Review 88 (June 1998), 587-97.

See also the correction to Morris and Shin's theorem 2 (and the answer to problem set 2) in Frank Heinemann, "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks: Comment," American Economic Review 90 (March 2000), 316-18.

Kenneth Rogoff, "Institutions for Reducing Global Financial Instability," Journal of Economic Perspectives 13, Fall 1999, 21-42. Also NBER Working paper 7265, July 1999.

Further Reading: Olivier Jeanne, "Debt Maturity and the Global Financial Architecture," CEPR Discussion Paper No. 2520, August 2000.

4. New Open Economy Macroeconomics

In recent years, there has been a surge of research on sticky-price international macroeconomics models with microfoundations for intertemporal choice. These models have completely supplanted the older Keynesian frameworks in academic research, and are beginning to supplant such models in policy research as well. (For some flavor of the scope or recent research, see Brian Doyle's New Open Economy Macroeconomics Homepage)

March 7: Main Reading: OR, chapter 10

Supplementary Application: Paola Caselli, "Fiscal Consolidations under Fixed Exchange Rates," European Economic Review.45 (2001), 425-450.

Supplementary Reading: See also Brian Doyle's New Open Economy Macroeconomics Homepage

Further reading: Philip Lane, "The New Open Economy Macroeconomics: A Survey," CEPR Discussion Paper #2115, March 1999, revised version forthcoming in the Journal of International Economics 2001

March 12: Main Reading: Maurice Obstfeld and Kenneth Rogoff, "New Directions in Stochastic Open Economy Models," Journal of International Economics 48 (February 2000), 117-153. Also NBER WP 7313.

Maurice Obstfeld and Kenneth Rogoff, "Do We Really Need a New Global Monetary Compact?" NBER Working Paper 7864, May 2000.

Supplementary Readings: Maurice Obstfeld and Kenneth Rogoff, "Risk and Exchange Rates," July 1998, NBER Working Paper 6694, August 1998.

Philippe Bacchetta and Eric van Wincoop, "Does Exchange Rate Stability Increase Trade and Capital Flows?" (September 1999), American Economic Review, 90, December 2000, 1093-1109.

Corsetti, Giancarlo and Paolo Pesenti, "Welfare and Macroeconomic Interdependence" Quarterly Journal of Economics, forthcoming.

First Short Report due. 


March 14: Persistence and real exchange rate changes:

Main Readings: V.V. Chari, Patrick Kehoe, and Ellen McGrattan, "Can Sticky Prices Generate Volatile and Persistent Real Exchange Rates?" mimeo, Federal Reserve Bank of Minneapolis, revised October 2000.

Supplementary Reading: Paul Bergin and Robert Feenstra, "Pricing to Market, Staggered Contracts, and Real Exchange Rate Persistence," NBER Working Paper 7026, revised February 2000.

For further background reading, see also Paul Bergin and Robert Feenstra, "Staggered Price Setting and Endogenous Persistence," Journal of Monetary Economics. 45, June 2000, 657-680.

March 19: Based on papers covered in short reports

Main Reading: Clarida, Richard, Gertler, Mark, and Jordi Gali, "Optimal Monetary Policy in Open versus Closed Economies: An Integrated Approach," mimeo, New York University, January 2001.


March 21: Based on papers covered in short reports

Main Reading: Devereaux, Michael, and Charles Engel, "Monetary Policy in an Open Economy Revisited: Price Setting and Exchange Rate Flexibility," and "Appendix," mimeo, University of Wisconsin, October 2000.


March 26, 28: Spring recess


5. Empirical Exchange Rate Issues

April 2: : The Purchasing Power Parity Puzzle and Deviations from the Law of One Price:

Main Readings: Charles Engel, "Accounting for US Real Exchange Rate Changes," Journal of Political Economy 107, June 1999, 507-538. This paper is part of a broader program of research that shows that price arbitrage across countries is empirically remarkably limited, with no obvious difference between the behavior of traded versus nontraded goods prices.

Kenneth Rogoff, "The Purchasing Power Parity Puzzle," Journal of Economic Literature 34, June 1996, 647-68.

Supplementary Readings: Charles Engel and John Rogers, "How Wide is the Border," American Economic Review, 86, December 1996, 1112-1125.

Pierre-Olivier Gourinchas, "Exchange Rates and Jobs: What Do We Learn from Job flows?" NBER Marcoeconomics Annual, 1998, 153-208.

Kenneth Froot and Kenneth Rogoff, "Perspectives on PPP and Long-Run Real Exchange Rates," in Handbook of International Economics vol. 3, Gene Grossman and Kenneth Rogoff (eds.), (Amsterdam: Elsevier Science Publishers B.V., 1995): 1647-88. NBER Working Paper 4952.

Penny K. Goldberg and Michael Knetter, "Goods Prices and Exchange Rates: What have we Learned?" Journal of Economic Literature 35 (September 1997): 1243-72.

Alan M. Taylor, "Potential Pitfalls for the Purchasing-Power-Parity Puzzle? Sampling and Specification Biases in Mean-Reversion Tests," NBER Working Paper No. 7577, February 2000.


April 4: Main Reading: Maurice Obstfeld and Kenneth Rogoff, "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?" forthcoming in Ben Bernanke and Kenneth Rogoff (eds.), NBER Macroeconomics Annual 2000 (Cambridge: MIT Press). Also NBER Working Paper 7777, July 2000.


6. Currency Unions

April 9: Main Reading: Maurice Obstfeld and Kenneth Rogoff, "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?" forthcoming in Ben Bernanke and Kenneth Rogoff (eds.), NBER Macroeconomics Annual 2000 (Cambridge: MIT Press). Also NBER Working Paper 7777, July 2000.


April 11: Andrew Rose, "One Money, One Market: Estimating the Effects of a Common Currency on Trade," mimeo, UC Berkeley, February 2000.  Economic Policy vol. 0, 2000, 7-33. Rose finds that the effects of currency unions on trade are remarkably large, on the order of 300 percent.



7. Implications of Market Segmentation

April 16: Main Readings: Helene Rey and Richard Portes, "The Determinants of Cross-Border Equity Flows: The Geography of Information," NBER Working Paper 7336, revised January 2000.

Sebnem Kalemli-Ozcan, Bent E. Sorenson, and Oved Yosha, "Risk sharing and Industrial Specialization: Regional and International Evidence," CEPR Discussion Paper 2295 (November 1999).

Supplmentary reading: Phillipe Martin and Helene Rey, "Financial Supermarkets: Size Matters for Asset Trade." CEPR Discussion Paper 2232, revised February 2001. 


April 18: Main Readings: The lectures will cover pages 319-332, 478-481, 579-584 in OR, but you are strongly recommended to read all of chapter 5 if you have not done so previously.

Supplementary Reading: Steven J. Davis, Jeremy Nalewaik, and Paul Willen, "On the Gains to International Trade in Risky Financial Assets," NBER Working Paper 7796, July 2000.

Further readings: Marianne Baxter, Urban Jermann, and Robert King "Nontraded goods, nontraded factors and international nondiversification," Journal of International Economics 46, March 1998. (The link here is to NBER Working paper 5175, 1995.)
Karen Lewis (1996), "What can explain the apparent lack of consumption risk sharing?" Journal of Political Economy 104 (April): 267-97.
Karen Lewis, "Trying to Explain Home Bias in Equities and Consumption," Journal of Economic Literature 37 (June 1999), 571-608.

April 23: (Special lecture on speculative attacks) Main Reading: Roberto Chang and Andres Velasco, "Financial Fragility and the Exchange Rate Regime," Journal of Economic Theory, 92(1), May 2000, 1-34.  

Handout: Notes on Velasco.

Second Short Report Due


April 25: Main Reading: Alesina, Alberto, and Robert Barro, "Currency Unions," mimeo, Harvard University.


April 30: Mail Reading: Andrew Rose and Eric van Wincoop "National Money as a Barrier to Trade: The Real Case for Currency Union," presented at the 2001 American Economic Association meetings.


May 2: Main Reading: Charles Engel, "Accounting for U.S. Real Exchange Rate Changes," Journal of Political Economy, June 1999.

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