ࡱ> lnk .bjbj̵ +Lצצ&%z z ;;;;;OOOO84DOP2^]"ZDT$$P&P&P&P&P&P&PRUU&P;xZZx|&P*;;;P***;;$P*x$P**DJl;; N]yefOK*O<QP0PKFU*UT N* N;Oxxxz :    BROWN UNIVERSITY DEPARTMENT OF ECONOMICS CURRENT GLOBAL MACROECONOMIC CHALLENGES Professor Maria Carkovic Economics 1500 Office: Sayles 016 Fall 2011 E-mail:  HYPERLINK "mailto:Maria_Carkovic@Brown.edu" Maria_Carkovic@Brown.edu Website: @MyCourses Office Hours: Thursdays, 3-4pm, and by appt. TA: Paul Christian. Email: Paul_Christian@Brown.edu COURSE DESCRIPTION This class analyzes current economic challenges around the globe. Topics include monetary and fiscal policies, as well as policies toward exchange rates, and long-run growth. Country and regional cases cover the US and China. Prerequisite: EC 1210. Also recommended: EC 1550 and 1850. GOALS The goal of this class is to review and synthesize the microeconomic and macroeconomic principles developed in other classes and use them to analyze the major economic problems facing industrial and emerging economies. To do so, the class will review theories of long-run economic growth, business cycles, and basic principles in finance. Based on these theories, the class will examine current performance and future economic prospects in the United States and China. In terms of long-run economic growth, the class will analyze how monetary and fiscal policies, as well as institutional arrangements, influence investment, technological change, and growth. In terms of business cycles, the class will examine how central banks and governments influence production, inflation, unemployment and asset markets during economic upswings and downswings. In terms of finance, the class will evaluate the causes and consequences of the ongoing financial crisis. OBJECTIVES On completion of this course, students should be able to: Have an improved understanding of the theoretical underpinning of long-run growth, short-term business cycles, and economic crises. Link world economic problems to economic theory. Evaluate the main macroeconomic problems, by region, in the world economy. Describe the major economic risks going forward. Identify the likely consequences of changes in monetary and fiscal policies on the macroeconomic environment. Assess risks to global growth emanating from phenomena covered in class, such as a banking crisis in a major economy, a dollar fall, a steep rise in technological progress, or a change in healthcare policy. ASSESSMENT 20% of the grade: Problem sets. Due dates will be announced in advance. (see icon on Homework policy in MyCourses) 80% of the grade: Exams. There will be three exams. The exams are individual, will be done in class, with closed books, and on these dates: Monday, Oct. 3, Friday Nov. 4, and Wednesday, December 7. Class participation. I expect class participation from students throughout the semester. An outstanding participant will routinely voice good comments, and always be on time for class. A good participant will occasionally express insightful comments, and be on time for class. I expect you all to be good or exceptional participants. REQUIRED READINGS Required: The Chinese Economy: Transitions and Growth. By Barry Naughton. The MIT Press 2007. Recommended: Macroeconomics. 7th Edition. By N. Gregory Mankiw. Please note that it is not necessary that you buy the latest edition of this textbook. You may use an earlier edition or get the book from the library. Recommended: Krugman and Obstfeld, International Economics, 8th edition. Please note that it is not necessary that you buy the latest edition of this textbook. You may use an earlier edition or get the book from the library. Special Readings posted in MyCourses. Please note that I will update special readings during the semester. Announcements on this will be made in MyCourses. Thus, special readings listed below are tentative. STUDYING FOR THIS CLASS A few words of advice. First, the key to developing the skills necessary to achieve the class goal is to link basic economic principles from different subspecialties and apply them to the complex realities of the world economy. This requires study, reflection, and dedication. Dont fall behind. Catching up will not provide enough thinking time. Second, the link between the recommended readings and class is not always close. The readings are background material. I expect you to read the assigned material beforehand and be prepared for class discussion. The class plan below lists the titles of the lectures and main questions examined. You will learn by reading the material assigned, doing the problems sets, and participating in class discussion. Academic Conduct Statement Your conduct in this course is governed by the  HYPERLINK "http://www.brown.edu/Administration/Dean_of_the_College/academic_code/code.html" Brown Academic Conduct Code, http://www.brown.edu/Administration/Dean_of_the_College/academic_code/code.html . Class Plan I. The United States: Growth, Business Cycle, & Macroeconomic Policies Lecture: Growth Trends in the US: Readings: Mankiw: Chapter 3 (National income) and chapter 7 (Economic growth I) Homework: HW1: The production function and the Solow model Lectures: Ideas The New Economy Readings: Notes on Technology Peter Howitt and David N. Weil,  HYPERLINK "http://www.econ.brown.edu/fac/Peter_Howitt/publication/Economic%20Growth%20Palgrave.pdf" Economic Growth, In The New Palgrave Dictionary of Economics, 2nd Edition, ed. Steven Durlauf and Lawrence Blume, New York: Palgrave Macmillan, 2008. A special report on innovation in emerging markets, the Economist, April 15, 2010 Trucking in Cameroon, The Economist, December 19, 2002 Homework: HW2: Ideas and the new economy Lecture: Business Cycles Lecture: The Federal Reserve Readings: The Federal Reserve System: Purposes & Functions, Overview ( HYPERLINK "http://www.federalreserve.gov/pf/pf.htm" http://www.federalreserve.gov/pf/pf.htm) Homework: HW3: The Federal Reserve Lecture: Monetary Policy Up to the Crisis Readings: Bernanke: Crash course on central banking Bernanke on asset market bubbles Homework: HW4: Monetary policy Lecture: Financial market issues Readings: IMF: Fannie Mae & Freddie Mac Calomiris & Wallison: Blame Fannie Mae and Congress, WSJ 8/23/08 Joe Nocera A mission goes off course, in the NY Times, 8/23/08 The Economist: The Game is Up, 8/16/07 The Economist: Another pounding, 7/12/07 Ross Levine: An Autopsy of US Financial System,  HYPERLINK "http://www.econ.brown.edu/fac/Ross_Levine/other%20files/Autopsy-4-13.pdf" http://www.econ.brown.edu/fac/Ross_Levine/other%20files/Autopsy-4-13.pdf Homework: HW5: Financial markets Lectures: Crisis Monetary analysis Readings: Mankiw, chapter 15 Martin Feldstein: Inflation is Looming on Americas Horizon FT, 4/19/09 Alan Meltzer: Inflation Nation, Op. Ed. 5/4/09 Ben Bernanke: Reflections on a Year of Crisis Jackson Hole Speech, 8/21/09 Ben Bernanke: Monetary Policy and the Housing Bubble, February 2010 Ben Bernanke: Jackson Hole Speech, 8/27/10 Olivier Blanchard et.al. Rethinking Macroeconomic Policies, IMF, SPN/10/3 Homework: HW6: Analytical monetary issues Also, you should be able to do the review questions in Mankiws chapter 15. Lectures: Fiscal Policy Fiscal Policy Now Readings: Mankiw, Chapter 16 Signed, sealed and delivered, The Economist, 3/25/10 Fiscal iceberg The Economist, 9/24/09 Christina Romer, Back from the Brink, Chicago Fed, Sept. 24, 2009 Homeworks: HW7: Fiscal policy, and Fiscal Sustainability Exercise (in excel) II. China: Reform and Growth, and Macroeconomics Lectures on reforms: Bit of history Chinas economic reform Readings: Naughtons book on China: Introduction, and Chapters 3 and 4 Qian Yingyi, and J. Wu: Chinas Transition to Market Economy-How Far across the River?, in Nicholas C. Hope, Dennis Tao Yang, and Mu Yang Li, editors, How Far Across the River: Chinese Policy Reform at the Millennium, Stanford University Press, 2003, pp. 31-63. May 2000. Sachs, Jeffrey & Woo: Reform in China and Russia, Economic Policy, April 1994. Homework: HW8: History and Reforms Lectures on growth: Sources of growth Governance Readings: Sachs, Jeffrey & Woo: Growth in China after the WTO, Journal of Chinese Economic 7 Business Studies, 2002. Krugman, Paul The Myth of Asias Miracle Allen, Franklin, J.Qian and M.Qian: Will Chinas financial system stimulate of impede the growth of its economy? Asia Program Special Report, No.129, July 2005. World Bank: Doing Business in 2011. Naughtons book on China: Chapters 6, 16, 19 Homework: HW9: Growth & Governance Lectures on exchange rates: Fixed exchange rates The yuan peg Readings: Krugman & Obtsfeld, Chapter 17 Homework: HW10: Fixed exhange rates and the yuan Lectures on macroeconomics: Macro-analysis Readings: Prasad, Eswar: Next Steps for China, Finance and Development magazine, IMF, Vol 43, No. 3, September 2005. Dunaway, Steven and E. Prasad: Rebalancing Economic Growth in China, International Herald Tribune, January 11, 2006. Prasad, E. and R. Rajan: Chinas Growth Paradigm. IMF Policy Discussion Paper 06/3. March 2006. Stephen Roach on China (www.project-syndicate.org) Nouriel Roubini on China (www.project-syndicate.org) Homework: HW11: Macro-analysis III. Global imbalances Lecture: Global Imbalances: Readings: Bernanke on the Global Saving Glut. Rajan, R. and A. Subramaniam: Exchange rate flexibility is in Asias Interest, Financial Times, September 26, 2004. Paul Krugman, The Chinese Disconnect, NY Times, 10/23/09 Eichengreen, Barry The G20 and global imbalances, Voxeu.org, June 26, 2011 Reinhart and Rogoff, Financial repression redux IMF Finance and Development, June 2011 Feldstein, Martin, What is next for the dollar? NBER Working Paper 17620, July 2011 Other readings to be posted in MyCourses     PAGE  PAGE 5 +U_  # 7 E b c  7 Ҵƫ٤مممممم}v h;/nhghHhg5 hHhgh;hg5CJaJhgCJOJQJaJ h`hgh>hg0J#jh:hgUmHsHjhgUmHsH h>hghg h;hghg5CJaJh;hgCJaJhgCJaJ**+TU7 d \   !gdg &d P gdggdg$a$gdgLVWXW^_defjmqshj278Žŵ{phh[hu]Xhg>*B*phjhgUhu]XhgCJaJhu]Xhg5CJ\aJhhg5CJaJ hg56hrhgH* hgH*h(Zthg5CJaJh@hg5hYhg5 hg5hShg5hnhg5h;hg5CJaJhghg5CJaJhHhg5CJaJ# wFGHIJKLWXS+ ST  !gdg & Fgdg$$gdggdgT   ^ 3Rq+,E^gdg`gdg $Y`Ya$gdg$p^p`a$gdg dd[$\$gdggdg^g~#$2stq,5DEFOcۮԡԅzoaojhhgUjhhgUhhgKH$aJhhg6]hhg0J\hhg\jhhgU\hhg>*\hhg>*aJ hhg]hhg\] hhghhg>*hhgaJ ho-hghgjhgU%EFc 012\ c 2!!!! "^gdgR`Rgdg ^`gdgS`Sgdg Y^`Ygdggdg  2;QU\2!3!!!!!!!!!"" 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