The Balance of Payments: Equilibrium and Adjustment (Wed., Aug. 20-Mon., Aug. 25)1 Kansas State University Department of EconomicsAdvanced International EconomicsEconomics 823Fall 2003E. W. Nafziger ([email protected])12:30-1:45 MW,Waters 329Office hrs: 3:30-4:20 MW, 1:30-2:20 F, or appointment,Waters 312 (no office hours October 15)I will calculate your semester grade by weighing the mid-term examination one unit, your classpresentations based on a research paper (see last section) one unit, and your final examination oneunit (old exams are at http://www.ksu.edu/economics/nafwayne/class.htm). Additionally, I willraise your semester numerical score if you make an excellent contribution to class. RELATIONSHIP OF THE COURSE TO OTHER INTERNATIONAL ECONOMICSCOURSESThe prerequisite for this course is Economics 681 or equivalent. The course does not cover thesame ground as, but is complementary to, International Economics (Economics 681),International Trade Theory and Policy (Economics 981), and International Markets andAgricultural Trade (Agec 840). The major objective of the course is to help students acquire an analytical framework to examinecontemporary international economic issues, such as the global (especially Asian, Latin, and Russian)financial crisis, international adjustment and reform in developing and transitional economies, U.S.-Japanese bilateral economic relationships, trade and income distribution, regional economicintegration, the international monetary system, the U.S. balance of payments problem, andglobalization. The goal is to provide students with the background, experience, and tools forfuture analysis of international economic problems and policies. REQUIRED MONOGRAPHSEconomics 823: Advanced International Economics: Professor E. Wayne Nafziger. Fall 2003. Eisenhower 11 (Eis) packet.C. Fred Bergsten & John Williamson, eds., Dollar Overvaluation and the World Economy (Washington: Institute for International Economics, 2003). ISBN paper 0-88132-351-9.Morris Goldstein, Managed Floating Plus (Washington, D.C.: Institute for International Economics, 2002). ISBN 0-88132-336-5. $16Dani Rodrik, Has Globalization Gone too Far? (Washington D.C.: Institute for International Economics, 1998). ISBN 0-88132-241-5. Michael Mussa, Argentina and the Fund: From Triumph to Tragedy (Washington, D.C.: Institute for International Economics Analyses in International Economics 67, July 2002). ISBN 0-88132-339-x.2William R. Cline, Trade and Income Distribution (Washington D.C.: Institute for International Economics, 1998). ISBN 0-88132-216-4Institute for International Economics monographs are at the bookstore or at www.iie.com/.PLAGIARISMPlagiarism: University policy is: “Plagiarism and cheating are serious offenses and may be punishedby failure on the exam, paper, or project; failure in the course; and/or expulsion from the university.”For more information refer to “Academic Dishonesty,” http://www.ksu.edu/uauc/fhbook/fhxf.html.REQUIRED READING ASSIGNMENTSThe Balance of Payments: Equilibrium and Adjustment (Wed., Aug. 20-Mon., Aug. 25)Peruse U.S. President, Council of Economic Advisors, Economic Report of the President, 2003,pp. 3-4, 15-25, 45-51, 59-63, 132-34, 208-11, 213-55, 394-402 (with emphasis on examiningUS’s international position in context), http://www.access.gpo.gov/eop/ or govt publicationsoffice, Hale Library, 3rd floor, for Monday, August 25, 2003. Lecture will focus on meaning andconcepts pertaining to the balance of payments, especially that of the US. Is the U.S. Trade Deficit Sustainable? Is the Dollar Overvalued or Undervalued SinceBergsten and Williamson wrote their book, the dollar has devalued, necessitating an extention ofFigure 3.5, p. 69. Nevertheless, issues concerning the U.S. current account deficit and valuationof the dollar are still current.Catherine L. Mann, “Is the U.S. Trade Deficit Sustainable?” Finance and Development 37(1) March 2000), http://www.imf.org/external/pubs/ft/fandd/2000/03/mann.htm. C.Fred Bergsten and John Williamson, “Overview,” in Bergsten & Williamson, Dollar Overvaluation and the World Economy, pp. 1-13.Jim O’Neill, “Features of a Dollar Decline,” in Bergsten and Williamson, pp. 15-34. Michael R. Rosenberg, “The Dollar’s Equilibrium Exchange Rate: A Market View, in Bergsten and Williamson, pp. 35-56.Catherine L. Mann, “How Long the Strong Dollar?” in Bergsten and Williamson, pp. 57-79.I.M. Destler, “The Dollar and US Trade Politics,” in Bergsten and Williamson, pp. 77-79.Martin Neil Baily, “Persistent Dollar Swings and the US Economy,” in Bergsten and Williamson, pp. 81-134.Thomas I Palley, “The Overvalued Dollar and the US Slump,” in Bergsten and Williamson, pp. 145-63.3Kathryn M. Dominguez, “Foreign Exchange Intervention: Did it Work in the 1990s?” in Bergsten and Williamson, pp. 217-47.The Global Financial Crisis Michael Mussa, Argentina and the Fund: From Triumph to Tragedy (Washington, D.C.: Institute for International Economics Analyses in International Economics 67, July 2002).Frederic S. Mishkin, “Global Financial Instability: Framework, Events, Issues,” Journal of Economic Perspectives 13(4) (Fall 1999): 3-20. The International Monetary System, Exchange Rates, and Reform of the IMF Stanley Fischer, “Globalization and Its Challenges,” American Economic Review 93(2) (May 2003): 1-30, Eis.Anne Krueger, “Sovereign Debt Restructuring: Messy or Messier?” American Economic Review 93(2) (May 2003): 70-74 , Eis.Morris Goldstein, Managed Floating Plus (Washington, D.C.: Institute for International Economics, 2002). ISBN 0-88132-336-5.Stanley Fischer, “Exchange Rate Regimes: Is the Bipolar View Correct,” Journal of Economic Perspectives 15(2) (Spring 2001): 3-24 (or http://www.imf.org/external/np/speeches/2001/010601a.htm).Milton Friedman, "The Case for Flexible Exchange Rates," in AEA, Readings in International Economics (Homewood, Ill.: Irwin, 1968), pp. 413-37, Eis.Joseph E. Stiglitz, “Capital Market Liberalization, Economic Growth, and Instability,” World Development 28(6) (June 2000): 1075-1086, Eis. Sebastian Edwards, “How Effective are Capital Controls?” Journal of Economic Perspectives 13(4) (Fall 1999): 65-84, Eis. Gerard Caprio and Patrick Honohan, “Restoring Banking Stability: Beyond Supervised Capital