Mendoza, Enrique G., Vincenzo Quadrini, and Jose-Victor Rios-Rull, “Financial Integration, Financial Development, and Global Imbalances,” Journal of Political Economy 117 (3) (June 2009), 371-416.Amador, Manuel, Javier Bianchi, Luigi Bocola, and Fabrizio Perri, "Reverse Speculative Attacks," Federal Reserve Bank of Minneapolis, Staff Report 528, May 2016.1 Revised September 13, 2016 Department of Economics, Harvard University Economics 1545: International Financial and Macroeconomic Policy Professor Kenneth Rogoff Time and Place: Fall 2016; M, W, 1-2:30 pm.; Harvard Hall 103 Office Hours: Littauer Center 216. Mondays 4-5 PM, or by appointment Email: [email protected] (N.B. When sending an email pertaining to this course, please put "1545" in the subject header.) Teaching Assistant: Nihar Shah, [email protected] Discussion Sections: T.B.A. (both sections will cover identical material). Staff Assistant: Jane Trahan, [email protected], 496-0062 Overview: This is an advanced international finance and macroeconomics course that uses a mix of theoretical, empirical and policy frameworks to analyze topical problems in international finance. Prerequisites: Economics 1011b (preferably) or 1010b (Knowledge of basic calculus will be assumed.) Background Texts: (On reserve at Lamont Library, and available for purchase at the COOP.) ● Foundations of International Macroeconomics, by Maurice Obstfeld and Kenneth Rogoff, MIT Press, 1996. ● This Time Is Different: Eight Centuries of Financial Folly, by Carmen Reinhart and Kenneth Rogoff, Princeton University Press, 2009, (selected chapters). ● The Curse of Cash, by Kenneth Rogoff, Princeton University Press, 2016 (selected chapters) Readings: Readings can be accessed online or are available on Reserve at Lamont Library. Primary readings are denoted by an * symbol. Supplementary readings will be summarized in class but are not required. Problem Sets: Students are encouraged to work with others on the problem sets, and it is permissible to hand in a single answer sheet for up to three students, with all three receiving the same group grade.2 Course Requirements: Midterm: Wednesday, October 19 (in-class, closed book; but exam will provide most of the basic formulas you might require, to lessen need for memorization). Analytical problems on the exam will closely parallel material covered in problem sets (but will generally require much less algebra), and the essay problem will relate to a central topic covered extensively in class. Final: The final will have a larger essay component than the mid-term. It will draw on the entire course. Short policy paper: You will be asked to write a short policy paper on a topic drawn from a list of questions relating to reform of the international monetary system. A one-page outline of your paper is due Monday morning, 9 am, October 31, and the complete paper is due at 9 am on Monday, November 14. The three policy discussions will be in class on November 21, November 28 and November 30. The papers are intended to be short and succinct—there is an absolute total page limit of 10 double-spaced (12 pt.) pages (roughly 2500 words): Only figures and references are excluded in this limit. The papers do not need to include any formal analytical or econometric analysis; you may write them in a style you find suitable to the question you are addressing. The final exam will include (a choice of) essay questions relating to the paper topics that you and your classmates have chosen. Problems: There will be 3 problem sets, due September 19, October 3 and November 7 October 31 Grades: Problems: 10%, Mid-term: 20%, Final: 35%, Paper: 35% TOPICS I. THE LOW INTEREST RATE PUZZLE AND FINANCIAL REPRESSION *Obstfeld-Rogoff (OR) 285-294 (consumption correlations puzzle, rationale for the representative agent assumption), OR 306-319 (the equity premium puzzle and the low interest rate puzzle), OR 329-332 (how large are the gains from international risk sharing) Barro, Robert J., "Rare Disasters and Asset Markets in the Twentieth Century," Quarterly Journal of Economics, August 2006: 823-866. *Reinhart, Carmen M and M. Belen Sbrancia, "The Liquidation of Government Debt," NBER working paper 16893, March 2011. Economic Policy, 2015. Giovannini, Alberto and Martha de Melo. 1993. "Government Revenue from Financial Repression." American Economic Review, vol. 83, No. 4: 953-963. II. THE LOW INTEREST RATE PUZZLE AND SECULAR STAGNATION *Gordon, Robert. 2015. “Secular Stagnation: A Supply-Side View.” American Economic Review 105 (May), 54-593 *Summers, Lawrence, 2015. “Demand-Side Secular Stagnation,” American Economic Review 105 (May), 60-65. *Rogoff, Kenneth 2016. “Debt Supercycle, Not Secular Stagnation,” in Progress and Confusion: The State of Macroeconomic Policy, Olivier Blanchard, Raghuram Rajan, Kenneth Rogoff and Lawrence Summers (editors), MIT Press, pp. 19–28. Lo, Stephanie, and Kenneth Rogoff. 2015. “Secular Stagnation, Debt Overhang and Other Rationales for Sluggish Growth, Six Years On”. BIS Working Paper 482. Summers, Lawrence, 2016. “Rethinking Secular Stagnation,” in Progress and Confusion: The State of Macroeconomic Policy, Olivier Blanchard, Raghuram Rajan, Kenneth Rogoff and Lawrence Summers (editors), MIT Press. Gordon, Robert J. 2016. The Rise and Fall of American Growth. Princeton, NJ: Princeton University Press III. BANK RUNS AND THE PERSISTENCE OF THE GREAT DEPRESSION *Diamond, Douglas and Philip H. Dybvig, "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy 91(3): 401-19, June 1983. Diamond, Douglas, "Banks and Liquidity Creation: A Simple Exposition of the Diamond Dybvig Model," Federal Reserve Bank of Minneapolis Quarterly, 93(2). *Bernanke, Ben, "Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression," American Economic Review 73 (June 1983): 257-76. Cole, Harold and Lee Ohanian, "New Deal Policies and the Persistence of the Great Depression," Journal of Political Economy, 112(4) August, 2004, 779-816. Shlaes, Amity, The Forgotten Man: A New History of the Great Depression, New York: Harper Books, 2007. Also: International transmission of the Great Depression via flaws in the inter-war gold standard *Obstfeld and Rogoff: pp. 626-630. *Eichengreen, Barry and Jeffrey Sachs, "Exchange Rates and Economic Recovery in the 1930s," Journal of