15.014 | Spring 2016 | Graduate

Applied Macro- and International Economics II


Course Meeting Times

Lectures: 3 sessions / week, 90 minutes / session


The prerequisite for this course is 15.012 Applied Macro- and International Economics for MBAs or 15.015 Macro and International Economics for Sloan Fellows.

Course Overview

This course is the continuation of 15.012 (and 15.015 if you are a Sloan Fellow). The course is divided in three distinct sections. The first one addresses questions of sustainability from a macroeconomic point of view.

In discuss a framework called PROMISE that I am designing. The underlying problem is how can standards of living be improved in a sustainable manner. In this context, sustainability has more than one dimension: (i) obviously sustainability from the environmental and resource use; but also from (ii) social and political; (iii) institutions; (iv) economy and markets; (v) organizations; (vi) relations; (vii) and personal. Growth in standards of living and social wellbeing needs all dimensions to be internally consistent. For example, it makes no sense to grow the economy if that is inconsistent with the environment, nor if it is inconsistent with personal aspirations. We develop a framework where we can study the interactions between all these dimensions and study each dimension in particular. We will use my class notes to develop this framework.

The second part of the course deals with economic policy. Having understood what economies need to do, then the next step is to consider how those actions can be implemented. Questions such as: How to deal with problems and conflicts that arises from international trade? How to deal with corruption and its economic impact? What are the problems of poverty and income distribution? In fact, what are the implications of the actual programs dealing with poverty in different countries and their impact on the environment? How can we design social security systems that are viable? What about health care systems? How to solve the problems of public choice, public goods, externalities, etc.? We will devote a fair amount of time to understand the international and macroeconomic implications of these issues. And how the solutions differ across the globe (and why they differ). In most of the problems highlighted there are welfare gains that can be generated, although they will be rarely fairly distributed among the population. To understand these problems we will rely heavily on simulations, games, and cases.

The last part of the course talks about how technology is changing the macro economy. I will pay attention to three main issues: How technology is changing currencies (cryptocurrencies), how technology is changing the banking and payment system, and how technology is affecting the way statistical offices work (related to my research with Alberto Cavallo on the Billion Prices Project).


The course is a combination of lectures, simulation exercises and cases. The grade is entirely driven by case write-ups. For each case I’ll have some questions that I want to be addressed before class. If the case has no question assigned then no case write-up is required. You have to have a write up for every case that has a question. You should work in teams of three to four. The grade in this course is evenly divided among the 6 total case deliverables.


BBNN Framework
1 PROMISE (Part I)  
2 BBNN: Internal and External Adjustment  
3 Short Run Adjustment: ASAD  
4 Automatic Adjustment and External Account Measurement Case Question 1 due
5 Shocks to BB and NN  
6 Social Peace Line and Political Cycles Case Question 2 due
7 Environmental Restriction Line  
8 Offshoring Exercise Case Question 3 due
Economic Policy
9 Fish Banks and Pareto Efficiency  
10 Market Faillure: Natural Monopolies: Natural Resources  
11 Market Faillure: Crime, Corruption, and Institutions  
12 Market Faillure: Public Goods: Social Security Case Question 4 due
13 Market Faillure: Public Choice: Democracy  
14 Market Faillure: Externalities: Lobsters and Taxes Case Question 5 due
15 Market Faillure: Unaceptable Outcomes: Poverty and Inequality Case Question 6 due
New Technologies
16 New Technologies: Cryptocurrencies  
17 New Technologies: Payment Systems  
18 New Technologies: Economic Measurement  
19 PROMISE (Part II)  
20 Life through Others  

Course Info

As Taught In
Spring 2016
Learning Resource Types
Lecture Notes
Written Assignments
Online Textbook