Readings

Study Questions are available for each session to guide your reading. A Textbook Guide is also available to highlight recommended chapters for students who want to augment their knowledge of the material.

SES #	TOPICS	READINGS
1	The issues, short–term and long–term	Kennedy, Robert E. “National Income Accounting.” Harvard Business School Case. Harvard Business School Publishing. Case: 9–797–075, November 15, 1996. Bureau of Economic Analysis. “GDP Growth Accelerates in Fourth Quarter.” U.S. Department of Commerce. (PDF) ———. “GDP and the Economy: Third Estimates for the First Quarter of 2011.” U.S. Department of Commerce, July 2011. (PDF) “World Economic Outlook Update.” International Monetary Fund, June 17, 2011.
2	Determinants of long–term growth	Acemoglu, Daron, Simon Johnson, and James Robinson. “Institutions as a Fundamental Cause of Long–Run Growth.” Chapter 6 in Handbook of Economic Growth, Volume 1A. Edited by Philippe Aghion and Steven N. Durlauf. North Holland, 2006, pp. 388–420. ISBN: 9780444520418. [Preview with Google Books]
3	Exchange rates for emerging markets	Alfaro, Laura, Rafael Di Tella, et al. “China: To Float or Not to Float? (A)” Harvard Business School Case. Harvard Business School Publishing. Case: 9–706–021, March 2, 2006. Rigobon, Roberto. “The BB–NN Model.” (PDF - 1.1MB) Johnson, Simon. “Brace for a Long Recovery From Global Credit Glut: Simon Johnson.” Bloomberg, September 11, 2011.
4	Exchange rates for industrialized countries	Alfaro, Laura, Rafael Di Tella, et al. “U.S. Current Account Deficit.” Harvard Business School Case. Harvard Business School Publishing. Case: 9–706–002, July 6, 2005 Rigobon, Roberto. “Simple Notes on the ISLM Model.” Boone, Peter, and Simon Johnson. “What Next for Greece and for Europe?” The New York Times, September 15, 2011.
5	Banking crises	Moss, David A., and Cole Bolton. “The Federal Reserve and the Banking Crisis of 1931.” Harvard Business School Case. Harvard Business School Publishing. Case: 9–709–040, January 20, 2009.
6	Modern financial crises	Alfaro, Laura, and Renee Kim. “The First Global Financial Crisis of the 21st Century.” Harvard Business School Case. Harvard Business School Publishing. Case: 9–709–057, April 7, 2009. Bernanke, Ben. “The Financial Accelerator and the Credit Channel.” The Federal Reserve, June 15, 2007
7	Japan’s lost decade	Schraede, Ulrike. “Japanese Financial System: From Postwar to the New Millennium.” Harvard Business School Case. Harvard Business School Publishing. Case: 9–700–049, October 20, 1999. Kwak, James. “Japan for Beginners.” The Baseline Scenario, December 21, 2008.
8	Crisis in Asia, 1997–98	Alfaro, Laura, Rafael Di Tella, et al. “Korea: After the 1997 Financial Crisis.” Harvard Business School Case. Harvard Business School Publishing. Case: 9–707–042, March 20, 2007. Johnson, Simon, and James Kwak. “Other People’s Oligarchs.” Chapter 2 in 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. Pantheon, 2010. ISBN: 9780307379054.
9	Who is more prone to crisis now—Europe or the US?	Boone, Peter, and Simon Johnson. “Europe on the Brink.” Peterson Institute for International Economics, Policy Brief 11–13, July 2011. (PDF – 1.6MB)

SES #	TOPICS	STUDY GUIDE QUESTIONS
1	The issues, short–term and long–term	How do we measure economic growth? Does this make sense? What is successful performance in the short–term for the United States? What would you regard as an acceptable growth rate for Western Europe or for an “emerging market” (such as Brazil, China, India, or Russia)? Where are we in the global economic cycle?
2	Determinants of long–term growth	When did countries diverge in income per capita? Which alternative explanations could account for this divergence? How important are savings and investment for growth? What is the role of productivity? How should we think about short–run macro dynamics relative to long–run growth and—for some countries—the failure to sustain growth?
3	Exchange rates for emerging markets	How do macroeconomic dynamics differ for countries that are open to trade? If countries are also open to capital flows, what difference does that make? Should China revalue its currency? Why exactly?
4	Exchange rates for industrialized countries	Is the US current account deficit a “problem”? In what sense? How could the US current account deficit be made smaller? What is your recommendation to US policymakers with regard to the current account deficit?
5	Banking crises	What caused the banking crisis of the 1930s? Could that happen again today? Can expansionary fiscal policy offset the effects of a banking crisis? What is missing from the ISLM model?
6	Modern financial crises	To what extent were “global imbalances” responsible for the crisis of 2008–09? Could “easy” monetary and fiscal policy have played a role in creating the conditions for a crisis? What was the likely role of weak financial regulation?
7	Japan’s lost decade	What was good about the Japanese financial system prior to 1990? What went wrong in Japanese finance after 1990? Why wasn’t macroeconomic policy able to get Japanese growth going again?
8	Crisis in Asia, 1997–98	What caused the financial crisis in Korea? What kinds of reforms did Korea need? What did the IMF propose and why?
9	Who is more prone to crisis now—Europe or the US?	Are modern economies becoming more or less prone to crises over time? Why? What would you recommend to make Europe “safer” in macroeconomic terms? What needs to be done, with regard to macroeconomic policy, in the United States?

The most basic text is Mankiw’s Macroeconomics. Krugman and Obstfeld’s International Economics is more applied to open economy issues, i.e., the focus on this course. King and King’s International Economics and International Economic Policy provides more advanced readings on particular topics (i.e., you need to have a strong grasp of the basics to really benefit from these essays).

[Mankiw] = Mankiw, Gregory. Macroeconomics. 6th ed. Worth Publishers, 2006. ISBN: 9780716762133.

[K&O] = Krugman, Paul, and Maurice Obstfeld. International Economics: Theory and Policy. 7th ed. Addison Wesley, 2005. ISBN: 9780321293831.

[K&K] = King, Philip, and Sharmila King. International Economics and International Economic Policy: A Reader. 4th ed. McGraw–Hill/Irwin, 2004. ISBN: 9780072873337.

None of these three texts are required, and you can do well in the course without looking at them. But for people who like to see more about the underlying theory or just to read more, these books are useful.

The matching between book chapters and topics/class sessions is as follows (keeping in mind that there is overlap and in many of our classes we repeat concepts already covered, as a way to build a broader understanding).

SES #	ASSIGNMENTS	READINGS
1	Global economy	“National Income Accounting and the Balance of Payments.” Chapter 12 in [K&O].
2	Longer–run growth	“Economic Growth I: Capital Accumulation and Population Growth.” Chapter 7 in [Mankiw]. “Economic Growth II: Technology, Empirics, and Policy.” Chapter 8 in [Mankiw]. Rodrik, Dani. “Trading in Illusions.” Chapter 15 in [K&K]. Dollar, David, and Aart Kraay. “Spreading the Wealth.” Chapter 17 in [K&K].
3	Development policies	“Developing Countries: Growth, Crisis, and Reform.” Chapter 22 in [K&O].
3–4	Internal and external balance	“Output and the Exchange Rate in the Short Run.” Chapter 16 in [K&O]. “Fixed Exchange Rates and Foreign Exchange Intervention.” Chapter 17 in [K&O]. Kenen, Peter. “Fixed versus Floating Exchange Rates.” Chapter 23 in [K&K]. Cooper, Richard. “Exchange Rate Choices.” Chapter 24 in [K&K].
4–6	ISLM model and the money multiplier	“Money and Inflation.” Chapter 4 in [Mankiw]. “Introduction to Economic Fluctuations.” Chapter 9 in [Mankiw]. “Aggregate Demand I: Building the IS–LM Model.” Chapter 10 in [Mankiw]. “Aggregate Demand II: Applying the IS–LM Model.” Chapter 11 in [Mankiw].
4–9	Central banks and currency crises	Chiodo, Abbigail J., and Michael T. Owyang. “A Case Study of Currency Crisis: The Russian Default of 1998.” Chapter 31 in [K&K]. Moreno, Ramon. “Learning from Argentina’s Crisis.” Chapter 32 in [K&K]. Spiegel, Mark. “Argentina’s Currency Crisis: Lessons for Asia.” Chapter 34 in [K&K].
7–8	Theories of short–run exchange rate determination	“The Open Economy Revisited: The Mundell–Fleming Model and the Exchange–Rate Regime.” Chapter 12 in [Mankiw]. “Aggregate Supply and the Short–run Tradeoff Between Inflation and Unemployment.” Chapter 13 in [Mankiw]. “Exchange Rates and the Foreign Exchange Market: An Asset Approach.” Chapter 13 in [K&O]. “Money, Interest Rates, and Exchange Rates.” Chapter 14 in [K&O]. Hopper, Gregory P. “What Determines the Exchange rate: Market Factors or Market Sentiment?” Chapter 22 in [K&K].
8	East Asian financial crisis	Radelet, Steven, and Jeffrey Sachs. “The Onset of the East Asian Financial Crisis.” Chapter 33 in [K&K]. Moreno, Ramon. “Capital Controls and Emerging Markets.” Chapter 35 in [K&K].

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Macro and International Economics