This web page provides the course outline and access some PDF files that we will use in class.
This page and the resources listed are for UCSB students enrolled in Econ 280B only.
Major announcement and chance in the class will be posted here; please check throughout the quarter.
Annoucements:
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General Information:
The course will survey the principles of international finance and open economy macroeconomics. The main topics are current account dynamics, exchange rate determination, international risksharing, and policy issues in the open economy. Prerequisites are Econ 204A-B.
The main textbook is: Maurice Obstfeld and Kenneth Rogoff: Foundations of International Macroeconomics, MIT Press, 1996.
A brief course description is available in pdf: Course Description
Course Outline and Reading List:
[Priority: • = core readings; others = supplemental]
Part I. Perspectives on Intertemporal Trade and the Current Account
1. The Two-Period Model
• Obstfeld/Rogoff ch.1. [Be prepared to discuss 1.3.1, 1.3.3,
1.4]
2. Small Open Economies
• Obstfeld/Rogoff ch.2.1-2.3.
[Be prepared to discuss 2.1.1, 2.2.1, 2.3.1-2.3.3,
2.3.5]
• Feldstein/Horioka, Domestic
Saving and International Capital Flows, Economic Journal 90, 1980.
[Read sections I-III only]
Glick, R. and K. Rogoff, “Global versus Country-Specific
Productivity Shocks and the Current Account,” Journal of Monetary
Economics 35, February 1995, 159-192. (Online at science direct)
3a. Overlapping Generations and Fiscal Policy
• Obstfeld/Rogoff ch.3.
[Be prepared to discuss 3.2.1-3.2.3 and
3.3.1-3.3.2]
3b. Business Cycles
• Backus/Kehoe/Kydland: International
Real Business Cycles, Journal of Political Economy 1992, 745-775.
Part II. Exchange Rates
4a. Old Theory: PPP, IRP, and Mundell-Fleming
• Obstfeld/Rogoff, ch. 4.1, 8.2, 8.4, 9.2-9.4
[Focus on 8.2.7, 8.4.1.1,
8.4.2, 9.2.1-2)]
4b. Evidence on PPP
• Rogoff, Kenneth, The
Purchasing Power Parity Puzzle, Journal of Economic Literature 34,
June 1996, 647-668.
• Engle, C. and J. Rogers, “How
Wide is the Border?” American Economic Review 86, December 1996, 1112-1125.
5. Real Exchange Rate Models
• Obstfeld/Rogoff, ch.4
[Be prepared to discuss 4.2.1-4.2.3]
6. Exchange Rates and the Current Account
• Obstfeld/Rogoff, The Unsustainable US Current Account Position Revisited, NBER #10869. 2004.
• Gourinchas/Rey: International Financial Adjustment (working paper)
• Dooley, Folkerts-Landau, Garber: An Essay on the Revived Bretton Woods System, NBER #9971.
• FRB St.Louis "Considering the Capital Account"
Part III. International Financial Markets
7. International Risk Sharing and Home Bias
• Obstfeld/Rogoff, ch.5.1-5.3
[Be prepared to discuss 5.1-5.1.6, 5.2.1, 5.2.4, 5.3]
Cole, H. and M. Obstfeld, “Commodity Trade and International Risk Sharing: How Much Do Financial Markets Matter?” Journal of Monetary Economics 28, 1991, 3-24.
• Lewis, Karen, “Trying to Explain Home Bias in Equities and Consumption,” Journal of Economic Literature 37, June 1999, 571-608.
• Baxter, Marianne, and Urban Jermann, “The International Diversification Puzzle is Worse Than You Think,” American Economic Review 87, March 1997, 170-180.
• Gordon, Roger, and Lans Bovenberg, Why is Capital So Immobile Internationally? Possible Explanations and Implications for Capital Income Taxation, American Economic Review 86, December 1996, 1057-1075.
8. Sovereign Risk
• Obstfeld/Rogoff, ch.6.1-6.2
[Be prepared to discuss 6.1.1, 6.2.1]
• Cole, Harold, and Patrick Kehoe, Models of Sovereign Debt: Partial Versus General Reputations, International Economic Review 39, February 1998, 55-70.
• Cole, Harold, and Patrick Kehoe, Self-Fulfilling Debt Crises, Review of Economic Studies 67, 2000, 91-116.
9. Nominal Exchange Rate Models [omitted 2005]
• Mary Finn, An equilibrium theory of nominal and real exchange rate comovement, JME 1999, 453-475.(Online at science direct)
Lucas, R.E., “Interest Rates and Currency Prices in a Two-Country World,” Journal of Monetary Economics 10, 1982, 335-359. (Online at science direct)
• Obstfeld/Rogoff, Exchange Rate Dynamics Redux, Journal of Political Economy 103, June 1995, 624-660.
Obstfeld/Rogoff ch.10
Please send any comments to bohn@econ.ucsb.edu
Comments on the readings, e.g., about their perceived relevance (or
lack of) or degree of difficulty are particularly appreciated.