Macroeconomics for Development

3 Credits · Level: Graduate, Juris Doctor

This course provides an “advanced introduction” to macroeconomic management in emerging and developing countries. We build a simple conceptual model that we use throughout the course to study those countries’ typical macroeconomic problems, the policy solutions available to their governments, and what has happened in practice. We start with the all-important foreign exchange market and its relationship with capital mobility, interest rates, and the money supply. We then examine how monetary, fiscal, foreign exchange, structural, and communication policies affect (or don’t affect) the real economy, in both the short- and long-run. From there, we move to how governments in the developing world can manage shocks—from sudden capital flight to COVID-19 to banking crises—and whether international financial arrangements like currency unions, global bank regulation, and the IMF help or hinder their efforts. Finally, we discuss the long list of macro-financial crises that middle- income and poor countries have suffered during the past three decades and how they tried to overcome them; this discussion is based on student-led presentations of specific country cases. As a key component of the instruction, in this course students will also learn to read the latest macroeconomic data of actual emerging and developing economies—their “vital signs”. During the last half-hour of each class, they will be given a wide-ranging compilation of statistics—from monetary, fiscal, and financial to sectoral, social, and demographic. They will use that information to distill and articulate, in just a few minutes, the macroeconomic “storyline” of the country in question. Towards the end of the semester, the process is reversed: from the vital signs and storyline of an “incognito” case, students will be asked to identify the country in question. Our overall goal is to make students able to engage professionally in macro-financial policy discussions within the context of emerging and developing nations, and to produce a reasoned assessment of why their economic and financial variables react the way they do to government decisions and to events that governments do not control. Those discussions, policies and events can range widely, from “What would happen to the Mexican peso if the US Congress decided to spend an extra trillion dollars in infrastructure?” and “Why did my late Argentine mother, a brilliant macroeconomist who never went to college, keep her life-saving in US dollars inside a shoe-box hidden under her bed?”, to “How come Saudi Arabia can keep its exchange rate fixed while running a huge fiscal deficit, but Egypt can’t?” and “Why couldn’t the government of Maldives respond to the COVID-19 shock with the same kind of fiscal stimulus that India deployed?”