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15.012

Applied Macro- and International Economics

3-0-6 units · Graduate

Explores the macroeconomic environment in which firms operate. Aims to provide a strong foundation in macroeconomic concepts and apply them to understand specific country experiences. Introduces the basic tools of short-run macroeconomic management, primarily monetary and fiscal policy, utilizing historical case studies and modern policy discussions as context. Explores drivers of long-term growth, examining the cases of economic miracles and productivity slowdowns in developed economies, and then delves into the fundamental theory of trade, applying it to the discussions of global trade wars and trade agreements.

Spring 2011

Topics

  • Introduction and the money multiplier via babysitters
  • Germany and Zimbabwe: Monetary policy and the velocity theory of money
  • The IS-LM model
  • Japan, Ireland, and the Great Depression: Applications of the IS-LM model: Fiscal policy and the Great Depression
  • AD-AS and long run adjustment: The connection to inflation
  • Central bank accounting
  • World through inflation
  • Banking crisis and accounting
  • Theories of nominal exchange rates: Short-run and long-run
  • Fiscal currency crises (GAME: Greece, Argentina, Mexico, and Everyone else)
  • Self-fulfilling currency crises (MIT: Malaysia, Indonesia, and Thailand)
  • Exchange-rate regimes
  • Capital controls, exchange rate regimes, and unemployment: The unholy trinity
  • US financial crisis
  • Debate 1: The international role of the dollar
  • Debate 2: The Euro
  • Introduction to development economics

Readings

  • A series of case studies are required readings for the course. Additional case studies and textbook chapters are suggested as optional readings. The following texts are recommended:
    Listed reading
  • [MFS] = Mankiw, N. Gregory, and Laurence Ball. Macroeconomics and the Financial System . Worth Publishers, 2010. ISBN: 9781429253673.
    Listed reading
  • [M] = Mankiw, N. Gregory. Macroeconomics . 7th ed. Worth Publishers, 2009. ISBN: 9781429218870.
    Listed reading
  • [KOM] = Krugman, Paul R., Maurice Obstfeld, and Marc Melitz. International Economics: Theory and Policy . Prentice Hall, 2011. ISBN: 9780132146654.
    Listed reading
  • “Money and Inflation.” Chapter 4 in [M].
    Recommended
  • “Price Levels and the Exchange Rate in the Long Run.” Chapter 15 in [KOM].
    Recommended
  • Moss, David A., and Julio J. Rotemberg. “German Hyperinflation of 1923.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-798-048, January 5, 1998.
    Required
  • Wells, Wyatt, and David A. Moss. “Note on Money and Monetary Policy.” Harvard Business School Note. Harvard Business School Publishing. Note: 9-797-094, January 24, 1997.
    Recommended
  • “Aggregate Demand I: Building the IS-LM Model.” Chapter 10 in [M].
    Recommended
  • “Aggregate Demand II: Applying the IS-LM Model.” Chapter 11 in [M].
    Recommended
  • McCraw, Thomas K. “Great Depression: Causes and Impact.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-391-258, July 3, 1991.
    Required
  • Kanno, Akiko, and Laura Alfaro. “Kinyuseiksaku: Monetary Policy in Japan.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-708-017, January 8, 2008.
    Required
  • Kennedy, Robert E. “National Income Accounting.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-797-075, November 15, 1996.
    Recommended
  • “National Income: Where It Comes From and Where It Goes.” Chapter 3 in [M].
    Recommended
  • “Output and the Exchange Rate in the Short Run.” Chapter 16 in [KOM].
    Recommended
  • Kennedy, Robert E. “Fiscal Policy: Managing Aggregate Demand.” Harvard Business School Note. Harvard Business School Publishing. Note: 9-797-076, January 15, 1997. Revised March 30, 1998.
    Required
  • “Introduction to Economic Fluctuations.” Chapter 9 in [M].
    Recommended
  • “Investment.” Chapter 18 in [M].
    Recommended
  • “The Data of Macroeconomics.” Chapter 2 in [M].
    Recommended
  • “Banking.” Chapter 18 in [MFS].
    Recommended
  • “Money, Interest Rates, and the Exchange Rates.” Chapter 14 in [KOM].
    Recommended
  • “Price Levels and the Exchange Rate in the Long Run.“Chapter 15 in [KOM].
    Recommended
  • Di Tella, Rafael, and Eliseo Neuman. “Menem and the Populist Tradition in Argentina.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-700-061, March 21, 2000.
    Required
  • Di Tella, Rafael, and Ingrid Vogel. “2001 Crisis in Argentina: An IMF-Sponsored Default? (A).” Harvard Business School Case. Harvard Business School Publishing. Case: 9-704-004, October 27, 2003.
    Required
  • “Financial Crises.” Chapter 19 in [MFS].
    Recommended
  • “Developing Countries: Growth, Crisis, and Reform.” Chapter 22 in [KOM].
    Recommended
  • Alfaro, Laura, Rafael Di Tella, and Renee Kim. “Chronology of the Asian Financial Crisis.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-708-001, February 8, 2008.
    Required
  • Pill, Huw, Rafael Di Tella, and Jonathan Schlefer. “Financial Crisis in Asia: 1997-1998 (Abridged).” Harvard Business School Case. Harvard Business School Publishing. Case: 9-709-004, October 31, 2008.
    Required
  • Pill, Huw. “Responding to the 21st Century Financial Crisis.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-798-090, April 13, 1998.
    Recommended
  • Di Tella, Rafael, and Ingrid Vogel. “Exchange Rate Regimes.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-704-038, May 5, 2004.
    Required
  • “The Open-Economy Revisited: The Mundell-Fleming Model and the Exchange-Rate Regime.” Chapter 12 in [M].
    Recommended
  • “The International Monetary System, 1870-1973.” Chapter 18 in [KOM].
    Recommended
  • “Macroeconomic Policy and Coordination Under Floating Exchange Rates.” Chapter 19 in [KOM].
    Recommended
  • Abelal, Rawi, and Laura Alfaro. “Capital Controls.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-702-082, April 3, 2002.
    Required
  • Alfaro, Laura, Rafael Di Tella, Ingrid Vogel, and Matthew Johnson. “U.S. Current Account Deficit.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-706-002, July 6, 2005.
    Required
  • 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.
    Required
  • “The Global Capital Market: Performance and Policy Problems.” Chapter 21 in [KOM].
    Recommended
  • Kennedy, Robert E., and Katherine Marquis. “China: Facing the 21st Century.” Harvard Business School Case. Harvard Business School Publishing. Case: 9-798-066, February 13, 1998.
    Required

Prerequisites & course information

Prereq: None G (Fall) 3-0-6 units

Sources