Darryl Mcleod

Fordham Department of Economics

ECON 5450

ECON 5450     Crises, Adjustment and Poverty  Spring 2018 Dealy 202 7:30 to 9;30 pm Syllabus 2018

 See the class calendar for updates Final Exam 4.3  and GFSNs   

Formatting  WBVC PowerPoint Guidelines  (note 20 point min font!)

Currency Crises Notes      IT Approaches Lecture   IMF Migrants as buffer

 ZMB Dallas Fed   IMF DSA Course   Sustainable Debt   Graduating to make Austerity    Nominal fx rate figure  (interactive) 

Course description: Though the 2008 Global Financial Crisis hit OECD countries hard, most developing countries more or less grew right through the crisis.  This was partly because commodity prices remained high and partly because the IMF and G-20 set up flexible credit lines and adjustment funds (neither of which were needed, which does not mean they were not helpful).  Swap lines between Central Banks also proved very helpful in Korea and Mexico for example.   However the main focus of this course is how developing countries affected by the Latin American and Asian cries of the 1990s have developed better policies for managing crises and in particular for protecting the poor.  These countries have developed a transfer programs and a macroeconomic tools to help them adjust to external shocks without traditional IMF austerity programs.   This capacity for “socially responsible macroeconomics” or what UNICEF calls “adjustment with a human face” strives to protect the poorest groups from the austerity programs imposed by the IMF (or their fellow union members in the case of Greece or Puerto Rico). There are some counter-cyclical policies and recently a good number of developing countries have either “graduated” or are on the “road to redemption” in that they have considerable reserves or Sovereign wealth funds (SWF) or prearranged swap lines with Central Banks or IMF prearranged “flexible credit lines” (FCLs) to draw on more or less unconditionally (Poland, Colombia and Mexico for example).  With center-right governments assuming power in Argentina, Brazil and Peru and a number of Latin American countries pursuing the Pacific Alliance (not to be confused with the TPP) the BRICS have become “havens” of globalization, inflation and positive real interest rates.  As newly elected President Macri said in June, post Brexit, “the world is a mess, invest in Argentina…”).  See the course calendar for additional course information updated as the course proceeds. Sachs&Larraine Chapt 6  Lecture 1 notes.  Traditional Approaches   PS#2 1015   PS3 S2016

*see also this web page for office hour updates. USDA RERs   IMF History  Abe Economics 2014   Japanese Yen 10 years   China Daily

Requirements: The midterm and final exam account for 60% of the course grade (25% and 35%). Several problem sets (20%) and a crisis and adjustment case study/presentation or blog entry account for the remaining 40% of the course grade. The weight of the take-home midterm is reduced when you present or post your cast study online discussion (20 minutes with PowerPoint) before the in-class final exam.  Most readings for problem sets and the exams are included as hyperlinks in the online discussion questions and on the exams themselves, so always read the questions before you do the readings, use the questions to focus your readings.  

 Office Hours: Wed 7:30-9:30pm; Monday 4:5pm or by appointment. My office is E-527 Dealy, but check in E-530 Dealy Wednesday (next door) always confirm a meetings by same day email at mcleod@fordham.edu by text at 914 661-6998 always put ECON 5450 in the email subject line or text.   

Recommended Masters level texts students:

Montiel, Peter (2011) Macroeconomics in Emerging Markets, 2nd ed. Cambridge Univ Press, $32 Kindle, 0521733049

World Bank LAC (2012) Latin America Copes with Volatility: the Dark Side of Globalization, World Bank,

Open Publication,  Presentation,  general information, Chief Economist’s reports.

Sachs J.G. & F. Larraine or S&L (1993) Macroeconomics in a Global Economy, Prentice-Hall. Chapt 6 &

         20-23 provide a comprehensive and accessible review of open economy macroeconomics. 0131022520

Recommended PhD texts:

Agénor, Pierre-Richard and Peter Montiel, (2015) Macroeconomics for Developing Countries, 4th edition,  $72 Kindle Princeton University Press, defines the field of emerging market macroeconomics, but does  not integrate models or teach (Intro and Chapter 1 ) useful review of the literature, 0691165394    

 Agénor, Pierre-Richard (2004)  Adjustment and Growth 2nd edition (not 1st ed) HUP, 0674015789 Introduction  (also used for ECGA 6470 Growth and Development)

Frankel, J. and A. Razin (1996) Fiscal Policies and Growth in the World Economy, 3rd ed. MIT Press Simple elegant integrated presentation of intertemporal current account dynamics Chapters 5 & 21.

Obstfeld and Rogoff (1998) Foundations International Macroeconomics, Chapt 1 and Chapt 9, MIT Press excellent open-economy macro text  mainly toward OECD countries

Uribe, Martın & Stephanie Schmitt-Grohé, 2016 “Open Economy Macroeconomics” in preparation for publication by Princeton University Press, pdf July 2016.

Vegh, Carlos A. (2013) Open Economy Macroeconomics in Developing Countries, MIT Press, 026201890X

Recommended empirical and crisis readings:  

Baldwin, Richard and Francesco Giavazzi (2015) The Eurozone Crisis A Consensus View of the Causes and a Few Possible Remedies A VoxEU.org eBook CEPR Press, London 978-1-907142-88-8.

Krugman, P. (2012) End this Depression now!, WW Norton, NY $9.5 Kindle, $15 paper, read intro, 0393088774

Krugman (2009) The return of Depression Economics and the Crisis of 2008, WW Norton, 0393337804

Kindle $10, paper $11.

Reinhart, Carmen M. and Kenneth Rogoff (2009) This Time Is Different: Eight Centuries of Financial Crisis

($13 paper or $9 Kindle) Princeton University Press, Princeton, NJ, read first few chapters free online.

Kindleberger, Charles P. and R Z Aliber (2011) Manias, Panics & Crashes, 6th ed, $13.6 kindle, Palgrave Macmillan, Chapt 13.

Binder, Alan (2013).  After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead,

Penguin HC 1594205302, $12 kindle (selected chapters)

Tirole, Jean (2002) Financial Crises, Liquidity and the International Monetary System, Princeton Univ. Press

Eichengreen, Barry (2002) Financial Crises and What to do about them, Oxford U. Press 019257442 (paper)

Books: PhD students doing research will need Uribe, Martın & Stephanie Schmitt-Grohé, 2016 “Open Economy Macroeconomics“Agenor 2004 and Angenor and Montiel (2015) 4th edition Masters students will find Montiel (2011) and Sachs and Larraine (1993) provides a complete introduction and overview of key models discussed in this class. We use selected readings and articles.            

Topics outline Fall 2016: 

  1. How emerging markets avoided global deflation and stagnation?  How did developing countries largely escape the 2008 crisis, until the 2013 Taper Tantrm at least…. Why has recovery taken so long in Greece? Did global current account “imbalances” cause or contribute to the global financial crisis? Why is this crisis different?
  2. Key models or tools adjustment: When capital flows into or out of a small open low income country, what can it do? Classical and modern approaches to balance of payments adjustment give us some ideas…. heterodox vs. orthodox stabilization policies, financing public expenditure with helicopter money drops (AbeEconomics for example)
  3. Protecting the Poor: social budgeting distributional impacts of crisis on poverty and inequality.
  4. Currency and banking crises: twins or just fellow travelers?
  5. The role of the IMF, the UN and the World Bank in mitigating crises (and now self-insurance & CAF…).
  6. Managing Foreign Aid: post-conflict, post-disaster and during health crises.
  7. Private Capital flows to poor countries: boon or bane? The case for capital controls or transaction taxes.
  8. Turning adversity to advantage: the Political economy of crises: are crises opportunities for reform?

 Readings by topic

Topic 1 What caused the GFC, why has recovery taken so long?  Krugman (2009) return of depression economics, pages 1-24  and Chapter 10 and Rheinhart& Rogoff (2009) Chapter 1  Krugman (2011) End this Depression Now, Introduction and Chapter 10 and how to end this Depression (NY Review of Books) *Woodford, Michael. 2011. “Simple Analytics of the Government Expenditure Multiplier.” American Economic Journal: Macroeconomics,3(1):1-35.    Gorton, Gary, and Andrew Metrick. 2012. “Getting Up to Speed on the Financial Crisis: A One-Weekend-Reader’s Guide. Spanish.  Journal of Economic Literature 50 (March): 128–50.

Consequences of the 2008 crisis for the poor (round I and II) World Bank The State of nets for the poor 2015   World Bank Global Monitoring Report: factsheet on impact of global crisis on poor  UNICEF Ronald Mendoza (2009) Aggregate Shocks, Poor Household and Children: Transmission  Channels and Policy Responses  LDCs avoid serious crisis: G-20 increases IMF Lending to $1 trillion

Commanding Heights Episode 2 The Agony of Reform Latin America at 19:38 Chile and Bolivia at 48:36  Episode 2 Transcript 

Chapters

 Episode 3 Transcripts for Video, see video below of Thailand for example see minute 7;13
  1. Chapter 1: Prologue [6:14]
  2. Chapter 2: The Global Idea [3:52]
  3. Chapter 3: NAFTA: The First Test [5:28]
  4. Chapter 4: Crossing Borders [3:30]
  5. Chapter 5: The Global Market [3:48]
  6. Chapter 6: Emerging Market Hunters [5:01]
  7. Chapter 7: Averting a Meltdown: 1994 [4:56]
  8. Chapter 8: The Global Village [6:47]
  9. Chapter 9: China and the Tigers [5:35]
  10. Chapter 10: The Japanese Paradox [3:01]
  11. Chapter 11: Global Contagion Begins [7:55]
  12. Chapter 12: Contagion Engulfs Asia [7:13]
  13. Chapter 13: Russia Defaults [2:31]
  14. Chapter 14: The Crisis Reaches America [7:07]
  15. Chapter 15: The Global Debate [2:49]
  16. Chapter 16: The Battle Joined [5:08]
  17. Chapter 17: Failure at the Summit [4:58]
  18. Chapter 18: The Global Divide [2:33]
  19. Chapter 19: Capitalism Redefined [7:00]
  20. Chapter 20: The Bottom End of Globalism [4:46]
  21. Chapter 21: Changing of the Guard [3:04]
  22. Chapter 22: The Battle Resumed [6:38]
  23. Chapter 23: 9/11 [4:27]

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