Intended for

Economists, researchers, and university professors interested in open economy macroeconomics and macroeconomic policies.

Prerequisites

Macroeconomics and finance at an advanced undergraduate level. Analytical treatment will be at the level of “Foundations of International Macroeconomics” by Maurice Obstfeld and Kenneth Rogoff (1996, The MIT Press).

Overview

The global crisis and its aftershocks, particularly in the Eurozone, have raised new questions about the costs and benefits of global financial integration and the role of external imbalances and financial innovation in the generation and propagation of macroeconomic fragility.

This course reviews recent analytical and empirical contributions on the causes of financial turbulence, the mechanisms of transmission across countries, and the policy responses to manage aggregate risk in a financially integrated world. Special emphasis will be given to emerging market economies.

Topics

Financial globalization and macroeconomic fragility. The costs and benefits of globalization. Financial integration and financial turbulence. Global imbalances and their causes. Resolving imbalances: is rebalancing a concern? Real adjustment and financial adjustment.

Bubbles. Varieties of asset bubbles: rational bubbles, beauty contests, behavioral investors. Bubbles and capital flows. Macroeconomic and welfare consequences of bubbles.

Financial crises. The “macroprudential” approach: new views on monetary, fiscal and regulatory policies for financial stability. Is there a role for capital controls?