International Finance, 362, Winter 2006.

Christiano

Miscellaneous Notes:

· Lectures: MW 8:30-9:50am, 102 University Hall.

· My office number is 3246, Arthur Andersen Hall; Phone: 491-8231. Email: l-christiano@northwestern.edu. Office hours: Mondays, 10-11:15am.

· The grades will be determined as follows: homeworks, 15%; midterm, 35%; final, 50%. There will be nine homework assignments. They will be distributed on or before Wednesday of each week, and will be due on Thursday of the following week, in the mail box of Emiliano Pagnotta in the economics department office.

· The midterm is on Wednesday, February 8. The final is on Wednesday, March 15, 12-2pm in the lecture room.

· The textbook for the course is:
     Paul Krugman and Maurice Obstfeld (KO), International Economics, Theory and Policy, Addison-Wesley, seventh edition, 2006.

· Handouts and other readings will be distributed from time to time. They will be put on this web site (see below), and students are responsible for checking it regularly.

· You will get more out of this course if you read the financial press regularly. Also, there is a lot of relevant information on the Web, and I encourage you to look through it. Here is a small sampling of the economic commentary and data that you can find there. The best general commentary is available from the Economist Magazine. See also the New York Times. Nouriel Roubini's web site is a fabulous source of information. Paul Krugman's web site (unfortunately, it is not updated) has numerous interesting commentaries on subjects of interest to this course, as well as links to other relevant sites (see also). Brad DeLong’s web site, http://www.j-bradford-delong.net/ . Speeches of Federal Reserve governors. Also, Dave Altig’s blog is a great read, and it provides links to lots of other interesting web blogs

· Various current articles (articles from previous years).

· Student Email Questions (questions from previous years)

· Exams

Goals.

This course will develop a framework useful for understanding financial flows in the international economy. We will use the framework to understand a number of issues that are of current interest. Perhaps the top international financial issue of our time is the huge United States current account deficit. What does it mean? Why is it happening? Does it pose risks for the US and/or the world economy? Other issues of interest in international finance are the financial crises experienced by nearly 10 emerging market economies in the past decade. These countries experienced between a 7 and 10 percent fall in aggregate output within a year. Understanding what makes an economy vulnerable to an international financial crisis is important if we want to make sure that it does not happen again. We will ask whether alternative exchange rate regimes or dollarization may be helpful. We will ask whether the International Monetary Fund (IMF) and other international financial organizations are part of the solution or part of the problem. We will discuss the debate that raged between the IMF and the World Bank over the proper response by the monetary authority to a financial crisis: should it raise or should it reduce interest rates? Other questions that we will investigate include the reasons, and prospects for, the monetary unification in Europe. We will also investigate various puzzles associated with exchange rates, including the reasons for their apparent excessive volatility.

Lectures:

Lecture 1: Chapter 12 in KO, lecture notes, international monetary fund report, Economist Magazine article.

Lecture 2: Chapters 12 and 13 in KO, lecture notes.

Lecture 3: Chapter 13 in KO, lecture notes.

Lecture 4: Chapter 14 in KO, lecture notes.

Lectures 5 and 6: Chapters 14 and 15 in KO, lecture notes (some notes on the ‘UIP puzzle’)

Lectures 7 – 9: Chapters 15 and 16, lecture notes.

Lecture 10 (and a bit of 11): Chapter 16, lecture notes.

Lecture 11-13: continuation of lecture 10 notes, and lecture 11-13 notes. Chapter 16 in KO. Data for past decade: US, US government purchases and receipts, US versus Euro Area.

Lecture 14: lecture notes and Chapter 17 in KO.

Lecture 15: lecture notes and Chapter 17 in KO.

Lecture 16: lecture notes and Chapter 17 in KO.

Lecture 17: lecture notes and Chapter 17 in KO.

Homeworks:

Hmk #1: questions 1, 2, 3, 5, page 303 in KO, due January 12, noon, in Emiliano Pagnotta’s box, economics department, Anderson Hall.

Hmk #2: questions 1 – 5, page 332 in KO; how much do profits fluctuate in the example of part 1 in lecture 3, when E¹=1.10, E²=1. and E³=0.90?, Due noon, Thursday, January 19 in Emiliano Pagnotta’s box.

Hmk #3: questions 10, 13, 16, page 333 in KO; question 2, 4, page 366 in KO. Due February 26, noon, in Emiliano Pagnotta’s box.

Hmk #4.

Hmk#5.

Hmk#6.

Hmk#7.

Economic Data:

	Nice overview of main aggregate US time series, but not easily downloaded - Economic Report of the President
	Fabulous, downloadable source of US data: Federal Reserve Bank of St Louis
	Lot's of great charts from Dr. Yardeni
	Particularly good for Historical Data - National Bureau of Economic Research
	Downloadable source of US National Income and Product data, in many cases going back to 1929 - Bureau of Economic Analysis
	Data on Assets and Liabilities of Various Sectors of the Economy, not convenient for downloading: Flow of Funds Accounts
	Data From the Bureau of the Census.
	European Data: Eurostat
	Tons of data for lots of countries: economagic
	Bureau of Labor Statistics
	Other data (including international data)