This course reviews selected topics in the area of international finance. Each class will focus on one specific topic. This course builds to a large extent on Macroeconomics I, but covers mostly empirical papers. The goal is to give students an introduction into selected and currently important issues in international finance and motivate further study. Another focus is methodological, giving students an introduction in how to pick a thesis topic.
Credits
3 ECTS
Time Schedule
Block 4.
4, 11, 18, 25 February and 4 March 2011.
Examination
An in class-assignment counts fro 25% and a final exam for 75%
1. Capital account liberalization and their real sector effects
Motivation: In many developing and emerging countries, there is still a heavy debate ongoing about the benefits and costs of opening up the capital account, a debate that is mirrored within the economic profession. We will cover recent empirical work on the real and financial effects of capital account liberalization.
Readings:
Bekaert, Geert, Campbell Harvey and Christian Lundblad, 2005. Does Financial Liberalization Spur Economic Growth? Journal of Financial Economics 77, 3- 55
Henry, Peter. 2007. Capital Account Liberalization: Theory, Evidence and Speculation, Journal of Economic Literature 45, 887-935.
Obstfeld, Maurice and Rogoff Kenneth, 1996, Foundations of International
Macroeconomics, chapter 1, the MIT Press
2. Currency and banking crises, international contagion etc.
Motivation: The current crisis is the first major crisis since the 1990s saw Mexico, Brazil, Russia and several East Asian countries hit by currency and banking crises. We discuss first, second and third generation of currency crises and survey the empirical literature on currency and banking crises
Readings:
. Andrea Pescatori & Amadou N. R. Sy, 2004. "Debt Crises and the Development of International Capital Markets," IMF Working Papers 04/44, International Monetary Fund.
Bordo, Michael. 1998. Currency in an historical perspective, report 10
Flood, R.P. and P.M. Garber, “Collapsing Exchange Rate Regimes: Some Linear Examples”, Journal of International Economics, August 1984, 17, 1–13.
Obstfeld, M., Models of Currency Crises with Self-fulfilling Features, European Economic Review, 1996, vol. 40, 1037–1048
Graziela Kaminsky, and Carmen Reinhart, “On Crises, Contagion and Confusion,” Journal of International Economics 51 (2000), 145–168.
Katrin Forbes, Roberto Rigobon, (2002), "No Contagion, only Interdependence: measuring Stock Market Co-movements". Journal of Finance 57 (5), 2223-2261.
Glick, R. and A.K. Rose (1999). Contagion and Trade: Why are Currency Crises Regional? Journal of International Money and Finance, Vol. 18(4), pp. 603-617.
Rijckeghem, C. van, and B.S. Weder (2001). Sources of Contagion: Is it Finance or Trade? Journal of International Economics, Vol. 54(2), pp. 293-308.
Krugman, Paul. 1979. A Model of
Balance-of-Payments Crises. Journal of Money, Credit and Banking 11, 311-25.
3. Cross-border banking – development and stability aspects
Motivation: foreign bank entry has been the most important structural change in many developing and transition economies’ financial systems over the past decades. We review the literature on its implications for stability and development. In this context, we discuss repercussions for the financial safety net and international cooperation.
Readings:
Cull, Robert and Maria Soledad Martinez Peria. 2007. Foreign Bank Participation and Crises in Developing Countries, World Bank Policy Research Working Paper Series 4128.
Kleimeier & Sander, "Regional Versus Global Integration of Euro-Zone Retail Banking Markets: Understanding the Recent Evidence from Price-Based Integration Measures" The Quarterly Review of Economics and Finance 46, 2006, 353-368.
Kleimeier & Sander, 2007, CEPS, Brussels. Report for the CEPS Task Force on “The
Internal Market for Retail Financial Services”.
4. Exchange rate movements
Motivated by the on-going debate whether some EU countries should enter or not the Euro-Zone, we discuss fixed vs. flexible exchange rate regimes and currency unions. etc.
Readings:
To be announced
5. Dutch disease and aid flows
Motivation: many developing countries heavily depend on donor flows. At the same time, large capital inflows have implication for the capital account balance, exchange rate and ultimately, the export competitiveness of countries.
Reading:
To be
announced.
5. The role of China and India in the new world order – current disequilibria
Motivation: For better or worse, China and Indi are taking a more and more important and active role in the international financial system. Political discussions on international imbalances often focus on China.
Readings:
To be announced.