FREE ELECTRONIC LIBRARY - Dissertations, online materials

Pages:   || 2 |

«Lecturer: Richard Portes Secretary: Harvinder Saran P326 (x8425) hsaran Course code: E306 AUT11 Wednesday 1845-2130 Aims and objectives ...»

-- [ Page 1 ] --


Lecturer: Richard Portes

Secretary: Harvinder Saran P326 (x8425)


Course code: E306 AUT11

Wednesday 1845-2130

Aims and objectives

This course deals with the international financial environment facing firms in a globalised

economy. It will provide tools for assessing the impact of economic policy shocks and

financial disturbances on financial markets, exchange rates, and capital flows. The course is suitable for anyone seeking the further understanding of the international macroeconomy, whose importance the current crisis has revealed. It will be especially relevant for careers in investment analysis, asset management, hedge funds, capital markets, corporate finance, and the finance/treasury function of corporates. There is little overlap with International Finance (E207) – GCMC gives the global macroeconomic context for international financing decisions.

The course will be taught by Richard Portes: http://faculty.london.edu/rportes/ Topics covered Exchange rates and the current account of the balance of payments • Real exchange rates and purchasing power parity • Nominal exchange rates, interest rates, and the carry trade • The dollar, the euro and the RMB in the long run • Financial globalisation • Currency and banking crises • Sovereign debt and default • Sovereign debt in 2011: US, UK, euro zone, emerging markets • International financial stability: the crisis of 2008-2009 • What to do, how to do it, what consequences?

• Format and teaching methods Teaching will be primarily in the form of lectures, with some distinguished visiting speakers (list to be posted on Portal). For each topic there will be a specific application of the tools discussed – e.g., is the US current account deficit sustainable? What determines emerging market spreads? Students will do group reports on these questions.

There will be no single set text – articles will be distributed in advance (in the course book), and there will be handouts for each session (all will be on Portal). But there will be some

citations from the following textbook:

P. Krugman and M. Obstfeld, International Economics: Theory and Policy ( Pearson / Addison Wesley,7th ed., 2006), Chs. 12-21. A basic text. Abbreviated KO. See http://www.amazon.co.uk/gp/offer-listing/032131154X/sr=8- 2/qid=1220829787/ref=olp_pg_new?ie=UTF8&coliid=&startIndex=0&me=&qid=1220829787& sr=8-2&seller=&colid=&condition=new An excellent source for selected journal articles, working papers, media coverage, and commentary is www.rgemonitor.com LBS subscribes to this website, and it is well worth it!

(If you have depressive tendencies, however, proceed with caution – Nouriel Roubini, the founder of this website, is the new holder of the title ‘Dr. Doom’, given in respect of his consistently hyper-negative assessment of the US subprime crisis, global financial turmoil, and macroeconomic prospects.) You will also find many relevant short articles at www.VoxEU.org NBER Working Papers are available (from LBS) at http://www.nber.org CEPR Discussion Papers are available (from LBS) at http://www.cepr.org IMF, BIS and OECD publications are often useful, available from their websites.

There are some good blogs that have a lot on international macroeconomics and finance –

see, for example:

Econbrowser – Menzie Chinn and James Hamilton - http://www.econbrowser.com/ Baseline Scenario – Simon Johnson and James Kwak - http://baselinescenario.com/ Pre-requisites International Macroeconomy and Competitiveness (the MBA/EMBA core course) or equivalent prior knowledge of basic macroeconomics. See the textbook we use at London Business School: D Miles and A Scott, Macroeconomics: Understanding the Wealth of Nations (2nd ed., Wiley, 2004).

Assignments and assessment Assessment will be based on one 500-word individual assignment (30%), a group report (35%), and a ‘take-home’ exam (35% - multiple choice questions and short essays).


The report will be on a topic in the ‘Applications’ specified below in the readings from sessions 1-9. The report should be downloaded onto Portal 48 hours or more before the relevant class discussion. All students are then invited to post comments or questions – this is not obligatory, but it helps you and the rest of the class to think through the issues and get your questions clear – and perhaps get some answers. 15 minutes will be devoted to discussion (not presentation) of the report in the relevant session – I shall assume that everyone has read it, and I am likely to put ‘cold call’ questions on it, especially if there isn’t much posted on Portal in response to the report.. I shall assign students to groups (hence topics) arbitrarily – you are welcome to trade places in a decentralised fashion (most economists believe in fostering ‘Pareto-improving’ trade). A trade itself shouldn’t go through me, but you must report it by email to Harvinder Saran (hsaran@london.edu ) so that I will know who did what when I give marks for the reports.

The assignment will be distributed on 26 October (due by 5.00 pm on 2 November). The take-home exam will be distributed on Portal and by email at 9.00 am Monday 28 November (due by 5.00 pm on Wednesday 30 November). The assignment and the exam may be submitted either as hard copy to Harvinder Saran in P326 or by email (gcmc@london.edu).

Although it should not be necessary, I nevertheless remind you of London Business School’s strict policies regarding plagiarism and the use of materials written by others. Individual assignments are to be done individually, with no sharing of work; undue similarities between papers will be noted. Any material drawn from written sources, whether printed or on the internet, must be properly referenced. In particular, the use of verbatim quotes without attribution normally would attract an automatic ‘fail’ (and if you were to copy something, it would usually be pretty easy to find it on the web – there is now software that does that!).


For the lectures, starred readings are essential, and I shall assume you have read them. Others are optional. Readings listed for applications are required only for those doing the report, but evidently you will get more out of the discussion if you read at least one of these. I have starred some of those to indicate priorities. The course pack will normally not include anything that is immediately available online. (Note: all NBER and CEPR working papers are available through LBS.)

1. Exchange rates and the current account of the balance of payments (28 September) *KO, Ch. 12

Application (group report due 1 October, discussion 5 October):

Is the US current account deficit sustainable? Must the dollar eventually crash?

P.-O. Gourinchas and H. Rey, 2007, ‘From world banker to world venture capitalist’, in R Clarida, ed., G7 Current Account Imbalances, ed. R. Clarida, University of Chicago Press for NBER, and at http://socrates.berkeley.edu/~pog/content.html *P. Krugman, ‘Will there be a dollar crisis?’, Economic Policy July 2007, pp. 435-67, at http://www.economic-policy.org/ N. Roubini, ‘Will the Bretton Woods 2 regime collapse?’, RGE Monitor 6 July 2008, http://www.rgemonitor.com/roubinimonitor/252920/will_the_bretton_woods_2_bw2_regime_collapse_like_the_original_bretton _woods_regime_did__the_coming_end_game_of_bw2

2. Real exchange rates and purchasing power parity (5 October) *KO, Ch 15 J. Haskel and H. Wolf, ‘The Law of One Price - A Case Study’, Scandinavian Journal of Economics, 2001, available as NBER WP 8112.

K. Rogoff, ‘The purchasing power parity puzzle’, Journal of Economic Literature, June 1996, 647-668, at http://www.jstor.org/stable/pdfplus/2729217.pdf

Application (due 8 October, discussion 12 October):

What do the Big Mac RERs really tell us?

*D. Parsley and S.-J. Wei, 2007, ‘A Prism into the PPP Puzzles:The Micro-foundations of Big Mac Real Exchange Rates’, Economic Journal (2007), 1336-1356.


D. Parsley and S-J. Wei, 2008, ‘In search of a euro effect: big lessons from a Big Mac meal’, Journal of International Money and Finance, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=995491 R. Cumby, 1996, ‘Forecasting exchange rates and relative prices with the hamburger standard’, at http://www.nber.org/papers/w5675

3. Nominal exchange rates, interest rates, and the carry trade (12 October) *KO, Chs. 13, 14, and Appendix I to Ch 17 *K. Rogoff, ‘Dornbusch’s overshooting model after 25 years’, 2002, Secs. II A and B, III A, and tables/graphs, IMF Staff Papers 49, 1-34, available through JSTOR.

*R. Portes, et al., November 2007, International Financial Stability, CEPR and ICMBS, pp.

65-69 (Sec. 6.4.1).

J. Frankel, ‘Getting carried away: how the carry trade and its potential unwinding can explain movements in international financial markets,’ November 2007, at http://ksghome.harvard.edu/~jfrankel/CarryTradeNov19-2007.pdf

Application (due 15 October, discussion 19 October):

Can exchange-rate forecasting do better than a random walk?

*K. Rogoff, ‘The failure of empirical exchange rate models’, Economic Policy Web Essay, 2002, at www.economic-policy.org R. Lyons, ‘The failure of empirical exchange-rate models – room for optimism?’, Economic Policy Web Essay, 2003, at www.economic-policy.org K Rogoff and V Stavrakeva, 2008, ‘The continuing puzzle of short horizon exchange rate forecasting’, NBER WP 14071 *T Adrian, E Etula, Hyun Song Shin, 2011, Risk Appetite and Exchange Rates (you can limit yourself to the first couple of sections, non-technical).

4. The dollar, the euro and the RMB in the long run *R. Portes and H. Rey, ‘The internationalisation of the euro’, pp. 49-56 of Global Outlook 1st quarter 1999, Economist Intelligence Unit, London. This is a non-technical, abbreviated version of: R. Portes and H. Rey, ‘The emergence of the euro as an international currency’, Economic Policy 26, April 1998, available at http://www.london.edu/faculty/rportes/ *M. Feldstein, ‘What’s next for the dollar?’, NBER WP 17260, July 2011.

M. Chinn and J. Frankel, ‘Why the euro will rival the dollar’, International Finance 11:1, 2008, pp. 49-73.

‘Global reserve currencies and the SDR’, Goldman Sachs Global Economics Paper no 196, 26 May 2010

R. Portes, ‘Global crises and international currencies’, March 2010 (especially sections 10Application (due 22 October, discussion 26 October):

Is the RMB (CNY) undervalued now (02 August USD = 6.44 CNY)?

H.Reisen, ‘On the Renminbi’, 17 December 2009 at www.voxeu.org *H-W Cheung et al., 2010, ‘Measuring Renminbi Misalignment’, Hong Kong Institute for Monetary Research WP 24/2010 C F.Bergsten, ‘Correcting the Chinese Exchange Rate’ 24 March 2010 at http://www.iie.com/publications/papers/paper.cfm?ResearchID=1523 W. R Cline, ‘Renminbi Undervaluation, China’s Surplus, and the US Trade Deficit’, August 2010 at http://www.piie.com/publications/pb/pb10-20.pdf

5. Financial globalisation (26 October) *KO, Ch. 21 and Mathematical Postscript *P. Lane and Gian Maria Milesi-Ferretti, "The Drivers of Financial Globalization", American Economic Review (Papers and Proceedings) 98(2), 327-332, May 2008.

*C. Reinhart and V. Reinhart, ‘From capital flow bonanza to financial crash’, VoxEU 23 October 2008, at http://www.voxeu.org/index.php?q=node/2478 R. Portes and H. Rey, ‘The Determinants of Cross-Border Equity Flows’, at www.london.edu/faculty/rportes/, Journal of International Economics February 2005.

R. Portes and D. Vines, Coping with International Capital Flows (Commonwealth Secretariat, 1997)

Application (due 29 October, discussion 2 November):

Are the ‘global imbalances’ really dangerous?

*R. Portes, ‘Global Imbalances’, in Macroeconomic Stability and Financial Regulation, eds.

Mathias Dewatripont, Xavier Freixas and Richard Portes, CEPR, March 2009, pp. 19-26.

Available at www.cepr.org M. Obstfeld and K. Rogoff, ‘Global Imbalances and the Financial Crisis’, August 2010, available at http://elsa.berkeley.edu/~obstfeld/.

*C. Borio and P. Disyatat, 26 July 2011, ‘Did global imbalances cause the crisis?’, VoxEU, at http://www.voxeu.org/index.php?q=node/6795 J. Gagnon, January 2011, ‘Current account imbalances coming back’, Peterson Institute for International Economics, Working Paper 11-1, at http://www.iie.com/publications/interstitial.cfm?ResearchID=1742

6. Currency and banking crises (2 November) *R. Dornbusch, 2001, ‘A primer on emerging market crises’, NBER WP 8326.

*P. Krugman, ‘Currency crises’, http://web.mit.edu/krugman/www/crises.html.

P. Blustein, 2003, The Chastening: inside the crisis that rocked the global financial system and humbled the IMF, Public Affairs.

B. Eichengreen, et al., July 2011, ‘International Financial Crises and the Multilateral Response’, Section II only, at http://www.nber.org/~confer/2011/GFC11/program.html

Application (due 5 November, discussion 9 November):

Are commodity markets driven by fundamentals or financial speculation?

*‘Commodity futures speculation’, James Hamilton on Econbrowser, 30 May 2008, at http://www.econbrowser.com/archives/2008/05/commodity_futur.html (and references there) P. Krugman, ‘Speculation and signatures’, 24 June 2008, at http://www.princeton.edu/~pkrugman/Speculation%20and%20Signatures.pdf. Also http://krugman.blogs.nytimes.com/2008/06/27/matters-of-convenience-very-wonkish/ ‘The rise and fall in oil prices’, UK Cabinet Office, December 2008, at http://www.cabinetoffice.gov.uk/media/112559/rise_and_fall.pdf For background on commodity prices, interest rates and exchange rates, see *J. Frankel, ‘Monetary policy and commodity prices,’ VoxEU 29 May 2008, at http://www.voxeu.org/index.php?q=node/1178 K Rogoff et al., ‘Where are commodity prices headed next?’, VoxEU 8 September 2008, at http://www.voxeu.org/index.php?q=node/1631

Pages:   || 2 |

Similar works:

«October 2, 2015 Dear Fellow Texan, Welcome to our new newsletter. The month of September was an especially busy month for bill implementation. Because so many bills went into effect last month, the focus around the dome was ensuring that the legislation we passed last session was going into effect appropriately and expediently. This month's newsletter will outline what was going on in Austin this past month, policy focus from last session, and a few pieces of information and events that we...»

«ENTREPRENEURSHIP, INNOVATION, INCUMBENCY IN VIETNAM’S TURBULENT FINANCIAL SECTOR: BANK MARKETING AND STRATEGY IMPLICATIONS FOR PRIVATE SECTOR CHALLENGERS William J. Ardrey IV University of Western Australia Amal Karunaratna University of Adelaide Michael Keane University of Southern California Track 6: Entrepreneurship, Innovation and Large and Small Business Marketing Key Words: International Bank Marketing, Entrepreneurship, Innovation, Marketing Information Systems, Knowledge Management....»

«Vice President for Finance and Administration Search 1 The Opportunity Albion College in Albion, Michigan seeks a highly qualified and experienced financial leader to join President-Elect Mauri Ditzler’s leadership team as the Vice President for Finance and Administration. President-Elect Ditzler will begin his first year at Albion College in July 2014. The Vice President will be responsible for a multi-faceted operation that includes oversight of the work of the Controller, the Director of...»

«Town Council Meeting January 26, 2016 EXECUTIVE SESSION – 6:00 p.m. Per RIGL 42-46-5 (a) (2) 1. Centre of New England 2. Miozzi Consent Judgment KC 2010-1574 3. Anthony Mills Betterment TOWN COUNCIL MEETING – 7:00 p.m. Present: Councilman McGee, Vice-President Carlson, Councilwoman Duxbury, Councilman Laboissonniere, President Shibley, Town Solicitor Gorham, Interim Town Manager Kerbel A motion was made by Councilman McGee seconded by Vice-President Carlson to come out of Executive Session....»


«INGREDIENT DECLARATION OF COMPOUND FEEDINGSTUFFS BY PERCENTAGE WEIGHT OF INCLUSION (“PERCENTAGE INGREDIENT DECLARATION”) GUIDANCE ON NEW LABELLING REQUIREMENTS This document is an introductory guide to the provisions of the new legislation. It is intended for the use of enforcement personnel and feed business operators (for example, feed manufacturers, importers, merchants, food businesses selling food products into the animal feed chain), including new businesses wishing to gain an...»

«Developing Marketing Strategies for Green Grocers: An Application of SERVQUAL David B. Eastwood Department of Agricultural Economics, University of Tennessee, 2621 Morgan Circle, Knoxville, TN 37996–4518. E-mail: eastwood@utk.edu John R. Brooker Department of Agricultural Economics, University of Tennessee, 2621 Morgan Circle, Knoxville, TN 37996–4518. James D. Smith Department of Agricultural Economics, University of Tennessee, 2621 Morgan Circle, Knoxville, TN 37996–4518. ABSTRACT...»

«PROFILE OF RESOURCE PERSONS Mr. Jaime Augusto Zobel de Ayala is the Chairman and Chief Executive Officer of Ayala Corporation, the holding company of the oldest business group in the Philippines. Ayala Corporation has subsidiaries and affiliates in real estate development, telecommunications, banking and financial services, electronics manufacturing, water distribution, automotive dealerships, business process outsourcing and overseas real estate investments. Apart from his responsibilities on...»

«EFIGE country report: Austria Austria Felix: The impact of the crisis on a small open economy Luigia Mirella Campagna, Attilio Pasetto and Antonio Riti EFIGE IS A PROJECT DESIGNED TO HELP IDENTIFY THE INTERNAL POLICIES NEEDED TO IMPROVE EUROPE’S EXTERNAL COMPETITIVENESS Funded under the Socio-economic Sciences and Humanities Programme of the Seventh Framework Programme of the European Union. LEGAL NOTICE: The research leading to these results has received funding from the European Community's...»

«APRIL 10, 2014 “Compound interest is the eighth wonder of the world. He who understands it, earns it. he who doesn't. pays it” – Albert Einstein Dear Investor, The first quarter of 2014 was uneventful for most major financial markets. There was no shortage of world news, but investors exhibited little concern. This lack of reaction was notable given the widespread worries of a reversal from last year’s significant rise in asset prices. For the quarter, U.S. equity markets were...»

«NOTICE OF REGULAR MEETING MISSION CITY COUNCIL JULY 25, 2016 4:30 P.M. MISSION CITY HALL PRESENT: ABSENT: Norberto Salinas, Mayor Jessica Ortega-Ochoa, Councilwoman Ruben D. Plata, Councilman Norie Gonzalez Garza, Mayor Pro Tem Dr. Armando O’caña, Councilman Abiel Flores, City Attorney Jaime Tijerina, Deputy City Attorney Anna Carrillo, City Secretary Martin Garza, Jr., City Manager ALSO PRESENT: STAFF PRESENT: Ismena Garcia Aida Lerma, Deputy City Manager Omar Villarreal Randy Perez, Deputy...»

«Jean-Pierre Landau: Procyclicality – what it means and what could be done Remarks by Mr Jean-Pierre Landau, Deputy Governor of the Bank of France, at the Bank of Spain's conference on Procyclicality and the Role of Financial Regulation; Madrid, 4 May 2009. * * * It is a great pleasure and privilege to be in Madrid for this conference hosted by the Bank of Spain and the Financial Stability Institute. I would like to present a few remarks on procyclicality, what it means, what role it played in...»

<<  HOME   |    CONTACTS
2016 www.dissertation.xlibx.info - Dissertations, online materials

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.