AMERICAN UNIVERSITY
DEPARTMENT OF ECONOMICS
ECON 663
Development Macroeconomics
Spring 2009
Janet Stotsky
Office: Roper 117
Phone: 202 885-3750
Class: Wednesdays, 5:30-8:00 pm
E-mail: stotsky@american.edu
Office Hours: M, W 2:00-4:30 pm
or by appointment
RECOMMENDED TEXTBOOK (available at the bookstore):
Montiel, Peter J., 2003, Macroeconomics in Emerging Markets (Cambridge: Cambridge
University Press). This contains many background chapters on macroeconomics.
Readings are assigned:
Serra, Narcis, and Joseph E. Stiglitz, editors, 2008, The Washington Consensus
Reconsidered (Oxford: Oxford University Press).
Suggested comprehensive and technical graduate textbook:
Agenor, Pierre-Richard, and Peter J. Montiel, 2008, Development Macroeconomics
(Princeton, NJ: Princeton University Press).
Suggested undergraduate textbook:
Krugman, Paul R., and Maurice Obstfeld (any edition), International Economics: Theory
and Policy (Boston: Addison Wesley).
GRADING: Grades will be determined by a short research paper (20%), country
macro/financial profile (10%), midterm examination (25%), and final examination (45%).
TEST DATES: Midterm:
Final:
March 4
May
READING LIST
I. OVERVIEW AND INTRODUCTION (week 1)
Qureshi, Zia, 2008, “In Sight but not yet within Reach,” Finance and Development, 45, 2:
50-52.
United Nations Millennium Project, 2005, Investing in Development (New York: United
National Development Programme), overview.
Stiglitz, Joseph E., 2008, “Is there a Post-Washington Consensus Consensus?” Chapter 4
in The Washington Consensus Reconsidered, edited by Narcis Serra and Joseph E.
Stiglitz (Oxford: Oxford University Press): 41-56.
Amsden, Alice et al, 2008, “The Barcelona Development Agenda,” Chapter 5 in The
Washington Consensus Reconsidered, edited by Narcis Serra and Joseph E. Stiglitz
(Oxford: Oxford University Press): 57-60.
International Monetary Fund, 2008, World Economic Outlook Update (Washington, DC:
International Monetary Fund).
II. GROWTH THEORY AND EVIDENCE (weeks 2, 3, and 4)
A. Theory
Solow, Robert M., 1956, “A Contribution to the Theory of Economic Growth,” Quarterly
Journal of Economics, 70, 1: 65-94.
Romer, Paul, 1994, “The Origins of Endogenous Growth,” Journal of Economic
Perspectives, 8, 1: 3-22.
Galor, Oded, with an introduction by Brian Snowden, 2008, “Toward a Unified Theory
of Economic Growth,” World Economics, 2, 8: 97-151.
B. Evidence
Mankiw, N. Gregory, David Romer, and David N. Weil, 1992, “A Contribution to the
Empirics of Economic Growth,” Quarterly Journal of Economics, 107, 2: 407-437.
Bosworth, Barry, and Susan M. Collins, 2008, “Accounting for Growth: Comparing
China and India,” Journal of Economic Perspectives, 22, 1: 45-66.
Hausman, Ricardo, Dani Rodrik, and Andres Velasco, 2008, “Growth Diagnostics,”
Chapter 15 in The Washington Consensus Reconsidered, edited by Narcis Serra and
Joseph E. Stiglitz (Oxford: Oxford University Press): 324-355.
Additional readings
Hall, Robert E., and Charles I. Jones, 1999, “Why do Some Countries Produce so Much
More Output per Worker than Others?” Quarterly Journal of Economics, 114, 1: 83-116.
Easterly, William, 2005, “National Policies and Economic Growth: A Reappraisal,”
Chapter 15 in Handbook of Economic Growth, volume 1A, edited by Philippe Aghion
and Steven N. Durlauf (Amsterdam: Elsevier): 1016-1059.
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C. Role of Institutions
Acemoglu, Daron, Simon Johnson, and James A. Robinson, 2005, “Institutions as a
Fundamental Cause of Long-Run Growth,” Chapter 6 in Handbook of Economic Growth,
volume 1A, edited by Philippe Aghion and Steven N. Durlauf (Amsterdam: Elsevier):
386-472. See especially sections 1-5.
Additional reading
Bardhan, Pranab, 1997, “Corruption and Development: A Review of Issues,” Journal of
Economic Literature, 35, 3: 1320-1346.
D. Finance and Growth
Levine, Ross, 2005, “Finance and Growth: Theory and Evidence,” Chapter 12 in
Handbook of Economic Growth, volume 1A, edited by Philippe Aghion and Steven N.
Durlauf (Amsterdam: Elsevier): 866-934.
E. Aid and Growth
Burnside, Craig, and David Dollar, 2000, “Aid, Policies, and Growth,” American
Economic Review, 90, 4: 847-868.
Easterly, William, Ross Levine, and David Roodman, 2004, “Aid, Policies, and Growth:
Comment,” American Economic Review, 94, 3: 774-780.
Kharas, Homi, and Johannes F. Linn, 2008, “Better Aid: Responding to Gaps in
Effectiveness,” Brookings Policy Brief 2008-06 (Washington, DC: Brookings
Institution).
Additional reading
Rajan, Raghuram G., and Arvind Subramanian, 2005, “What Undermines Aid’s Impact
on Growth,” International Monetary Fund Working Paper, WP/05/126 (Washington,
DC: International Monetary Fund).
F. Inequality and Growth
Forbes, Kristin J., 2000, “A Reassessment of the Relationship between Inequality and
Growth,” American Economic Review, 90, 4: 869-887.
G. Gender Inequality and Growth
Cagatay, Nilufer, Diane Elson, and Caren Grown, 1995, “Introduction,” World
Development, Special Issue on Gender, Adjustment and Macroeconomics, 23, 11: 18271836.
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Klasen, Stephan, 2002, “Low Schooling for Girls, Slower Growth for All? Cross-Country
Evidence on the Effect of Gender Inequality in Education on Economic Development,”
World Bank Economic Review 16, 3:345-373.
III. EMERGING MARKETS (weeks 5, 6, 7, 9, and 10)
A. Equilibrium Real Exchange Rates
Montiel, chapter 16.
Additional readings
International Monetary Fund, Research Department, 2006, “Methodology for CGER
Exchange Rate Assessments,” (Washington, DC: International Monetary Fund).
Ricci, Luca Antonio, Gian Maria Milesi-Ferretti, and Jaewoo Lee, 2008, “Real Exchange
Rates and Fundamentals: A Cross-Country Perspective,” International Monetary Fund
Working Paper, WP/08/13 (Washington, DC: IMF).
Williamson, John, 2008, “Exchange Rate Economics,” Working Paper Series, WP 08-3
(Washington, DC: Peterson Institute for International Economics).
B. Capital Account Liberalization
Montiel, chapters 14-15.
Prasad, Eswar S., and Raghuram G. Rajan, 2008, “A Pragmatic Approach to Capital
Account Liberalization,” Journal of Economic Perspectives, 22, 3: 149-172.
Additional reading
Kose, M. Ayhan, Eswar Prasad, Kenneth Rogoff, and Shang-Jin Wei, 2006, “Financial
Globalization: A Reappraisal,” IMF Working Paper, WP/06/189 (Washington, DC:
International Monetary Fund).
C. Optimal Exchange Rate Regimes
Montiel, chapters 17-18.
Calvo, Guillermo A., and Frederic S. Mishkin, 2003, “The Mirage of Exchange Rate
Regimes for Emerging Market Countries,” Journal of Economic Perspectives, 17 4: 99118.
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Additional readings
Frankel, Jeffrey A., 2003, “Experience and Lessons from Exchange Rate Regimes in
Emerging Economies,” NBER Working Paper No. 10032 (Cambridge, MA: National
Bureau of Economic Research).
Obstfeld, Maurice, 2004, “Globalization, Economic Performance, and the Exchange
Rates of Emerging Economies,” NBER Working Paper No. 10849 (Cambridge, MA:
National Bureau of Economic Research).
D. Inflation Targeting
International Monetary Fund, 2005, “Does Inflation Targeting Work in Emerging
Markets?” Chapter IV in IMF World Economic Outlook (Washington, DC: International
Monetary Fund): 161-186.
Additional reading
Blanchard, Olivier, 2004, “Fiscal Dominance and Inflation Targeting: Lessons from
Brazil,” NBER Working Paper No. 10389 (Cambridge, MA: National Bureau of
Economic Research).
E. Currency Crises
Montiel, chapter 19.
Rangvid, Jesper, 2001, “Second-Generation Models of Currency Crises,” Journal of
Economic Surveys, 15, 5: 613-46.
Arias, Guillaume, 2003, “Currency Crises: What We Know and What We Need to
Know,” C.E.F.I. Working Paper No. 2003/13 (Aix-en-Provence: Center of International
Economics and Finance).
Additional readings
Calvo, Guillermo A., and Ernesto Talvi, 2008, “Sudden Stop, Financial Factors, and
Economic Collapse in Latin America: Learning from Argentina and Chile,” Chapter 8 in
The Washington Consensus Reconsidered, edited by Narcis Serra and Joseph E. Stiglitz
(Oxford: Oxford University Press): 119-149.
Kaminsky, Graciela L., Carmen M. Reinhart, and Carlos A. Vegh, 2003, “The Unholy
Trinity of Financial Contagion,” Journal of Economic Perspectives, 17, 4: 51-74.
Kaminsky, Graciela, Saul Lizondo, and Carmen M. Reinhart, 1998, “Leading Indicators
of Currency Crises,” IMF Staff Papers, 45, 1: 1-48.
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Berg, Andrew, Eduardo Borensztein, and Catherine Pattillo, 2005, “Assessing Early
Warning Systems: How Have They Worked in Practice,” IMF Staff Papers, 52, 3: 462502
Krugman, Paul, 1979, “A Model of Balance of Payments Crises,” Journal of Money,
Credit, and Banking, 11: 311-25.
F. Assessing Fiscal Sustainability
Montiel, chapters 6 and 8.
International Monetary Fund, 2003, “Public Debt in Emerging Markets: Is It Too High?”
Chapter III in IMF World Economic Outlook (Washington, DC: International Monetary
Fund): 113-152.
Mendoza, Enrique, and Marcelo Oviedo, 2004, “Public Debt, Fiscal Solvency, and
Macroeconomic Uncertainty in Latin America: The Cases of Brazil, Colombia, Costa
Rica, and Mexico,” NBER Working Paper No. 6380 (Cambridge, MA: National Bureau
of Economic Research).
Additional readings
Reinhart, Carmen M., Kenneth S. Rogoff, and Miguel A. Savastano, 2003, “Debt
Intolerance,” Brookings Papers on Economic Activity, 2003, 1: 1-62.
Eichengreen, Barry, 2003, “Restructuring Sovereign Debt,” Journal of Economic
Perspectives, 17, 4: 75-98.
V. LOW-INCOME COUNTRIES (week 11)
Guest lecturer, Dr. Emilio Sacerdoti, International Monetary Fund.
African Department, 2008, “The Great Sub-Saharan Growth Take-off: Lessons and
Prospects,” Regional Economic Outlook (Washington, DC: International Monetary
Fund): 23-51.
Sacerdoti, Emilio, et al, 2008, “Assessment of the Real Exchange Rate and External
Competitiveness,” IMF Selected Issues Paper (Washington, DC: International Monetary
Fund).
Sacerdoti, Emilio, et al, 2008, “The Macroeconomic Impact of Scaled-Up Aid: the Case
of Niger,” IMF Selected Issues Paper (Washington, DC: International Monetary Fund).
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VI. GLOBAL MACROECONOMIC GOVERNANCE (week 12)
Mussa, Michael, and Miguel Savastano, 1999, “The IMF Approach to Economic
Stabilization,” IMF Working Paper, WP/99/104, (Washington, DC: International
Monetary Fund).
IMF staff, 2008, “Turkey: Seventh Review and Inflation Consultation Under the StandBy Arrangement and Request for Waiver of Nonobservance of Performance CriteriaStaff Report,” IMF Country Report No. 08/272 (Washington, DC: International Monetary
Fund).
Rajan, Raghuram G., 2008, “The Future of the IMF and the World Bank,” American
Economic Review, 98, 2: 110-115.
Boughton, James M., and Colin I. Bradford, Jr., 2007, “Global Governance: New Players,
New Rules,” Finance and Development, 44, 4:10-14.
Additional readings
IMF staff, 2008, “India: 2007 Article IV Consultation—Staff Report,” IMF Country
Report No. 08/51 (Washington, DC: International Monetary Fund).
Elson, Anthony, 2007, “Reform of the IMF and World Bank: Where Do Things Stand?”
World Economics, 8, 2: 65-95.
Khan, Mohsin S., and Sunil Sharma, 2001, “IMF Conditionality and Country Ownership
of Programs,” IMF Working Paper, WP/01/142 (Washington, DC: International
Monetary Fund).
VII. TRADE (week 13)
Frankel, Jeffrey, 2008, “The World Trading System and Implications of External
Opening,” Chapter 10 in The Washington Consensus Reconsidered, edited by Narcis
Serra and Joseph E. Stiglitz (Oxford: Oxford University Press): 180-214.
Khor, Martin, 2008, “The World Trading System and Development Concerns,” Chapter
11 in The Washington Consensus Reconsidered, edited by Narcis Serra and Joseph E.
Stiglitz (Oxford: Oxford University Press): 215-259.
Berg, Andrew, and Anne Krueger, 2003, “Trade, Growth, and Poverty: A Selective
Survey,” IMF Working Paper 03/30 (Washington, DC: International Monetary Fund).
VIII. REVIEW (week 14)
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