15.015
All Sections
Profs. Cavallo & Rigobon
Fall 2014
Applied Macro and International Economics
Syllabus
This course explores the macroeconomic environment in which firms operate. It aims to provide a good
grounding in macroeconomic concepts and applications to specific country experiences. The course first
develops the basic tools of macroeconomic management, predominantly monetary and fiscal policy. We
will use both historic case studies as well as discussions of modern policy for context. This part of the
course is focused on the short run. We will then move to the long run and discuss how to understand the
long term growth prospects of an economy, the paths countries have taken to make economic reforms and
the role of the private sector. This leads nicely into other macro electives offered at Sloan where there will
be more discussion of international economics, currency and financial crises. In terms of applications, our
class discussions will cover a broad array of emerging economies from China to Latin America and
Africa, as well as the challenges faced by developed nations in recent years.
The class will be co-taught by Professors Alberto Cavallo and Roberto Rigobon. On any given day, all
sections will be taught by the same professor. All sections will therefore cover exactly the same material
and have exactly the same set of classes.
Note that this class is meant to be an introduction to macro and international economics. There are
additional macro and international classes at Sloan that build on this material. For example, Jonathan
Parker teaches 15.447 “International Finance: Capital Markets”, and Kristin Forbes teaches 15.218
“Global Economic Challenges”, for which this class is recommended. Also, Roberto Rigobon teaches
15.014 in the fall, which can be taken concurrently with 15.015.
There are two TAs for the class, one for each section. There will be no recitations for this class, but the
TAs will each hold office hours by appointment.
Before each class, you are expected to read all “required readings” listed below. An optional textbook is
“Macroeconomics and the Financial System”, 1st Edition by Mankiw and Ball (referred to as MFS
below).
This is a case/readings-based class with a focus on active participation. There is no final exam. Instead,
participation will count towards your grade and the last class will be reserved for debates/presentations,
which are described in detail below.
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15.015
All Sections
Profs. Cavallo & Rigobon
Fall 2014
DEBATES/PRESENTATIONS
The last class is reserved for a debate. The debate questions are listed below for each section.
For the debate, in each section, students will sort into teams of 3 or 4. Each team will pick the name of a
country in the world as their name (please email your TA with your team name and who is in your team
within the first week of class).
Each team will have to prepare a presentation on the question for their section. These presentations should
be PowerPoint (or similar) presentations with a maximum length of 5 slides. The presentations are the
only deliverables you have to do for the debates. The slides are due by 5.00PM on Monday Oct 6th, and
must be submitted via email to your section’s TA. You have to make sure the TA has received your
presentations before the deadline.
Before the debates, the teaching faculty (Alberto and Roberto) and the TAs will grade the debates and
pick teams to present on the relevant day. Since the question is open ended, there may well be between 2
and 5 teams picked to present (all with different answers to the questions posed). The teams that do not
get picked will get a chance to participate as described below.
We will announce the teams picked by the end of the day on Friday Oct 10th.
For the actual day of the debates, we will ask the teams who got selected to present their answers. They
have to use the slides they submitted to their TA. No changes are allowed after that. They will have 5
minutes maximum to present.
Once the selected teams have presented, we will open up the question to discussion from the rest of the
class. The other teams that did not get selected will have an opportunity to present their arguments either
in support of one of the answers already provided or for a whole new answer. All presentations and
discussions will be graded (see the section on grading below).
The debate will be judged by a panel of three experts (like “American Idol”). Two of the judges will, of
course, be Alberto and Roberto. There will be an additional third external judge who will kindly spend the
debate day with us.
Debate Questions
There is a debate question for each section as below:
Section A Debate Question: Saving Japan?
Imagine you are the Prime Minister of Japan. What is the single most important policy aside from basic
monetary/fiscal policy that you would implement to revive the Japanese economy within the next year?
Section B Debate Question: A Balanced Budget in the US?
Start with this article as a reference: http://www.nytimes.com/2013/08/12/opinion/republicans-anddemocrats-both-miscalculated.html?pagewanted=2&_r=0&hp. Should the US pass a balanced budget
amendment to the constitution? The answers can only be a Yes or a No (i.e. no “it depends”). Use the
presentation to justify why yes or why no.
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15.015
All Sections
Profs. Cavallo & Rigobon
Fall 2014
Grading the Debate
The grade of the debate has two main parts:

The first part of the grade for each team comes from the slides prepared by every team. These
will be graded by Alberto, Roberto, and the TAs. This accounts for 40% of your total grade in the
class.

The second part of the grade deals with the actual day of the debate. This will count for a total of
35% of your grade. For the day, there is a straight up 10% for attending class. An additional 25%
comes from the grade that the panel of experts gives each team. The teams can earn this portion
of the grade in two ways. If they are picked to present then that grade will come directly from the
presentation. If they are not picked to present, then they should make a statement when the
discussion is opened and that statement will award their team grades. In addition, any other
substantive comments made by anyone will award their team points (note that the only individual
points for the debates come from attendance).

Note that, in total, the debates make up 75% of your grade.
OVERALL GRADING SCHEME:
Your grade for the course will be composed of the following:
Class participation:
Grade on the debate slides:
Grade on attendance for the debate:
Grade on the actual debate:
25%
40%
10%
25%
Class participation is graded on a range of 0 to 3 in every class. If you do not attend class, or if you attend,
but do not speak up much, you get 0. If you speak up with at least one decent comment, you will get
points ranging from 1 to 3, depending on the quality of the comment. Speaking up on its own is not
enough to earn even a 1. A 3 will be awarded extremely rarely and is for a comment/question that really
changes the discussion. Your final participation grade is an average of all the individual class grades.
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15.015
All Sections
Profs. Cavallo & Rigobon
Fall 2014
Contact Information
Professors
Alberto Cavallo
Office:
E62-512
Email:
acavallo@mit.edu
Office Hours: By appointment
Roberto Rigobon
Office:
E62-515
Email:
rigobon@mit.edu
Office Hours: By appointment
Teaching Assistants
Section A
Parul Batra
Email:
Office Hours:
pbatra@mit.edu
By appointment
Section B
Michael Parker
Email:
mpparker@mit.edu
Office Hours: By appointment
Course Assistant
Krysta Harmon
MIT Sloan School of Management
77 Massachusetts Avenue, E62-511
Cambridge, MA 02139
T: 617-253-8959
F: 617-258-6786
E: harmon_k@mit.edu
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15.015
All Sections
Profs. Cavallo & Rigobon
Fall 2014
Required Readings
Sep 4:
Macro Data and Measurement
MFS Chapters 2
http://www.newyorker.com/talk/financial/2011/05/30/110530ta_talk_surowiecki
http://www.economist.com/node/18867338
Sep 9:
Money, Banking and Central Banks
HBS Case #9-798-048: The German Hyperinflation of 1923
MFS Chapter 4 with Appendix
Sep 11:
The Money Market and Aggregate Demand
MFS Chapter 9 (From intro to 9-3)
Sep 16:
Sticky Prices and Aggregate Supply
MFS Chapter 9 (9-4 to end)
Sep 18:
Monetary Policy and Fiscal Policy: Applications
HBS Case #9-391-258: The Great Depression: Causes and Impact (Abridged)
Sep 23:
Intro to Exchange Rates
MFS “Macroeconomics” Chapter 5-3 (pages 137-150)
Sep 25:
Crises and Economic Reforms in Developing Countries
HBS Case #9-700-061: Menem and the Populist Tradition in Argentina
Sep 30:
Europe and Optimal Currency Areas
Article (Economist):
Staring into the Abyss
Article (Economist):
The Euro Crisis: Damned with Faint Plans
Oct 2:
China: Exchange Rate Choices and Internationalization of the Renminbi
HBS Case #9-706-021: China: To Float or Not to Float?
Oct 7:
Financial Crises: US
HBS Case # 9-709-057: The First Global Financial Crisis of the 21st Century
MFS Chapter 19
Oct 9:
Growth Theory: Total Factor Productivity and Innovation
HBS Case #9-703-040: Singapore Inc.
Article(WSJ):
Singapore Swing: Krugman was Right…
Article (Economist):
Lands of Opportunity
Oct 14:
What makes rich countries rich and poor countries poor?
Class Notes
Oct 16:
Debate
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