15.s18 Applied International Macroeconomics II Roberto Rigobon rigobon@mit.edu Spring 2014 The course’s objective is to expand the tools and discussions developed during Macro I and apply them to current events. The US crisis resolution, Europe’s fiscal crises, and Japan’s challenges are just some of the topics we will address. We will discuss how monetary policy and fiscal policy work, and what are their limitations. We will develop a simple framework to understand growth, financial sustainability, political sustainability, and crises. We will study how different shocks impact the economy – shocks such as as financial crises, immigration, contagion, currency wars, etc. The boring section: Grades: 40 percent first assignment and 60 percent from the final assignment. Participation? Not graded. I’ll explain why in the first class. More boring stuff: RULES! Actually, there is only one rule in my classes: The rule is known at MIT as “Roberto’s Rule”. If you are late you have to bring me a coffee (it has to be decaf with soy milk – so, yes, brown water) or tea (it has to be herbal tea). After the first 5 minutes you will realize you do not want me on caffeine, and I am allergic to milk and stupid comments. If you do not bring the coffee I will make you go and buy it! No exceptions! Other than that you can do whatever you want in class. So, computers, ipads, iphones are all welcomed. Please leave them on, and use them if my classes become boring. I use this behavior as a signal when a joke is needed. The notes will be available after the classes. You do not have to do a single prereading before the first one (you’re welcome). After that, I expect you to do the reading before the classes except for my notes. The notes are part of a book I am writing and they are incomplete and meant to reinforce the discussions. I can also recommend macro books to you – Olivier Blanchard’s Macroeconomics is one of the best. But those books teach macroeconomics in a way that I believe is confusing for management. The course has 12 sessions (6 days): Tittle External and Internal Sustainability Readings BBNN Basic (Ch 7) HBS 9706002: The U.S. Current Account Deficit Jan 25 External and Internal Sustainability II BBNN Shocks (Ch 8) HB Review F0809A-PDF-ENG: New Thinking for a New Financial Order Feb 07 Crisis and Social Peace BBNN Social Peace + Sustainability (Ch 10-11) Feb 28 Development: Cycle of SelfDiscovery Macro Development (Ch 16) HBS 9706041: China: Building “Capitalism with Socialist Characteristics” Apr 12 Sovereign Debt Sustainability Fiscal Policy (Ch 5) EuroZone Debt - Roubini Report HBS 9711088: The Greek Crisis Apr 25 ESIMP Jan 24 Assignments: 1. Form teams of 3-4. Pick a country – any country you want. Perform a diagnostic of the macro situation using the BBNN. Place the last 5 years in the BBNN map and evaluate the social and political conditions: explain your evaluation, indicate the sources, etc. Due date is Feb 28th. 2. Use the country you used in part one. Design a growth program for the country. The growth program has to be consistent with social, political, institutions, environmental, and individual constraints. Use the ESIMP framework. Again, explain your decisions, sources, etc. The final report should not have more than 20 pages including everything. Please, include an analysis of the debt dynamics and fiscal situation. Due date is May 2. Useful sources for country data? World Bank: World Development Indicators http://databank.worldbank.org/data/views/variableSelection/selectvariables.aspx?source=world-development-indicators IMF: International Financial Statistics or World Economic Outlook http://elibrary-data.imf.org Economist Intelligence Unit: http://www.eiu.com/default.aspx?autologin=bulk (go to Vera, you have to enter through MIT)