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Johann Wolfgang Goethe-Universitδt

Fachbereich Wirtschaftswissenschaften

Jan Mutl

Sommersemester 2004

Syllabus – Version April 13, 2004

Advanced International Macroeconomics

Course Language

The language of instruction for the course will be English and course participants are expected to

satisfy all course requirements in English.

Class Time and Location

Tuesdays, 4:15-6:30, room 120C. Some of the classes will be used for discussion sessions and

will take place at the computer lab.

Course Description

This course will provide a selective discussion of various topics in international macroeconomics.

We will begin with a review of empirical methods and practical tutorials on STATA and

MATLAB. The aim of the course is to provide an introduction to the issues discussed in the

literature and develop an understanding of the tools used so that the students will be able to carry

independent research in the field.

Course Requirements

Grading will be based on a final exam (40%), short paper (40%) and several problem sets (20%).

The final exam will take place at the conclusion of the class.

Course Prerequisites

I will presume knowledge of econometric techniques at the level of, say, Greene, Econometric

Analysis and a basic knowledge of mathematics at the level of Simon and Blume Mathematics for

Economists. The students are also expected to have taken the methodological course Advanced


Course Logistics

First Class: April 13, 2004.

Office Hours: Room 107B, Wednesday, 10:00 am – 11:00 am

There will be a course website:

The web site will contain further updates of this syllabus, course news/administrative

announcements, class notes, assignments, and data sets.


Although there will be no official textbook, most of the material covered is discussed in

• Obstfeld, M., and K. Rogoff (1996): Foundations of International Macroeconomics,

Cambridge (MA): MIT Press.

Further books containing useful material for this course are listed below. See also the course

outline for additional references.

Econometric Techniques

• Baltagi, B.H. (2001): Econometric Analysis of Panel Data, (Second Edition),

New York: John Wiley.

• Hamilton, J.D. (1994): Time Series Analysis, Princeton University Press.

• Maddala, G.S. and In-Moo Kim (1999): Unit Roots, Cointegration and Structural

Change, Cambridge University Press.

• Judge, G.G., W.E. Griffiths, R.C. Hill, H. Luetkepohl and T.C. Lee (1985): Theory and

Practice of Econometrics, Wiley.

• Dhrymes, P. (1978): Mathematics for Econometrics, Springer.

• Magnus, J.R. and H. Neudecker (1999): Matrix Differential Calculus with its

Applications in Statistics and Econometrics, John Wiley and Sons.

International Macroeconomics

• Mark, N.C. (2001): International Macroeconomics and Finance,

Oxford: Basil Blackwell.

• Agenor, P. and P. Montiel (1996): Development Macroeconomics, Princeton University


• Calvo, G. (1996): Money Exchange Rates and Output, MIT Press.

• Dornbusch, R. (1980): Open Economy Macroeconomics, New York: Basic Books.

• Dornbusch, R. (1988): Exchange Rates and Inflation, MIT Press.

• Flood, R. and P. Garber (1994): Speculative Bubble, Speculative Attacks, and Policy

Switching, MIT Press.

• Frankel, J. (1993): On Exchange Rates, MIT Press.

• Kenen, P. (1995): Understanding Interdependence: The Macroeconomics of the Open

Economy, Princeton University Press.

• The Handbooks in International Economics, Vols. I-III., North Holland.

Course Outline:

I. Review of Econometric Methods

1. Background Mathematic Results and Concepts

Matrix Algebra, Differentiation, Statistical Theory

2. Basic Estimation Methods

OLS and extensions, IV, GMM, ML, QML, MD

3. Time Series Topics

Unit Roots and Cointegration, VAR Models

4. Panel Data Methods

- Static Panels, Fixed vs. Random Effects, ANOVA Models

- Dynamic Panels

Additional References:

• Pφetscher, B. and I. Prucha (2001): Basic Elements of Asymptotic Theory, in Baltagi,-

Badi-H., ed. A Companion to Theoretical Econometrics. Malden, Mass. and Oxford:

Blackwell; pp. 201-29.

II. Practical Sessions

1. Introduction to STATA

2. Introduction to MATLAB

Additional References:

• Kermit, S. (1992): Matlab Primer

available at

• Juul, S. (2004): Introduction to Stata 8

available at

III. Exchange Rate Issues

1. Theoretical Models of Exchange Rate Determination

Taylor (1995): Economics of Exchange Rates, JEL 33, 13-47.

Krugman (1991): Target Zones and Exchange Rate Dynamics, QJE 106, 669-82.


2. Empirical Studies

Meese and Rogoff: (1983): Empirical Exchange Rate Models of the Seventies:

Do The Fit Out of Sample?, Journal of International Economics 14, 3-24.


3. Devaluation Issues

Lizondo and Montiel (1989): Contractionary Devaluation in Developing

Countries: An Analytical Survey, IMF Staff Papers.

Goldfajn and Valdes (1996): The Aftermath of Appretiations, NBER WP5650.


4. PPP Testing

Rogoff (1996): The Purchasing Parity Puzzle, JEL 34, 647-68.

Engel and Rogers (1996): How Wide is the Border, AER 86, 1112-1125.

Taylor (2001): Potential Pitfalls for the Purchasing-Power Parity Puzzle?

Sampling and Specification Biases in Mean-Reversion Tests of the Law of One Price, Econometrica 69, also NBER WP7577.

5. Real Exchange Rate Behavior

Engel (1993): Real Exchange Rates and Relative Prices: An Empirical

Investigation, Journal of Monetary Economics, 32, 35-50.


6. Exchange Rate Regime Choice, Stabilization Issues

Reinhart and Rogoff (2004): The Modern History of Exchange Rate

Arrangements: A Reinterpretation, QJE, forthcoming.

IV. Speculative Attacks

1. Theoretical Currency Crises Models

Krugman (1979): A Model of Balance-of-Payments Crises, Journal of Money,

Credit and Banking, 11(3), 311-25.

Calvo (1998): Varieties of Capital-Market Crises, mimeo.

Dooley (1997): A Model of Crises in Emerging Markets, NBER WP6300.

Obstfeld (1994): The Logic of Currency Crises, NBER WP4640.

Obstfeld (1996): A Model of Currency Crises with Self-fulfilling Features, EER

40(1), 1037-47..

Velasco and Chang (2002): A Model of Financial Crises in Emerging Markets,


Morris and Shin (1998): Unique Equilibrium in a Model of Self-Fulfilling

Currency Attacks, AER 88, 587-97.

2. Empirical Studies

Kaminski, Lizondo and Reinhart (1998): Leading Indicators of Currency Crises,

IMF Staff Papers.

Larrain, F. and G. Esquivel (1998): Explaining Currency Crises, HIID Harvard

University, November.

Goldfajn and Valdes (1999): Are Currency Crises Predictable?, EER 42, 873-85.

3. Contagion Issues

Calvo and Mendoza (1997): Rational Contagion and the Globalization of

Securities Markets, mimeo.

Gerlach, and Smets (1994): Contagious Speculative Attacks, CEPR Discussion

Paper No. 1055.

Yuzefovich (2003): Estimating Contagion: A New Approach, mimeo.

4. Banking Crises

Calorimis and Gorton (1991): The Origins of Banking Panics.

Gorton (1988): Banking Panics and Business Cycles, Oxford Economic Papers,

40, 751-81.

5. Twin Crises

Velasco (1987): Financial and Balance-of-Payments Crises, Journal of

Development Economics, 27(1/2), 263-83.

McKinnon and Pill (1997): Credible Liberalizations and Overborrowing, AER,

87, 189-203.


Goldfajn and Valdes (1996): Balance of Payments Crises and Capital Flows: The

Role of Liquidity, mimeo.


V. International Capital Flows

1. Theory and Policy Consequences

Calvo, Liederman and Reinhart (1993): Capital Inflows and Real Exchange Rate

Appreciation in Latin America: The Role of External Factors, IMF Staff Papers.

Calvo, G. (1998): Capital Flows and Capital-Market Crises: The Simple

Economics of Sudden Stops, mimeo.

2. Capital Controls

Gourinchas and Jeanne (2003): The Elusive Gains From International Financial

Integration, NBER WP9684.

Forbes (2003): One Cost of Chilean Capital Controls: Increased Financial

Constraints for Small Traded Firms, NBER WP9777.

VI. Some Remaining Puzzles

1. Feldstein-Horioka

Feldstein and Horioka (1980): Domestic Savings and International Capital Flows,

Economic Journal, 314-29.

Tesar (1991): Savings, investment and international capital flows, Journal of

International Economics 31, 55-78.

2. Home Bias and Consumption Correlation

Backus, Kehoe and Kydland (1992): International Real Business Cycles, Journal

of Political Economy, 100 (4), 745-775.


AER = American Economic review

EER = European Economic Review

JEL = Journal of Economic Literature

QJE = Quaterly Journal of Economics



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Poslednja izmena: sreda, 19 januar 2005