Trade and Finance Schedule

Schedule of classes, readings, and assignments

Textbook readings are referred to as “FTU” (Free Trade Under Fire), “RDE” (The Return of Depression Economics) and “Euro” (The Euro Crisis and Its Aftermath), followed by the chapter number(s). Links to other readings are available on Moodle.

Tue Jan 16

First day of class

Thu Jan 18

FTU2: Theoretical and empirical arguments for free trade

Reading notes questions:

What does it mean to say that the US has an absolute advantage (in terms of productivity) over Indonesia?

Then, why do economic liberals (like the author) argue that the theory of comparative advantage is good news for a country like Indonesia, in terms of its ability to gain from trading with more advanced countries like the US?

Irwin’s data shows that China’s labor productivity was 72% of that of the US in apparel production. For machinery production, however, China’s labor productivity is 4% of that of the US. Questions: does any country have an absolute advantage here? And which one has a comparative advantage in apparel?

What are two other reasons (other than comparative advantage) for the existence of gains from increased international trade.

Tue Jan 23

FTU 3: Protectionism

Reading notes questions:

How do tariffs and quotas work?

In what ways are these policies costly for society?

If the costs are so high, why do these policies remain in place?

What is the sugar tariff-rate quota?

What was the MFA and who did it benefit?

Thu Jan 25

FTU 4 “Trade, jobs and income distribution”

Reading note questions:

How does international trade create and destroy jobs?

According to the author, what is the evidence and how should we interpret it?

How has the US manufacturing sector been affected by international trade?

How has trade with China affected the US?

How has offshoring affected the US economy?

How does international trade affect wages?

Why do some researchers think it contributed to the rise in income inequality in the US?

How does the author interpret the evidence? Do you agree?

What is the trade adjustment assistance program? Do you think it is a useful policy?

Tue Jan 30

FTU 5: Anti Dumping

Reading notes questions:

What is dumping?

How do we figure out that a foreign producer is guilty of it?

Why does it cause trade diversion?

What are the costs of anti-dumping for the US?

How can the law be corrupted?

What is the Escape Clause?

Why does Irwin believe temporary protection from imports doesn’t work? Do you agree with his assessment of cases like steel, textile and Harley Davidson?

Thu Feb 1

FTU 6: Trade and Development I

Reading notes questions:

What data and examples does the author use to argue that more open trade is good for development?

What positive role has international trade played for China and India?

How has NAFTA affected Mexico? Does it confirm or challenge the author’s general view that more open trade is good for development?

What is the author’s view on the issue of sweatshops? Do you agree?

Do you believe in fair trade to help the poor? Why/why not?

Tue Feb 6

Trade and Development II: Reading on Moodle; Post your reading notes today as usual, but look ahead for what you will use this reading for on Thursday Feb 8.

Reading notes questions:

How does Dani Rodrik (the author of this reading)’s view on the East Asian miracle differ from Irwin’s (in the chapter we read for the previous class)?

How is his take on China different from Irwin’s?

Why does this author argue that industrial policy and import-substitution industrialization actually did some good?

For Rodrik, what explains the success of Mauritius and the difficulties of South Africa?

Thu Feb 8

Recorded position speech on Rodrik vs Irwin due BY EMAIL to me by 10:50am. See the prompt at this link.

Tue Feb 13

Trade short paper due on Moodle by 23:59pm. See the prompt at this link.

Thu Feb 15

The politics of multinational corporations: reading on Moodle

Reading notes questions:

What were some concerns of developing countries regarding MNCs ownership of critical natural-resource industries?

Give two types of regulation that developing countries put in place to influence MNCs’ activities?

What are export processing zones?

Why do MNCs usually enjoy more bargaining power than host countries in low-skilled labor-intensive manufacturing industries?

Why have advanced industrial countries have been less vulnerable to foreign MNCs’ domination than developing countries?

Tue Feb 20

The Trans-Pacific Partnership

Readings:

FTU Chapter 7, only pp281-294 (Regional Trade Agreements)

Read through the set of 10 cards explaining the (now old) TPP here: http://www.vox.com/cards/trans-pacific-partnership/what-is-the-trans-pacific-partnership

Listen to this 20 min podcast about the revival of the TPP (the CPTPP!): https://piie.com/experts/peterson-perspectives/trade-talks-episode-12-how-save-pacific-trade-deal

Reading note questions:

How to regional trade agreements (RTAs) differ from WTO multilateral agreements?

Why are many economists skeptical about preferential trade arrangements?

Why do preferential/regional trade agreements include “rules of origin?”

In your view, which aspects of the TPP seem especially controversial?

How is the TPP being revived without the US?

Thu Feb 22

China in Africa

Watch these two videos (25 min and 39 min) about China’s involvement in Africa

China’s African gold rush https://www.youtube.com/watch?v=A9QzwKjMNsc

How China is changing Africa https://www.youtube.com/watch?v=wj79k-CUZhU

“Reading” note questions:

Explain several examples of China’s economic relationship with African countries

What are some benefits of China’s push on the African continent?

What are some downsides?

What do you see as key ingredients for China’s involvement to benefit Africans themselves? What are some opportunities and challenges ahead?

Tue Feb 27

(CHANGE OF PLAN. India in Africa replaced with workshop)

Class workshop for research on the upcoming trade paper.

Today, we are working on your upcoming research paper, so you can do some research and ask me questions as needed.

If you don’t yet use a software for your citations, you should start, it’s so much easier, and formats can be changed in 2 seconds even when you are all done with the paper. The library has Refworks, but the free Firefox extension Zotero is very good too.

If you are interested, here’s an excellent Zotero tutorial: how to get started, build a reference database, and include citations and bibliography in Word. If you have never used a citation and bibliography management software, this is well worth the 15 minutes or so. It will save you HOURS of very tedious work in all your classes: https://www.youtube.com/watch?v=mP5AzJHXfIA

 

Thu Mar 1

QUIZ STARTS AT 9:30AM Trade quiz 2 (cumulative, all topics so far).

Tue Mar 6

No reading. Material provided in class. Work on your paper.

Thu Mar 8

Trade research paper due on Moodle by 23:59pm.

SPRING BREAK

Tue Mar 20

RDE 2: The Tequila Crisis

Reading notes questions:

What kind of reforms international investors convinced there was a “Mexican miracle” in the early 1990s?

What factors reversed investors’ confidence in the Mexican economy?

Why did the Mexican central bank have to stop defending the fixed exchange rate regime?

What role did the US Treasury and the World Bank play to stop the panic?

Thu Mar 22

RDE 4: Asia’s crash

Reading notes questions:

During the economic boom in Thailand, what did the Thai central bank have to do to prevent an appreciation of the baht?

What is crony capitalism?

Why does Krugman argue there is a vicious circle of financial crisis?

Which other Asian countries suffered due to “contagion” from the Thai crisis?

Tue Mar 27

RDE 5: Understanding the capital controls debate

Reading notes questions:

What is an “adjustable peg” exchange rate system?

What is the trilemma that policy makers in each nation face in the global economy?

What are capital controls?

What is a self-fulfilling crisis?

Why does Krugman blame the “confidence game” for Brazil’s 1998 crisis?

Thu Mar 29

RDE 6 and 7: Hedges funds; Greenspan’s bubble

Reading notes questions:

For chapter 6:

Explain how George Soros made a lot of money by playing with the British Pound.

What happened in the panic of 1998?

For chapter 7:

What does Krugman mean when he says that Alan Greenspan let “the punch bowl stay out while the party went on”?

On housing, why did lenders relax their standards, according to Krugman?

What is the securitization of home mortgages?

What is a collateralized debt obligation (CDO)?

For Krugman, what does Greenspan’s approach to monetary policy have to do with the housing bubble?

Tue April 3

EURO 1 and 2

Intro to the European Debt Crisis

Reading notes questions:

Chapter 1 (Note: there is a lot in here, too much! It’s a very fast overview of the whole picture. We will break each part down in the next chapters as we progress)

How would you describe the central divergence between Northern and Southern European countries? How did this contribute to the crisis? (Note: think about the balance of payments, notably capital inflows and outflows)

Why did the Euro help governments and households borrow more in countries like Ireland, Spain and Greece?

Why did the “interest rate spread” between Germany and Greece rise after October 16, 2009?

Why does the author say that the Eurozone had a crisis prevention system but no crisis management system?

Chapter 2:

What makes the Euro a currency of a kind “never seen before?”

What were some reasons to be skeptical of the Euro back in the times when it was just a project?

What were the behavioral, logical and political reasons behind the strong push for the Euro, despite all the cautionary arguments?

Thu Apr 5

Euro 3, 4 and 5

Reading notes questions:

Chapter 3

Why did the German model dominate in shaping the ECB?

What provisions guaranteed ECB independence?

How was budgetary discipline incorporated in the Euro architecture?

Chapter 4

Why was the monetary union seen as incomplete?

Why did Germany and France disagree on what to do about it?

Chapter 5

According to the author, how did many European countries fail to adapt to make sure they could function as part of a monetary union?

Tue Apr 10

Short finance paper due at 10:50am (end of class time)

Recorded finance speech due by 23:59pm

Thu Apr 12

Euro 6, 7, 8, 9

Reading notes questions:

Chapter 6

How did Germany boost its competitiveness?

How did the ECB interest rate policy help make the divergence between Germany and Europe destabilizing?

Chapter 7

Why was Greece a “perfect culprit?”

What were some problems with the crisis prevention framework for the Euro area?

Chapter 8 (note: we will spend most of the time of class on the case of Spain)

What drove the Spanish economic boom of the 2000s and what role did the Euro play?

Why did high inflation persist?

Why did market forces fail to correct imbalances?

Why could the Bank of Spain have done to prick the bubble, and why did it fail to act?

Why did the EU fail to act?

Chapter 9

What were key weaknesses in France and Italy?

Tue Apr 17

Euro 14, 15, 17

Reading notes questions:

Chapter 14

In Europe, unlike in the US, why has so much emphasis been placed on fiscal discipline and consolidation to address the crisis?

Chapter 15

Some have discussed the possibility that Greece leave the Euro area, a “Grexit!” What obstacles does the author see to a Euro area exit?

Chapter 17

According to the author, why was there “a lethal feedback loop between banks and sovereigns?”

How could Eurobonds help address this?

What about the banking union?

Thu Apr 19

Should West African countries adopt a single currency?

Read this article: https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/AEB_Vol_7_Issue_1_2016_Why_and_when_to_introduce_a_single_currency_in_ECOWAS.pdf

Tue Apr 24

Tax havens

Problems and opportunities created by tax havens https://www.researchgate.net/publication/247576283_What_Problems_and_Opportunities_Are_Created_by_Tax_Havens

Why tax havens are political and economic disasters https://www.theatlantic.com/business/archive/2016/07/tax-haven-curse/491411/

Thu Apr 26

Cryptocurrencies

Christine Lagarde speech https://www.imf.org/en/News/Articles/2017/09/28/sp092917-central-banking-and-fintech-a-brave-new-world

Article in Finance and Development http://www.imf.org/external/pubs/ft/fandd/2016/06/adriano.htm

Economics of currency competition http://voxeu.org/article/competition-between-government-money-and-cryptocurrencies

Digital currency and the future of central banking http://voxeu.org/article/benefits-central-bank-digital-currency

Bitcoin bubble https://www.theatlantic.com/business/archive/2017/12/bitcoin-bubble/547952/

Tue May 1

QUIZ STARTS AT 9:30am. International finance quiz 2 (cumulative, all finance topics)

Tue May 8 by 10am

Finance paper due on Moodle. This is the end of officially scheduled final exam (there’s no final exam, just the paper to turn in online).

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