International Finance II

International Finance II (Economic Crisis)

Understand objectives and effects of key policies related to economic crises from both theoretical and empirical perspectives. Economic crises can be classified to (1) currency crisis or BOP crisis, (2) sovereign debt crisis, and (3) financial crisis. Students are expected to become familiar with issues that are common, as well as specific to, each type of economic crises. The first two types can be called as macroeconomic crisis, but recently many countries have experienced financial and macroeconomic crises at the same time. Therefore, students are also expected to recognize structural issues on (4) finance-macro linkages in crises. Lastly, this course will cover recent policy discussions developed since the global financial crisis of 2008.

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Schedule

Class 1. Introduction to the course Part A: Banking and sovereign debt crises Class A1. Overview of economic and financial crises Class A2. Banking crisis: bank run Class A3. Too big to fail problem Class A4. Sovereign debt crisis Class A5. Twin and Triple crises: global financial crisis Class A6: International financial system and globalization Part B: Currency and BOP crises Class B1. Empirical facts on currency attacks and sudden stops Class B2. Introduction to the 1st generation models Class B3. Overview of the 2nd generation models Class B4. A two-good small-open economy (SOE) model of a sudden stop Class B5. A two-good SOE model with a collateral constraint Class B6. Pecuniary externality and policy intervention (subject to change) Class 14. Final exam

Teaching Methods

Lecture (discussions encouraged)

Method of Evaluation

Class participation and exams

Required Textbook

No textbook

Reference Books

Mark Aguiar and Manuel Amador, 2021, The Economics of Sovereign Debt and Default (Princeton University Press). Stijn Claessens, M. Ayhan Kose, Luc Laeven, and Fabian Valencia ed., 2014, Financial Crisis: Causes, Consequences, and Policy Response (IMF). Maurice Obstfeld and Ken Rogoff 1996, Foundation of International Macroconomics (MIT Press). Martin Uribe and Stephanie Schmitt-Grohé, 2017, Open Economy Macroeconomics (Princeton University Press). Carlos A. Vegh, 2013, Open Economy Macroeconomics in Developing Countries (MIT Press).

Notes on Taking the Course

Basic understanding of micro and macroeconomics as well as statistical methods / econometrics are necessary. A prerequisite is Macroeconomics for Public Policy (or its equivalent). Strongly recommended to have taken or to take International Financial Policy.