Applied Macro and International Economics II Syllabus

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Patience Tate
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1 Applied Macro and International Economics II Syllabus This course is the continuation of (and if you are a Sloan Fellow). The course is divided in three distinct sections. The first one addresses questions of sustainability from a macroeconomic point of view. I discuss a framework called PROMISE (I am still working on it ) The underlying problem is how can standards of living be improved in a sustainable manner. In this context, sustainability has more than one dimension: (i) obviously sustainability from the environmental and resource use; but also from (ii) social and political; (iii) institutions; (iv) economy and markets; (v) organizations; (vi) relations; (vii) and personal. Growth in standards of living and social wellbeing needs all dimensions to be internally consistent. For example, it makes no sense to grow the economy if that is inconsistent with the environment. Furthermore, it is inconsistent if growth collides with personal aspirations. We develop a framework where we can study the interactions between all these dimensions and study each dimension in particular. We will use my class notes to develop this framework. The second part of the course deals with economic policy. Having understood what economies need to do, then the next step is to consider how those actions can be implemented. Questions such as: How to deal with problems and conflicts that arises from international trade? How to deal with corruption and its economic impact? What are the problems of poverty and income distribution? In fact, what are the implications of the actual programs dealing with poverty in different countries and their overall impact? How can we design social security systems that are viable? What about health care systems? How to solve the problems of public choice, public goods, externalities, etc.? We will devote a fair amount of time to understand the international and macroeconomic implications of these issues. And how the solutions differ across the globe (and why they differ). In most of the problems highlighted there are welfare gains that can be generated, although they will be rarely fairly distributed among the population. To understand these problems we will rely heavily on simulations, games, and cases. The last part of the course talks about how technology is changing the macro economy. I will pay attention to three main issues: how technology is changing currencies (cryptocurrencies), how technology is changing the banking and payment system, and how technology is affecting the way statistical offices work (very related to my research with Alberto Cavallo on the Billion Prices Project). Most of the readings are from three sources: my class notes (MIM) Managerial International Macroeconomics, from (FT) Feenstra and Taylor s International Economics book, and from (JG) Jonathan Gruber s Public Finance Book. Prerequisites: you must have before taking this class if you are an MBA. No exceptions! If you are a Sloan Fellow and you were enrolled in then you have the prerequisite already. Important, we will use notes that I have been writing. The chapters will be available as we go along...

2 Evaluation The course is a combination of lectures, simulation, exercises and cases. The grade is entirely driven by case write-ups. For some of the classes I ll require some questions to be addressed before we meet. If the class has no question assigned, then no case writeup is required. You have to have a write up for EVERY class that has a question. You should work in teams of two or three no more than that. You HAVE to send the case write-up before the class to the TA. The subject needs to say case #. Where # is the number of the case or the date of the class. There are 5 total deliverables (That s it!) The questions address aspects of the case that need further analysis. Every question should be answered (at most) in one page. Believe me, you DO NOT NEED more than a page. Contact Information Professor Roberto Rigobon Office: E rigobon@mit.edu Office Hours: By appointment Teaching Assistant (only for grading) Section 0830am: Section 1000am: Diego Aparicio dapa@mit.edu Jasmin Yu jasminyu@mit.edu Communication Please, use s! And very important, in the subject please put I receive hundreds of a day and I have a special filter in the when I deal with this course. This will maximize the likelihood that I read your !

3 Class Schedule Class Date Tittle Case # Case Tittle 1 4/2/18 M PROMISE 2 4/4/18 W BBNN: Internal and External Adjustment 3 4/6/18 F Automatic Adjustment and External Account Measurement HBS U.S. Current Account Deficit 4 4/9/18 M Shocks to BB and NN HBS Japan: Betting on Inflation? 5 4/11/18 W Social Peace Line and Political Cycles HBS Hank and Nancy: The Subprime Crisis 6 4/13/18 F NO CLASS 7 4/16/18 M Patriots Day (No Class) 8 4/18/18 W Environmental Restriction Line 9 4/20/18 F Market Failure: Introduction 10 4/23/18 M Market Failure: Public Goods: Social Security Kellog KEL493 Reforming Social Security Around the World 11 4/25/18 W Market Failure: Natural Monopolies: Natural Resources 12 4/27/18 F Market Failure: Public Choice: Democracy 13 4/30/18 M Market Failure: Unacceptable Outcomes: Poverty and Two Science Articles (By Piketti and by Inequality Author) 14 5/2/18 W Market Failure: Health Care in the US 15 5/4/18 F Contagion and the European Monetary Union 16 5/7/18 M New Technologies: Payment Systems 17 5/9/18 W New Technologies: Cryptocurrencies 18 5/11/18 F Organizations: Labor in the Digital Era RGE chapters 19 5/14/18 M PROMISE: Putting all together 20 5/16/18 W Personal: Life Through Others 21 5/18/18 F

4 Assignments and Required Readings Class Date Readings or Videos Case Questions 1 4/2/18 2 4/4/18 (RR): BBNN: Basic 3 4/6/18 4 4/9/18 (RR): BBNN: Shocks 5 4/11/18 (RR): BBNN: Social Peace 6 4/13/18 7 4/16/18 8 4/18/18 (RR): BBNN: Sustainability 9 4/20/ /23/18 (JG): Public Goods: Problems and Solutions (Chapter 7) 11 4/25/ /27/ /30/18 (JG): Implementing Public Goods: Political Economy and Public Choice (Chapter 9) 14 5/2/18 (JG): Externalities: Problems and Solutions (Chapter 5) 5/4/ /7/ /9/ /11/ /14/ /16/ /18/18 Video: Video: How Is the US sustainable? Find in trading economics the CA for the last years and depict the evolution of the economy relative to the BB (assume a constant e/w). Comment on the movememts of the economy. What is the diagnostic of the Japanese Economy? What reforms do ypou recommend? Find in trading economics the CA and Wage Changes in any of the last three years and do a BBNN diagnostic! UK: What are the advantages of Protection? Reduction of immigration, and increase in tarrifs. Answer for one country only: How would you change the social security system in US, France, or Japan? (only one country) In one page! What is the solution to the problem of income inequality in a developed nation?

5 Recommended Readings Class Date Additional Readings 1 4/2/18 2 4/4/18 3 4/6/18 (FT): National and International Accounts (Chapter 16) 4 4/9/18 5 4/11/18 6 4/13/18 7 4/16/18 8 4/18/18 (FT): Trade and Technology: The Ricardian Model (Chapter 2) 9 4/20/18 (RR): Preliminaries on Public Finance 10 4/23/18 (JG): Social Security (Chapter 13) 11 4/25/ /27/ /30/18 (JG): Chapters 12 and /2/18 5/4/ /7/ /9/ /11/ /14/ /16/ /18/18

Applied Macro and International Economics II 2016 Syllabus

Applied Macro and International Economics II 2016 Syllabus This course is the continuation of 15.012 (and 15.015 if you are a Sloan Fellow). The course is divided in three distinct sections. The first