Syllabus
19.2. Lecture: Benefits of international financial liberalisation in the 2-period model of intertemporal trade; Seminar: BoP terminology and identities; 2-period model - exercises 26.2. Lecture: Further issues: borrowing constraints, productive economy, large economies; Seminar: 2-period model extensions - exercises 4.3. Lecture: Welfare implications of sudden stops in international financial flows; Seminar: Sudden stops and capital flight - exercises 11.3. Lecture: Twin deficits in the OLG model, Feldstein-Horioka puzzle; Seminar: OLG model - exercices 18.3. Lecture: CA dynamics in the infinite-horizon model with perfect financial markets; Seminar Infinite horizon - exercises 25.3. Lecture: Long-term economic growth with international borrowing constraints; Seminar: Terms-of-trade shocks and CA balance
(1.4. Easter holiday) 8.4. Lecture: Price level convergence and the Ballassa-Samuelson effect; Seminar guest lecture: Equilibrium real interest rate (r*) in large vs. small-open economies (speaker: Jan Vlček) 15.4. Lecture: Financial imperfections and international financial flows; Seminar: Financial imperfections - 2 country model 22.4. Lecture i: Fundamental-based vs. self-fulfilling currency crisis; Lecture ii: Exchange rate mismatches and their implications 29.4. Lecture: OCA and exchange rate regime choice; Seminar: CNB's analyses for euro adoption 6.5. Lecture: Inflation targeting in small open economies, the exchange rate transmission channel; Seminar: Performance of IT during the GFC in comparison with hard pegs 13.5. Lecture: Foreign exchange interventions under the inflation targeting regime; Seminar: Exchange rate as an unconventional monetary policy instrument
Annotation
This course is focused on advanced international macroeconomics with an emphasis on the issues associated with international financial flows. It contrasts benefits and potential challenges associated with these international financial flows.
It starts with studying the intertemporal trade between economies and equilibrium current account determination with perfect financial markets. The implications of sudden stops in international lending or capital flight are then discussed.
One lecture deals with the twin-deficit phenomenon and interpretation of the Feldstein-Horioka puzzle. The neo-classical growth model for a small open economy facing borrowing constraints is derived.
The price level convergence is also studied using the Balassa-Samuelson effect. Attention is also paid to financial imperfections and their impact on international capital allocation.
The second block of lectures starts with discussing the exchange rate regime choice, currency crises and the optimum currency area theory. The focus is then put on the inflation-targeting regime in small open economies, reaction of central banks to foreign shocks, discussion of exchange rate management under the inflation targeting, etc.
The course assumes a prior good knowledge of closed-economy macroeconomics at the level of master studies.