Syllabus

Course description:

The forces of globalization – trade and financial liberalization, political integration and technological change – have led to a dramatic expansion of the global financial system during the last two decades. Rapidly increasing private capital flows have provided the foundation for economic growth and wealth creation in a large number of developing economies. Yet, they may also have contributed to a series of severe international financial and economic crises from Latin American in the 1980s to East Asia, Asia and Brazil at the end of the 1990s and the financial collapse in Argentina in 2002. The crisis that started in August 2007 is currently affecting the developed countries. These setbacks, along with perceptions that inequality is on the rise worldwide, have provided the impetus for an increasingly vocal opposition to globalization. The process is therefore controversial and its continuation is not necessarily certain.

The course will examine how these powerful forces of international capital flows are shaping public policy decisions at the national and the international level. Class discussions will be based on selected theoretical and policy papers.

Requirements

Graduate students and MIA students who do not claim interdisciplinary credits will have to satisfy two requirements, each of which will count for half of the final grade:

• Make a class presentation of twenty minutes during one of three dedicated sessions. The presentations should be prepared in groups of 3. Assignments will be made on a first come- first served basis.
• Write a take-home exam, which will be distributed during the last session on Dec. 16 and be due on January 7, 2008.

MIA students who enroll in this class in order to obtain the required interdisciplinary credits must submit in addition a 5000-word (about 15 pages double-spaced) research paper (either single-authored or co-authored with another student).  Grading is as follows: 40% for the research paper, 30% for the final take-home exam and 30% for the class presentation.

Readings:

The emphasis of the course is not upon the technical aspects of the operation of financial markets, but rather upon the evolving political and institutional context in which they operate. Nevertheless, students must have a basic understanding of international macroeconomics.
Students should be familiar with the material presented in macroeconomic textbooks such as Obstfeld-Krugman or Burda-Wyplosz. Students are strongly encouraged to explore the websites listed below and the rapidly expanding sites dealing with globalization.

Economics – References:

• Burda, M. and Wyplosz, C., Macroeconomics, A European Text (Fourth edition).
• Krugman, P. and Obstfeld, M. International Economics: Theory and Policy (latest edition). especially parts III and IV.
• Economics and International Political Economy – General (selected) Bibliography:
• Cohn, Theodore H. 2007. Global Political Economy: Theory and Practice. New York: Longman (4th edition).
• Dicken, Peter 2007.  Global Shift: Reshaping the Global Economic Map in the 21 st Century. London: Sage.
• Eichengreen, Barry (1996). Globalizing Capital. Princeton: Princeton University Press.
• Eichengreen, Barry (2002). Financial Crises. Oxford: Oxford University Press.
• Grieco, Joseph M. and G. John Ikenberry (2003). State Power and World Markets. New York: W.W. Norton.
• Helleiner, Eric (1994). States and the Reemergence of Global Finance: From Bretton Woods to the 1990s. Ithaca: Cornell University Press.
• Luttwalk, Edward (2000). Turbo Capitalism. Winners and Losers in the Global Economy. New York: HarperCollins (anti-establishment but thoughtful account of evolution towards winner take all turbo capitalism with its inevitable societal upheavals and economic inequities).
• Ravenhill, John, ed., (2008). Global Political Economy. Oxford: Oxford University Press (2nd edition).
• Soros, George (1994). The Alchemy of Finance. New York: John Wiley & Sons (difficult but insightful account of a great speculator's investment reasoning).
• Stiglitz, Joseph (2002) Globalization and its Discontents, New York: W.W. Norton.

Journals:

International Organization; World Politics; The World Economy; International Studies Quarterly; American Political Science Review; Review of International Political Economy (RIPE); Journal of Economic Perspectives; World Development; Journal of Common Market Studies. Economic Policy; Foreign Affairs

Newpapers, Magazines:

The Economist and Financial Times

International Organizations:

Students should carefully explore the International Monetary Fund's website http://www.imf.org/external/index.htm which covers a wide range of information and publications. For most countries, the IMF now publishes its annual economic reviews or abstracts thereof (Article 4 reviews).  With regard to the Asian crisis, the IMF’s May 1998 International Capital Markets reports is particularly useful.

OECD: for one of the most useful global economic data references, see the OECD's World Economic Outlook. http://www.oecd.org/

Bank of International Settlements: BIS Annual Report, http://www.bis.org/

For World Development Reports and the World Debt Tables, go to the World Bank's website: http://www.worlbank.org

The European Commission's website contains links to all other EU websites. 

National Central Banks:

All national central banks maintain rich websites. In particular, you should look at major monetary policy speeches by prominent central bankers as well as the most important regular economic publications of leading central bank (Federal Reserve Bank, European Central
Bank, Bank of Japan, Bank of England, German Bundesbank, Swiss National Bank etc.)

Course Outline

Articles marked with a star (*) are required reading for all students. We will provide on the webpage of the course electronic versions for all readings that are not available online.

1. Introduction: Globalization, Trends and Reversibility (Sept. 16, 2008)

• *Abdelal, Rawi and Adam Segal (2007). “Has Globalization Passed its Peak?” Foreign Affairs 86:1: 103-114.
• *Rodrik, Dani (1998). "Symposium on Globalization in Perspective: An Introduction." The Journal of Economic Perspectives 12(4): 3-8.
• *Williamson, Jeffrey (2002) “Winners and Losers Over Two Centuries of Globalization”, NBER Working Paper No. 9161.

• Bourguignon, François et al (2002) “Making Sense of Globalization, A Guide to the Economic Issues”, Policy Paper 8, CEPR, London.
• Eichengreen, Barry and Harold James (2001) “Monetary and Financial Reform in Two Eras of Globalization”, University of California, Berkeley.
• Faria, André, Paolo Mauro, Martín Minnoni and Aleksandar Zaklan (2006) “The External Financing of Emerging Market Countries: Evidence from Two Waves of Financial Globalization”, IMF Working Paper No. WP/06/205.
• Obstfeld, Maurice and Alan Taylor, (2002) “Globalization and Capital Markets”, University of California, Berkeley.
• O'Rourke, Kevin H. (2001) “Globalization and Inequality: Historical Trends”, NBER Working Paper 8339.

 
PART I: MANAGING INTEGRATION: FEATURES AND VARIETY OF RESPONSES

2. Managing integration: the international dimension (Sept. 23, 2008)

• *Aggarwal, Vinod K. and Cédric Dupont (2008). Collaboration and Coordination in the Global Political Economy. In John Ravenhill, ed. Global Political Economy. Oxford, Oxford University press, pp. 67-94.
• *Kaul, Inge, and Ronald U. Mendoza, “Advancing the Concept of Public Goods”, in Inge Kaul, Pedro Conceição, Katell Le Goulven and Ronald U. Mendoza (eds.), Providing Global Public Goods: Managing Globalization, New York, Oxford University Press, 2008, http://www.undp.org/globalpublicgoods/globalization/pdfs/KaulMendoza.pdf

• Drezner, Daniel W. 2007. All Politics is Global. Princeton: Princeton University Press (chap. 2)
• Koromenos, B., C. Lipson, et al., “Rational Design: Looking Back to Move Forward”, in International Organization, 55(4), 2001, pp. 1051-1082, read pp.1054-1064 (empirical results)
• Williamson, Oliver E. (2002). The Theory of Firm as Governance Structure: From Choice to Contract”. Journal of Economic Perspectives 16(3): 171-195.

3. Managing integration: the national level (Sept. 30, 2008)

• *Bernhard, William, et al. (2002). The Political Economy of Monetary Institutions. International Organization 56(4): 693-723.
• *Freeman, John R. (2002). Competing Commitments: Technocracy and Democracy in the Design of Monetary Institutions. International Organization 56(4): 889-910.
• *Keefer, Philip and David Stasavage (2003). The Limits of Delegation: Veto Players, Central Bank Independence, and the Credibility of Monetary Policy. American Political Science Review 97(3): 407-423.

• The Economist (2007). Britain’s bank run: The Bank that failed, Sept. 22, p. 16
• The Economist (2007). Only Human. A Special Report on Central Banks and the World Economy, Oct. 20.
• Pearce, David H. (2003). Societal Preferences, Partisan Agents, and Monetary Policy Outcomes. International Organization 57(2): 373-410.

 
PART II: LIFE IN AN INTEGRATED WORLD

4. Policy risks (1): The Effects of Financial Liberalization in Emerging Market Countries (Oct. 7, 2008)
 

• *Eichengreen, Barry (2008) “Exchange Rate Regimes and Capital Mobility: How Much of the Swoboda Thesis Survives?”, unpublished paper.
• *Reinhart, Carmen and Ioannis Tokatlidis (2001) “Before and After Financial Liberalization”, University of Maryland and NBER.
• *Wyplosz, Charles (2002) “How Risky is Financial Liberalization in the Developing Countries?” Comparative Economic Studies, June.

• Catão Luis A.V. (2006) “Sudden Stops and Currency Drops: A Historical Look”, IMF Working Paper No. WP/06/133.
• Cizre, Umit and Erinç Yeldan (2005). The Turkish encounter with neo-liberalism: economics and politics in the 2000/2001 crises. Review of International Political Economy 12(3): 387-408.
• Hahm, Joon-Ho and Frederic Mishkin 2000. The Korean Financial Crisis: An Asymmetric Information Perspective, Emerging Markets Review 1:21-52.
• Kaminsky, Graciela and Carmen Reinhart (1998) "On Crises, Contagion, and Confusion", unpublished, November 1998. http://www.puaf.umd.edu/papers/reinhart.htm
• Kaminsky, Graciela and Sergio L. Schmukler (2002) “Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization”, George Washington University. http://home.gwu.edu/~graciela
• Kim, Andrew E. 2004. Social Perils of the Korean Financial Crisis. Journal of Contemporary Asia 34(2): 221-237.
• MacIntyre, Andrew (2001). "The Politics of the Economic Crisis in Southeast Asia." International Organization 55(1): 81-122.
• Shambaugh, George E. (2004). The Power of Money: Global Capital and Policy Choices in Developing Countries. American Journal of Political Science 48(2): 281-295.

5. Policy risks (2): The Effects of Financial Liberalization in Developed Countries (Oct. 14, 2008)

• *Cecchetti, Stephen (2008) “Monetary Policy and the Financial Crisis of 2007-2008”, CEPR InsightNo. 21. http://www.cepr.org/pubs/PolicyInsights/PolicyInsight21.pdf
• *Hildebrand, Philipp (2008) “The Credit Crunch”, Presentation to the Group of 30.
• *Reinhart, Carmen and Kenneth Rogoff 2008. Is the 2007 Sub-Prime Financial Crisis So Different? An International Historical Comparison. NBER Working Paper Series, 13761.

• The Economist (2008) “Hall of Shame”.
• Hiroshi Nakaso (2001) “The financial crisis in Japan during the 1990s: how the Bank of Japan responded and the lessons learnt”, BIS Papers No 6.
• Eichengreen, Barry 2008. Thirteen Questions about the Subprime Crisis, Berkeley: ms.
• The Economist (2008) Briefing: Wall Street’s Crisis, pp. 73-82, March 22

 
6. Lessons learnt (1) (Oct. 21, 2008)

Student presentations: The pros and cons of financial integration.

 
PART III: GLOBAL GOVERNANCE: THE CHALLENGES

7. Domestic Governance: Options and risks (Oct. 28, 2008)

• *Archer, C. C., G. Biglaiser, et al. (2007). "Sovereign Bonds and the "Democratic Advantage": Does Regime Type Affect Credit Rating Agency Ratings in the Developing World?" International Organization 61(3): 341-365.
• *Eichengreen, Barry and David Leblang (2006), Democracy and Globalization, NBER Working Paper No. 12450.
• *Quinn, Denis (2002). "Political and International Financial Liberalization." Paper presented at a CEPR/CREI Conference on "Controlling Global Capital: Financial Liberalization, Capital Controls and Macroeconomic Performance, ms.

• Anoop Singh (2006) “Macroeconomic Volatility: The Policy Lessons from Latin America”, IMF Working Paper No. WP/06/166.
• Bird, Kelly, Hal Hill, et al. 2008. "Making Trade Policy in a New Democracy after a Deep Crisis: Indonesia." The World Economy: 947-968.
• Hardie, Ian 2006. The Power of Markets? The International Bond Markets and the 2002 Elections in Brazil. Review of International Political Economy 13(1): 53-77.
• Przeworski, Adam 2004. Institutions Matter? Government and Opposition 39(4): 527-540.

8. International Power: Toward a new world? (Nov. 4, 2008)

• *Aizenmann, Joshua and Jaewoo Lee (2008). “Financial versus Monetary Mercantilism: Long-term view of large international reserves hoarding,” The World Economy : 593-611
• * Eichengreen, Barry (1996) “Hegemonic Stability Theory and Economic Analysis: Reflections on Financial Instability and the Need for an International Lender of Last Resort”, University of California, Berkeley Center for International and Development Economics Research (CIDER) Working Paper: C96/080 October 1996 http://iber.berkeley.edu/wps/cider/c96-80.pdf
• *Haass, Richard N. (2008). "The Age of Nonpolarity." Foreign Affairs 87(3): 44-56.
• *Kimmitt, Robert (2008). “Public Footprint in Private Markets: Sovereign Wealth-Funds in the World Economy,” Foreign Affairs 87(1): 119-130

• Bowles, Paul and Baotai Wang 2008. "The rocky road ahead: China, the US and the future of the dollar." Review of International Political Economy 15(3): 335 — 353.
• Cooper, Andrew F., Agata Antkiewicz, et al. 2007. "Lessons from/for BRICSAM about South-North Relations at the Start of the 21st Century: Economic Size Trumps All Else?" International Studies Review 9: 673-689.
• Siebert, Horst 2007. "China: Coming to Grips with the New Global Player." The World Economy: 893-922.
• The Economist (2008). “Sovereign-wealth funds: Asset-backed insecurity,” Jan. 19.

9. From one Washington consensus to the next? (Nov. 11, 2008)

• * Commission on Growth and Development (2008), Report Highlight. http://www.growthcommission.org
• *Naim, Moses (2000) “Washington Consensus or Washington Confusion” Foreign Policy 118: 87-103.
• * Rodrik, Dani (2008) “Spence Christens a New Washington Consensus”, The Economists' Voice: 5 (3). http://blog.doingbusiness.org/files/Review.pdf

• Abdelal, Rawi and Laura Alfaro (2003). “Capital and Control. Lessons from Malaysia,” Challenge 46:4: 36-53
• Williamson, John (2003) “From Reform Agenda to Damaged Brand Name”, Finance and Development 40(3): 10-113

10. Lessons learnt (2) (Nov. 18, 2008)
 
Student presentations: Do we have a safe recipe?

PART IV: GLOBAL GOVERNANCE: THE CHALLENGES

11. Challenges for a global architecture (1): the international organizations (Nov. 25, 2008)

• *Bird, Graham and Dane Rowlands 2006. "IMF quotas: Constructing an international organization using inferior building blocks." Review of International Organizations 1: 153-171.
• *Joyce, Joseph P. and Todd Sandler 2008. "IMF retrospective and prospective: A public goods viewpoint." Review of International Organizations 3: 221-238.
• *The Economist (2008) “Who Runs the World?” July 3.

• Kenen, Peter, Jeffrey Shafer, Nigel Wicks and Charles Wyplosz (2004) “International Economic and Financial Cooperation: New Issues, New Actors, New Responses”, Geneva Reports on the World Economy 6, London: CEPR.
• Lombardi, Domenico 2008. "The governance of the World Bank: Lessons from the corporate sector." Review of International Organizations 3: 287-323.
• Porter, Tony (2001). The Democratic Deficit in the Institutional Arrangements for Regulating Global Finance. Global Governance 7(4): 427-439.
• Pauly, Louis W. (1999). "Good Governance and Bad Policy: The Perils of International Organizational Overextension." Review of International Political Economy 6(4): 401-424.
• Rapkin, David P. and Jonathan R. Strand 2006. Reforming the IMF's Weighted Voting System. The World Economy 29(3): 305-323.
• Woods, Ngaire and Domenico Lombardi (2006). Uneven Patterns of Governance: How Developing Countries Are Represented in the IMF. Review of International Political Economy 13(3): 480-515. (available online from HEI campus)

 

12. Regionalism to the rescue? (Dec. 2, 2008)

• *Baldwin, Richard (1997) “The Causes of Regionalism”, The World Economy 20(7): 865-88. 
• *Cooper, Scott (2007). "Why Doesn't Regional Monetary Cooperation follow Trade Cooperation?” Review of International Political Economy 14(4): 626-652.
• *Pomfret, Richard 2007. "Is Regionalism an Increasing Feature of the World Economy?" The World Economy: 923-947.
• *Wyplosz, Charles (2004) “Monetary and Financial Arrangements as Regional Public Goods: A European Perspective”.

• Dieter, Heribert and Richard Higgott (2003). Exploring Alternative Theories of Economic Regionalism: From Trade to Finance in Asian Cooperation? Review of International Political Economy 10(3): 430-454.
• Heymann, Daniel (2001) “Regional Interdependencies and Macroeconomic Crises, Notes on Mercosur”, CEPAL Buenos Aires.
• Masson, Paul R. 2008. "Currency Unions in Africa: Is the Trade Effect Substantial Enough to Justify their Formation?" The World Economy: 533-547.
• Pempel, T.J. (2006) “Firebreak: East Asia Institutionalizes Its Finances”, East Asian InstituteUniversity Of California, Berkeley.
• Whalley, John 2008. "Recent Regional Agreements: Why So Many, Why So Much Variance in Form, Why Coming So Fast, and Where Are They Headed?" The World Economy: 517-532.

 

13. Challenges for a global architecture (3): global financial supervision (Dec. 9, 2008)

• *Financial Stability Forum (2008) “Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience”.
• *Kane, Edward, “Regulation and Supervision: An Ethical Perspective”, unpublished paper, Boston College, 2008.
• *Claessens, Stijn, Geoffrey R. D. Underhill, et al. 2008. "The Political Economy of Basle II: The Costs for Poor Countries." The World Economy: 313-344.

• Bruner, Christopher M. and Rawi Abdelal, “To Judge Leviathan: Sovereign Credit Ratings, National Law, and the World Economy,” Journal of Public Policy, 25(2), 2005: 191-217
• Büthe, Tim 2008. "Politics and institutions in the regulation of global capital: A review article." Review of International Organizations 3: 207-220.
• Goodhart, Charles (2008) “Central Banks’ Function to Maintain Financial Stability: An Uncompleted Task”, un published paper.
• Masciandaro, Donato, Marc Quintyn, and Michael Taylor (2008) “Financial Supervisory Independence and Accountability – Exploring the Determinants”. IMF Working Paper 147.
• Rosas, Guillermo 2006. “Bagehot or Bailout? An Analysis of Government Responses to Bvanking Crises”, American Journal of Political Science 50(1): 175-191.
• The Economist (2008) “Confession of a risk manager”, Aug. 7.
• Büthe RIO 2008

 

14. Lessons learnt (3) (Dec. 16, 2008)

Student presentations: What reforms will really be implemented?