1. ITF 220: The Economics of International Financial Policy Course Preview, Shopping Day Prof. Jeffrey Frankel January 23, 2015

2. ITF-220: Economics of International Financial Policy I.e., Open-economy macroeconomics Professor: Jeffrey Frankel Office hrs: Mon.4:15-5:15; Tues.2:00-3:00. Pre-requisites: – Introductory micro-economics – Intermediate macro-economics – Comfort with quantitative thinking, esp. algebra

3. 3 Prerequisite for ITF 220: standard Intermediate Macroeconomics. For example: API 121 Macro Theory & Policy Filipe Campante [not offered, 2014-15]

4. 4 At more advanced levels: API-120 Fall JF Advanced Macro for Open Economy I API-119 Spring Filipe Campante Advanced Macro for Open Economy II

5. 5 Other useful / relevant courses Econometrics Finance – – API-141 Fall Akash Deep Finance – ITF 270 Spring Carmen ReinhartFinancial Crises International trade -- – at a much less technical level, ITF-110 F Robert Lawrence Political Economy of Trade ITF-225 SRobert Lawrence Future of Globalization & Larry Summers [not offered, 2014-15]

6. 6 Substitutes for ITF 220 (this course) but at a more basic level: - ITF-100 F International Capital Markets Alfred Schipke [not offered, 2014 ] At a more advanced level: In the Economics Department (FAS), - Ec 1544 S Foundations of International Macroeconomic Policy Gita Gopinath.

7. Topics covered in ITF220 I) ELASTICITIES & THE TRADE BALANCE II) THE KEYNESIAN MODEL OF INCOME III) THE MONETARY APPROACH TO THE BALANCE OF PAYMENTS IV) GLOBALIZATION OF FINANCIAL MARKETS V) FISCAL & MONETARY POLICY UNDER INTERNATIONAL CAPITAL MOBILITY VI) INTERDEPENDENCE & COORDINATION VII) SUPPLY, INFLATION & MONETARY UNION VIII) EXPECTATIONS, MONEY, & DETERMINATION OF THE EXCHANGE RATE Professor Jeffrey Frankel, Kennedy School, Harvard University

8. Some illustrations of international economic questions that we study in ITF220 8

9. 9 Why did the euro depreciate 2 % yesterday, Jan. 22, 2015?

10. Why was the US trade balance on a downward trend, 1965-2011? ($ millions) ↑ Surplus ↓ Deficit Measures of external balance: United States with a few improvements in 1990-91, 2001, & especially 2008-09?

11. Bussière, Callegari, Ghironi, Sestieri, & N.Yamano, 2013, "Estimating Trade Elasticities: Demand Composition and the Trade Collapse of 2008-2009." Why did global trade collapse in the 2008-09 global recession? (much more than usual) 2009

12. Has fiscal austerity helped, as a response to the euro crisis? Source: P.Krugman, 10 May 2012, via R.Portes, May 2013.

13. 13 Why are MacDonald’s hamburgers expensive in Norway & Switzerland? but cheap in India & Ukraine? http://www.economist.com/news/finance-and-economics/21608647-our-flame-grilled-guide-currencies-suggests-dollar-getting-dearer

14. Why did Mexico used to suffer a currency crisis every 6 years? Mexican inflation, 1970-2011 Changes in the $ value of the peso, 1970-2011

15. Hyperinflation: Why did Zimbabwe’s inflation rate reach 2,600% per month in mid-2008?

16. After Fed “taper talk” in May 2013, why did capital flows to Emerging Markets reverse? Powell, Jerome. 2013. “Advanced Economy Monetary Policy and Emerging Market Economies.” Speech at the Federal Reserve Bank of San Francisco Asia Economic Policy Conference, November. http://www.frbsf.org/economic-research/publications/economic-letter/2014/march/federal-reserve-tapering-emerging-markets/

17. Why did EM stocks fall not only in May-June 2013 but also January 2014 ? Source: FT

18. Why did the Swiss National Bank allow the Swiss franc to appreciate 15 % on 1/15/2015? 18