Macroeconomics of the Open Economy, part II

obligatory courses

(in Polish)

Wymagania wstępne

Makroekonomia zaawansowana Wymagania formalne

Znajomość podstawowych modeli makroekonomii otwartej i determinantów kursu walutowego. W szczególności modelu klasycznego, modelu Mundella-Fleminga oraz modelu Dornbuscha .

Założenia wstępne

„Makroekonomia gospodarki otwartej I”, „Makroekonomia II”, „Zaawansowana makroekonomia”

The lecture is a continuation of the lecture "Macroeconomics of open economy I" from undergraduate studies and is intended for second-cycle (master's) students. The lecture consists of two parts.

The first part covers issues related to the problem of choosing the exchange rate system and determining the level of the exchange rate. The presented theoretical models will be accompanied by a discussion of empirical research relating to the issues discussed.

The second part of the lecture will be devoted to intertemporal macroeconomics in open economy. This part discusses the inter-temporal approach to the current account, dynamics in a small open economy, relations between fiscal policy and the current account, determinants of the real exchange rate, economic growth in the economy, as well as channels for international diffusion of knowledge.

The lecture program on "Macroeconomics of Open Economy II":

1. Models of the exchange rate in empirical research.

The lecture is to identify the factors that shape exchange rate volatility, resulting from the exchange rate models known to students (monetaristic model, Dornbusch model and Mundell-Fleming model), and to confront these predictions with conclusions from empirical research. Organized hours: 2, own work: 4

2. Portfolio approach to the exchange rate.)

Balance on the asset market. Consequences of disturbances in the short and long term. Organized hours: 2, own work: 4

3. New open economy macroeconomics - Obstfeld-Rogoff model (4h) The aim of the lecture is to familiarize students with the basic model of the New Open-Economy Macroecnomics trend, emphasizing the importance of microeconomic optimization in overall equilibrium. Organized hours: 4, own work: 6

4. Uncertainty and expectations and exchange rate volatility. The aim of the lecture is to introduce students to the problem of uncertainty as a factor explaining the instability of exchange rates and the consequences of this for the economy. Organized hours: 2, own work: 4

5. Selection of the exchange rate system.

Discussion of the advantages and disadvantages of various exchange rate systems. The importance of the exchange rate system: the exchange rate system and inflation and growth - a review of empirical research. Impact of exchange rate volatility on the economy - a review of empirical research. Organized hours: 2, own work: 4

6. Intergovernmental approach to the current account. The aim of the lecture is to familiarize students with the inter-temporal approach to the analysis of current account behavior using simple models of general equilibrium for two countries and two periods. organized hours: 2, own work: 4.

7. Dynamics in a small open economy. The aim of the lecture is to familiarize students with the analysis of adjustments taking place in a small open economy using multi-period models in the conditions of a finite and infinite time horizon. organized hours: 2, own work: 4.

8. Fiscal policy versus the current account. The aim of the lecture is to familiarize students with the relations between fiscal policy and the state of the current account. organized hours: 2, own work: 4.

9. Real exchange rate. The aim of the lecture is to familiarize students with factors affecting the real exchange rate, as well as the relationship between the real exchange rate and the current account balance. organized hours: 2, own work: 4.

10. Neoclassical theory of growth in the open economy. The aim of the lecture is to familiarize students with the neoclassical approach to the theory of growth in the open economy based on Solow-Swan, Ramsay-Cassa-Koopmans and the Barro-Manikwa-Sala-i-Martin model. organized hours: 2, own work: 4.

11. New theory of growth in the open economy. The aim of the lecture is to familiarize students with the models of the new theory of growth, in particular the models of Grossman-Helpman and Romer. organized hours: 2, own work: 4.

12. International diffusion of knowledge. The aim of the lecture is to familiarize students with the theory and empiricism regarding international channels of knowledge diffusion, in particular international trade and foreign direct investment. organized hours: 2, own work: 4.

1. Copeland L., Exchange Rates and International Finance, Financial Times/ Prentice Hall 4 Edition (2005) lub 5 Edition (2008)

2. Hallwood C. P., R. MacDonald, International Money and Finance, WileyBlackwell 3rd Edition 2000.

3. Obstfeld M., K. Rogoff, Foundations of International Macroeconomics, MIT Press 1996.

4. Najlepszy E., K. Sobański, Niestabilność równowagi zewnętrznej krajów rozwijających się, PWE 2010.

5. Obstfeld M., K. Rogoff, Foundations of International Macroeconomics, MIT Press 1996.

6. Obstfeld M., K. Rogoff, Foundations of International Macroeconomics, MIT Press 1996, ch. 1..

7. Obstfeld M., K. Rogoff, Foundations of International Macroeconomics, MIT Press 1996, ch. 2.

8. Obstfeld M., K. Rogoff, Foundations of International Macroeconomics, MIT Press 1996, ch. 3.

9. Obstfeld M., K. Rogoff, Foundations of International Macroeconomics, MIT Press 1996, ch. 4.

10. Obstfeld M., K. Rogoff, Foundations of International Macroeconomics, MIT Press 1996, ch. 7.

11. . Obstfeld M., K. Rogoff, Foundations of International Macroeconomics, MIT Press 1996, ch. 7.

12. Barro R., Sala-i-Martin X., Economic Growth, MIT Press, 2004, ch. 8.

A) Knowledge:

1. The student knows the basic models of determination of the exchange rate level,

2. The student understands the weaknesses and limitations of exchange rate modeling,

3. The student knows the basic conclusions of empirical research on the exchange rates.

4. The student understands the importance of the exchange rate system in shaping the economic situation of the country.

5. The student understands the adjustments occurring in the small open economy of the finite and infinite time horizon.

6. The student has knowledge about the relationship between fiscal policy and the current account balance.

7. The student knows the factors affecting the development of the real exchange rate, and understands the relationship between the real exchange rate and the current account balance.

8. The student knows what is the international diffusion of knowledge. He knows the theory and empirics concerning international channels of knowledge diffusion, in particular international trade and foreign direct investment.

B) Skills:

1. The student can indicate the basic determinants of the exchange rate.

2. The student is able to make a critical analysis of the theoretical model using empirical data.

3. The student knows how to determine the consequences of adopting a given exchange rate system for the economy in specific characteristics.

4. The student can indicate the optimal exchange rate system for a country with specific characteristics, as well as can define the optimal choice.

5. The student can analyze the adjustments taking place in a small open economy using multi-period models in the conditions of a finite and infinite time horizon.

6. The student is able to analyze the behavior of enterprises on foreign exchange markets, determine the optimality of these behaviors.

7. The student can think and logically and precisely prove the theses postulated by him.

C) Social competences

1. The student understands the need to verify theoretical conclusions with empirical data.

2. The student is prepared for a critical assessment of the known economic models.

3. The student is aware of the importance of the exchange rate system in shaping the economic situation of the country and society.

4. The student is aware that conclusions from various economic theories are often opposite, and therefore it is necessary to verify these conclusions on the basis of empirical analyzes, which leads to the development of knowledge.

K_K03, K_W01, K_W02, K_U01, K_K01, K_K02, K_K03

The final exam in the subject will have the form of open and problem questions.