Fall 2010



(Oct. 14) The answers to homework 4 has been posted.

(Oct. 13) Since we elected not to cover Euro, we will talk about the causes of the Great Recession in the last lecture. As such, Chapter 20 will not appear on the final exam. However, if you want to understand more about fixed exchange rate regime, I would suggest that you browse through very quickly the lecture notes on Euro, especially the part on the major flaws of Euro.

Also be reminded, we will spend the second half of the last lecture to talk about the final exam.

(Oct. 13) For those who wanted to see how the calculation of exchange rate movement would be different when you change the base currency, I just uploaded a revised version of Answers to HW3 to demonstrate.

I also posted a provocative piece on what are the avalaible tools to fight deflation, in case you are interested in our discussion today on deflation vs. inflation.

(Oct. 11) For those who would like to practise on the exam, I posted last year's final exam with answers here. Note that last year's exam was close-book; also the chapters covered last time were quite different. Therefore, I would not recommend you spend too much time on it.

(Oct. 10) There were a couple of mistakes in the first question of HW3. Thank you for those who pointed that out.  I made the correction and posted the new version here (in red). The answers stay the same.

(Oct. 8) Homework 4 is up running now and the Answer to Homework 3 has also been uploaded.

(Oct. 1) Homework 3 is up running now.

(Sept. 30) Answer to Homework 2 has just been uploaded.

(Sept. 26) Notice the first meeting next week will be on Tuesday, instead of Wednesday. The venue is PH Ovnhallen.

(Sept. 24) Homework 2 has just been uploaded. Have a nice weekend!

(Sept. 23) Answer to Homework 1 is online now. Please check with your own answers. If you have questions, or haven't done the homework, you should go to the exercise session on Friday.  HW2 will also be posted online on Friday.

(Sept. 18) Please take note of the small correction I made for lecture notes 3, on page 13.   I also posted a note regarding Stolper Sameulson Theorem.

(Sept. 17) Correction: The readings for next Wednesday should be Chapter 9 & 10, not 10 & 11.

(Sept. 17) The first homework is up running now!

(Sept. 12) There will be no homework this week. The first homework assignment will be given to you next Thursday (on Sept. 16), and you'll have more than one week to work on it before meeting with Rikke Christensen, your exercise session instructor, on the coming Friday (Sept. 24).


Lecture Notes Update:

Lecture notes 1         Lecture notes 2          Lecture notes 3

Lecture notes 4         Lecture notes 5          Lecture notes 6

Lecture notes 7         Lecture notes 8          Lecture notes 9

Lecture notes 10       Lecture notes 11       Lecture notes 12 (also pps version)

Lecture notes on Euro: Experiments of Regional Common Currency


Other Notes and Comments:

              A note on Stolper Sameulson Theorem


Homework Assignments:

HW1      HW2       HW3      HW4  

    Homework Answers:

AK1      AK2       AK3      AK3 with revisions    AK4  



Sept. 8, 2010      Introduction and Overview (L1)

                                 Required reading:

                                 > Krugman & Obstfeld (KS) Chapter 1 & 2


Sept. 9, 2010      Understanding Copmarative Advantage (L2)

                                 Required readings:

                                 > KS Chapter 3: Ricardian Model

                                 > Matthew Slaughter, "What is an 'American' Car?", Wall Street Journal, May 7,                                        2009               


Sept. 15, 2010    Trade and Income Inequality (L3)

                                 Required readings:

                                 > KS Chapter 4: Heckscher-Ohlin Model

                                 > Paul Krugman, "Trade and inequality, revisited", June 2007.

                                 > Heather Wilhelm, "How China Helps America's Poor", The American, Sept. 12,                                       2008


Sept. 16, 2010    Basic Trade Policy Tools (L4)

                                 Required readings:

                                 > KS Chapter 8

                                 > Milton Friedman, "The Case for Free Trade", 1980.


Sept. 22, 2010    International Trade Policies (L5)

                                 Required readings:

                                 > KS Chapter 9 & 10

                                 Optional reading:

                                 > Paul Krugman, "Competitiveness: A Dangerous Obsession", Foreign Affairs,                                        March/April, 1994.




Sept. 23, 2010    Balance of Payments and Introduction to FX Market (L6)

                                 Required readings:

                                 > KS Chapter 12 & 13

                                 > Chad Bown and Rachel McCulloch, "Q&A on the Trade Deficit ", The American,                                       Jan. 31, 2007.


Sept. 28, 2010    Exchange Rate Determination, Part I (L7)

                                 Required readings:

                                 > KS Chapter 14 (starting from p360) & 15


Sept. 30, 2010    Exchange Rate Determination, Part II (L8)

                                 Required readings:

                                 > KS Chapter 16

                                 > Link: GapMinder and the dynamics of Wage and Labor Productivity


Oct. 6, 2010        Exchange Rate Regimes (L9)

                                 Required readings:

                                 > KS Chapter 17

                                 > "Fix or Float?", Economist Magazine, 01/28/1999.



Oct. 7, 2010        History of International Monetary System (L10)

                                 Required readings:

                                 > KS Chapter 18

                                 > Ben Bernanke, "Money, Gold and Great Depression", March 2, 2004.

                                 Optional reading:

                                 > "Currency Wars: A Fight to Be Weaker", Wall Street Journal, 09/29/2010.


Oct. 13, 2010      Euro: Experiments of Common Currency (L11)

                                 Required readings:

                                 > KS Chapter 20

                                 > "Currency Union Teetering, 'Mr. Euro' Is Forced to Act", WSJ, 09/27/2010.

                                 Optional reading:

                                 > Martin Feldstein, "Reflections on Americans' Views of the Euro Ex Ante", Jan. 2009


Oct. 14, 2010      Global Imbalances and the Great Recession (L12)

                                 Required readings:

                                 > NONE