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Open Economy Macroeconomics, Spring 2006


This course was offered in English in 2006 to fourth-year undergraduate students in our Professional Career Programme as well as to Master's level graduate students.

The purpose of this course is to introduce basic concepts and basic analytical frameworks of Open Economy Macroeconomics, and to encourage students to apply them in thinking about real-world issues. Students who attend this course are assumed to have sufficient knowledge of entry-level macroeconomics and microeconomics. There are no textbooks, only references as given in the Outline and Lecture Notes.

I. A Review of Closed Economy Macroeconomics
IS-LM Analysis, Aggregate Supply, and Aggregate Demand

II. Basic Concepts in Open Economy Macroeconomics
Small Country Assumption, Stock vs. Flow, The Balance of Payments,
The Exchange Rate, The Interest Rate Parity Condition
-Reference: Kaji, Sahoko (2004) Kokusai Tsuka Taisei no Keizai Gaku (The Economics of Exchange Rate Systems), Nihon Keizai Shimbun Publishing

III. Theories of Exchange Rate Determination
Purchasing Power Parity, Stock Equilibrium Approach, Flow Approach, The Marshall-Lerner Condition, The J-curve Effect

IV. The Mundell-Fleming Results
The M-F Result and the Structure of the Model --- a Simple Model
The M-F Result under Fixed Exchange Rates
Alternative Assumptions: Two-Country, Imperfect Capital Substitution
-Reference: Dornbusch, Rudiger (1980) Open Economy Macroeconomics, Basic Books, Chapter 10
The M-F Result under Flexible Exchange Rates
Alternative Assumption: Two-Country
-Reference: Dornbusch (1980) Chapter 11

V. The Speed of Adjustment of Endogenous Variables and Overshooting
-Reference: Dornbusch (1980) Chapter 11

VI. Economic Interdependence and Choice of Exchange Rate Regimes
-Reference: Canzoneri, M. and D. Henderson (1988) "Is Sovereign Policymaking Bad?"Carnegie-Rochester Conference Series on Public Policy No.28, pp.93-140

KAJI, Sahoko

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