ECGA-5450: Crises, Adjustment
and Poverty in LDCs Fall
2009
Course Description: This course explores the main sources of
instability and crises in
developing
countries, and how governments and international agencies can cope with these
crises to
mitigate their impact on poverty and growth. In particular, examine how surges
in
aid,
private capital flows or commodity prices can destabilize financial markets and
currencies in
poor
and emerging market countries. Large inflows of foreign currency may be the
result of an
aid
surge following a natural disaster or the signing of a peace agreement foreign
aid to deal
with an
HIV-Aids pandemic. We review key debates focus on exchange rate management, on
measures to
manage private capital flows and on effective ways to use target transfers to
protect
the
poor during crises. The appropriate role of the IMF, the World Bank and
bilateral donors also
remains a
subject of debate. The role of the IMF for example has changed since the end of
the
1990s
currency crisis in Asia, Argentina, Brazil and Russia. Most of these countries have
accumulated
large reserves and switched to more flexible exchange rates to protect
themselves
against
future crises, but with inflation increasing and world economic growth slowing,
and
especially
with surging oil and food prices we could well see the IMF return to its former
role as
lender of
last resort during currency crises.
Course requirements: The midterm and final exam account for 70% of the course grade (25%
and 45%).
Several problem sets, participation in the IMF debate, brief crisis case
study account
for remaining 30% of the course grade. The
weight of the take-home midterm can be reduced
to 20% if the student puts more effort into
the case study preparing a brief PowerPoint style
presentation of the key results of the case study. Each
student will be expected to prepare data
and analyze a crises or aid surge episode and
summarize their post-mortem referring to data
in tables and charts prepared before the exam
Course Description
requirements ECGA 5450 Calendar midterm exam
Walsh Library Reserve List Case
Study Resources
PS#1 PS#2 Commanding Heights Episode 3 Stabilization classic quotes
Office Hours: Wed 9:30-10:30pm Monday 4-5pm or by appointment: when
possible please confirm office hours with at mcleod@fordham.edu or call
914 661-6998 to find out where I am
(perhaps on campus).
Topics Outline:
1. Aid inflows and economic
growth: The Absorption Problem Case study: surges in Aid in
2. Classical Approaches to
External Adjustment: Elasticity, Absorption and Monetary Approaches
3. Modern Approaches to
External Adjustment: Intertemporal CA, TNT and Mundell-Fleming models.
4 . Stopping high inflation: Money vs. Exchange-Rate-Based
Stabilization Program
5. The IMF and its Critics (class debate).
6. Currency and Banking Crises
: What caused the currency crises of the
1990s?
7. Conflict Traps and Disaster
Relief: Coping with post-conflict and disaster aid surges.
8. Private Capital Flows to
poor countries: are some currency inflows better than others.
9. From Stabilization to
Growth: the new Bretton
Woods strategy: sterilize and hold reserves
10. Stabilization, Safety Nets
and Income protecting the poorest groups
during the adjustments
11. Political Economy of Stabilization and Reform: why can government’s
stabilize w/o the IMF?
12. Case Studies:
countries that make good use of aid and capital inflows, and some that
did not.
Recommended texts:
PhD: Agénor, Pierre-Richard (2004) Adjustment and Growth 2nd
edition (not 1st edition) Harvard
Univ Press, 0674015789 Introduction (PhD
students: same text used for
ECGA 6470 Growth and Development)
Agénor, Pierre-Richard and Montiel
(2008) Macroeconomics for Developing
Countries
Masters: Sachs J.G. & F. Larraine (1992) Macroeconomics
in a Global Economy,
Prentice-Hall. (S&L) Chapters 6 and 20-23
provides good and at times unique
review of open economy macroeconomics with a focus on LDCs
Recommend with some required
reading:
World Bank (2007) Global
Development Finance: The Development Potential of Surging Capital Flows,
Tirole,
Jean (2002) Financial Crises, Liquidity and the International Monetary System,
Eichengreen,
Barry (2002) Financial Crises and What to do about them, Oxford U. Press 019257442
(paper)
Frankel, J. and A. Razin
(1996) Fiscal Policies and Growth in the World Economy, 3rd ed. MIT
Press
Good integrated graphical presentation of intertemporal
current account dynamics Chapters 5 & 21.
Obstfeld
and Rogoff (1998) Foundations International
Macroeconomics, Chapter. 1, MIT Press
Excellent more advanced Open-economy macro text, but oriented mainly toward
OECD countries
1. Managing Aid flows: conflict and
disaster recovery
Gupta, Sangeev et. al (2005) Macro
Challenges of Scaling up Aid to Africa (Chapters *1 & *2)
Demekas et. al (2002) The Economics
of Post Conflict Aid, IMF Working Paper
Collier, et. al.
(2003) Breaking the Conflict Trap, Chapter 5 (World Bank on the CD)
Paul Collier and Anke Hoeffler (2001) Aid,
Policy and Growth in Post-Conflict Societies
Gupta,
Sangeev, R. Powell and Y. Yang (2006) Macroeconomic Challenges of Scaling up Aid to Africa,
A checklist for
Practitioners, IMF,
Haacker, M. (2004) The Macroeconomics of
HIV/AIDS, IMF, Washington D.C. http://www.imf.org/external/pubs/ft/aids/eng/
Elbadawi, I. A., Kaltani, L &
K. Schmidt-Hebbel (2007) “Post-Conflict
Aid, Real Exchange Rate Adjustment,
and Catch-up Growth”, World Bank Policy Research Working
Paper 4187, http://go.worldbank.org/PI1GZKJ2B0
Hausmann, R and D. Rodrik (2003) Discovering El
Salvador’s growth potential
http://ksghome.harvard.edu/~drodrik/elsalvador.pdf
Arndt, C., Sam Jones and Finn Tarp (2006) “Aid and Development: The
Mozambican Case”
University of Copenhagen, Department of Economics, Discussion Paper 06-13.
2. External Adjustment I: Identity-Based Approaches: Elasticities, Absorption & Monetary Approach
Elasticity
Approach Notes Monetary Approach
Handout Notes
on Alternative Adjustment Strategies
*de Vries,M.G. (1987) pp 7-30 *Boughton, James
(2000) The
Silent Revolution
Helmers Chapter 2 The RER pp. 10-23
Gillis
et al. Adjustment in a small open economy (TNT & MABP)
Agénor sections *(9.2-9.4) (skip 9.1 & 9.5) Hinkle & Montiel (1999) FX
Misalignment (on CD)
3. External Adjustment II: Intertemporal, TNT & Mundell-Fleming
CA models
S&L
(1993) Chapters *6, 13.1-13.3, 14.1-14.2, and 21A &
21B
(ERES) Overshooting Handout
Economist
& Rogoff (2001) “Overshooting”
Mundell-Fleming Handout Problem Set
#2
Frankel and
Razin (1996) 3rd ed. Chapter
**17 chapter
5**; **Agénor Chapters 1,2
and 8.1-8.3
Obstfeld and Rogoff (1998) International
Macroeconomics, Chapter 1,
MIT Press.
4. Crises in Emerging Markets: an introduction
Tirole Introduction and Chapter 1
Tornell, Westerman and
Eichengreen,
(2004) Financial Instability (pages 1-36) or (1999) Chapters 1-2
and App. B
World Bank (2006) GDF:
The Development Potential of Surging Capital Flows, *Overview and *Chapt. 5
Aziz & Dunaway
(2007) China’s
Rebalancing Act
Bernanke
on Global Imbalances A slightly
different view from the head of FRBNY
Raghuram Rajan (2005) Global Current
Account Imbalances IMF Speech March 15th 2005
Edwards, Sebastian (2005) Is The
And If Not, How Costly Is Adjustment
Likely To Be? NBER WP #11541
Obstfeld & Rogoff
(2005) The Unsustainable U.S. Current Account Deficit Revisited
NBER
IMF World Economic Outlook Chapter 5
Globalization and External Imbalances
Commanding
Heights Episode 3 Chapters 1,5,6,11,12 (on line)
World
Bank, GDF 2004, Overview
and Chapter
1 A Mystery slides GDF
presentation slides
Guitan, M. The Challenge of Managing Global Capital Flows,
F&D, June 1998 (CD)
5. Globalization, commodity price shocks
and the return of high inflation:
Rogoff et. al
(2006) slides Rogoff (2004) Gruben
and McLeod (2006)
Agénor Sections 3.1,3.2, Chapt 6
2nd ed, 9.6. Defining Fiscal Deficits chart only Brazil’s Inflation
*Calvo & Vegh (1994) “Stabilization &
Nominal Anchors” CEP XII,35-45 . High Inflation Handout
*Hamann, J.
and A. Prati (2001) “Why Do
Many Disinflations Fail” pp. 1-9 & 17-38 (IMF Working Paper
Calvo and Vegh (1997) “Inflation
Stabilization…” in Taylor & Woodford, ed. Handbook of Macroeconomics
Quirk, Peter (1996) “Exchange Rate Regimes as
Inflation Anchors” F&D, IMF, March 1996
Dornbusch, R. (1993) "Lessons from High
Inflation..." in Stablization,
Debt and Reform, Prentice Hall.
M.
Kiguel and
Dornbusch, R and Stanley Fischer, "Moderate
Inflation," WBER, January 1993, 7(1), pp. 1-44.
6. The WB-IMF and their critics (debate): (return to topic list) IMF out of Argentina
Contemporary
IMF critics and supporters: Keeping Capital
Flowing
IMF-IEO The IMF in recent Capital Account Crises in Indonesia, Korea
and Brazil
IMF-IEO
Argentina Rogoff’s
IMF Strikes Back
IMF-IEO SubSaharan Africa
Stanley
Fischer Asian Crisis: View from the IMF
IFIAC (Meltzer) Commission Report
and Associated Studies
Fishlow(2000) It’s Working
Economist: A Thankless Job
IMF
Conditionality: Policy Issues
K. Rogoff *Moral
Hazard, F&D 9-02; *Managing World
Economy; Easing
Pain
Khan & Sharma (2002) *Conditionality
and Country Ownership F&D June 2002
*full article: IMF Working
Paper No. 01/142
M Mussa & M. Savastano (1999)
“the IMF Approach to Stabilization” WP/99/104
(see
also Masson & Mussa, The Role of
the IMF, IMF Pamphlet 50, 1997)
M .Feldstein, Refocus the IMF, Foreign Affairs
– March/April 1998
J. Sachs (1997) IMF
a power onto itself, FT 12-11-97 Allan
Meltzer Interview 2003
Goldstein,
Morris (2000) Structural Conditionality: How Much is too much?
Traditional criticisms of the
IMF:
Bacha, E. (1987) "IMF Conditionality: Conceptual Problems …" WD 15:12, 1457-67.
Spraos,
J.(1987) "IMF Conditionality: Misdirected, Ineffectual"
Buira, A. (2001) of IMF An Analysis of IMF Conditionality… G24 working paper ?? [CD]
Buira,A. (1983)"IMF Financial Programs and Conditionality" JDE 12,111-36.
7. Currency and Banking Crises: causes and cures.
*Generations
of Currency crisis models
Agénor Chapter 8 (esp. *8.2-8.4) *Tirole Chapter 1 and *Chapter 2
&3
Berg, A. et.al. Monetary
regime options for Latin America F&D September 2003
Fischer,
Dornbusch, R.(2001) A Primer on
Emerging Market Currency Crises
7.1 1st
Generation Currency Crisis Models *Mechanics of
Speculative attacks (F&D, 1997)
*Agénor Chapter 8, Sachs and Larraine, Chapter 11, especially pp. 335-343. IMF WEO 1995
Flood, R.
and
IMF International Capital Markets, 1997 Appendix 2 page 37 and *IMF * ICM 1995 part III.
7.2 2nd Generation
Currency Crisis Models—Fixed vs. Flexible Rates:
Obstfeld and Rogoff (1996) Section 9.5.
smaller file for printing
Calvo, G. & Carmen
Reinhart, Capital Flows, Exchange Rates, and Dollarization, F&D, Sept
1999, 13-15.
McLeod & Welch (1993) "Costs and Benefits of
Fixed Exchange Rates.."
Dallas Federal Reserve Bank, 31-44 (or see Agénor Chapter 5 )
Roubini, N.
(1998) The Case Against Currency Boards, A. Gulde,
and H. Wolf, Currency Boards:
Currency Boards: the Ultimate Fix? IMF Working Paper, WP/98/8, IMF, 1998
7.3 3rd Generation Models: Banking and
Currency Crisis in Emerging Markets:
Notes
on Chang and Velasco *Chang, Roberto
and Velasco "The Asia
Liquidity Crises"
*Keller, C. et.al. “The Bottom
Line” F&D Dec. 2002 summary of “The
Balance Sheet
Approach to Financial
Crisis, IMF Working Paper WP/02/210
Calvo,
Guillermo "Balance of
Payments Crises in Emerging Markets" NBER, March 1998.
7.4 Predicting Currency Crises: Kaminsky,Lizondo & Rheinhart (1998) Leading Indicators
of Crises,
App
& references IMFSP, 45:1, March 1998 *Mulder C. “Assessing Dangers” F&D Dec. 2002.
IMF Global
Financial Stability Report--March 2002 Chapter 4 “Early Warning Systems”
IMF Fact Sheet:
Vulnerability Indicators Edwards,
S. (2000) “Does the CA
matter?”
Esquivel, G
and F. Larrain (1998) Explaining Currency Crises, HIID,
processed,
Salvatore, D. and Reagle
(2001) “Lessons From
Andrew Berg and Catherine Pattillo (1999) Are Currency Crises Predictable?” IMFSP, 46:2,
7.5 Contagion: Kaminsky, G. & Reinhart, C. (1998) “Crises Contagion, Confusion..” [CD]
Forbes, Kristina IMF Global
Financial Stability Report--March 2002 (see
IMF WEO 1999 Chapter 3 Contagion Roubini Contagion Page
8. Managing LDC Debt and Capital Flows: topic list Notes on Financial Integration & Crises
*Edwards
(2005) Capital Controls and Sudden Stops
Daseking, Christina “Debt: How
much is too much? F&D Dec. 2002
IMF WEO (2001) Chapt 4 International Financial Integration IMF Occ Paper 190 Capital Controls
GDF 2001 *Chapt 3 Capital Flows & Growth; McLeod (1996) *Capital Flight
(Encyclopedia of Economics).
*Agénor
Chapter 6. *WEO 1998 Chapter 2 World Bank: Global Economic
Prospects Chapter 3
Lopez-Mejia, A (1999) Large Capital Flows:
Causes, Consequences and Responses, IMF WP/99/17
IMF, WEO Oct 1999,
&
IMF ICM,
1997 Annex VI, Capital Flows to Emerging Markets—A Historical Perspective
IMF,ICM
1998 Annex IV "
Corbo
and Hernandez (1996) "Adjusting to Capital Inflows: LatAm
vs.
9. Managing Aid flows: conflict and
disaster recovery
Gupta, Sangeev et. al (2005) Macro
Challenges of Scaling up Aid to Africa
Demekas et. al (2002) The Economics
of Post Conflict Aid, IMF Working Paper
Collier, et. al.
(2003) Breaking the Conflict Trap, Chapter 5 (World Bank on the CD)
Paul Collier and Anke Hoeffler (2001) Aid,
Policy and Growth in Post-Conflict Societies
10. From Stabilization to Growth: Debt
relief and structural adjustment
Agénor Chapter 9.4-9.5 *15.1,*15.5 and
*16 return to topic list Calvo et al. 2006 Phoenix Recoveries
*Corbo,
V., S. Fischer and S.B. Webb (1992) Adjust Lending Revisited, Intro [ERes]
*Dani
Rodrik (1992) Trade
Policy Reform in Developing Ctys, JEP,6:1,87-105
Dani Rodrik (1991) Policy
Uncertainty and Private Investment in Developing Ctys,
JDE,36:2,229-42.
Dornbusch,
R, (1990) “Classical Macro and Stabilization” AER, 80:2, 143-47.
Dornbusch,
R, (1991) "Moving from Stabilization to Growth" World Bank
ABCD,
*Paul Krugman,
"Reducing Developing County Debt" Revista
de Analisis Econ,4:2,3-18,1989. [CD]
Kahn, M.S. & M.D.
Knight (1985) "Fund Adj. Programs & Growth" IMF Occasional Paper
41.
11. Stabilization, Safety Nets and Income Distribution to topics Income Dist Handout
Bourguignon, F & C. Morrisson (1992) Adjustment & Equity in LDCs (OECD, Paris).
*Clement, Benedict (1997) Brazil’s Real Plan, Income Dist. & Poverty, F&D, Sept.
*Lustig, Nora (1999)“Crises & the Poor: Socially Responsible Macroeconomics”, IADB
Easterly and
Fischer (2001) Inflation
and the Poor, JMCB.
World Bank, Managing Economic Crises Chapter 9 2001 WDR World Bank,
World Bank, Safety Nets and Transfers
Romer and Romer (1998) “Monetary Policy & the Poor”,NBER WP #6793 [CD]
Subbarao,Braithwaite, Jalan (1997) Protecting the Poor During Adjustment, WB
12. The Political Economy of
Stabilization and Reform: return to topics
*Drazen (2000) Inaction
Delay and Crises See also Agénor Chapt 17 section 4 Chapt 17 part 1
*Agénor Chapter 17 Clift and J. Williamson Beyond the Washington Consensus, September 2003
*Haggard, S. & S. Webb (1993) "Political Economy of Reform," WBRO, 8:2,143-68, [ERes]
*Haggard, S. & S. Webb (1996) Voting for Reform “Introduction” [ERes]
Drazen, A. (2001) Conditionality: A Political Economy Approach
Alesina & Drazen (1991) Why Stabilizations are Delayed AER,81:5, pp. 1170-1188 [CD]
Williamson, J (1990) What Washington Means by Reform (2002) Did the Washington Consensus Fail?
Dani Rodrik (1993) The Positive Economics of Policy Reform, AER, 83:2,356-361 [CD]
Ivanova et.al,(2001) "What Determines Success or Failure of Fund Programs?" pp, 1-11.
Dollar
& Swensson Explaining
the Success of Structural Adjustment Programs World Bank.
Allan Drazen& Vittorio Grilli(1993) Do crises benefit reform?, AER, 83:3,598-607.
[CD]
Alesina, Alberto (1994) “Political Models of Fiscal Reform”, in Haggard & Webb (1994) op.cit.
13. The New International Financial Architecture: Old Wine in New Bottles? return to topic list
Eichengreen, Barry “Financial Instability” Essay for
Copenhagen Consensus (see also comments)
IMF
Singapore (2006) Crisis prevention reading list
Lukongo, Inutu “Riding out the
Storm” F&D December 2002
*Miller, Marcus
(2002) Sovereign Debt
Restructuring, Boorman, Key
Issues in International Reform
Roubini Debate
on IMF and World Bank Reform *Goldstein (2002) Proposals
to Reform the IFA
Swaboda (1999) Reforming
International System Bergsten, Fred (2000) Reforming the IMF
*Krueger,(2002) Sovereign Debt
Restructuring Mechanism (SDRM) 1 yr Later
(SDRM Factsheet)
Rogoff, Moral
Hazard How Big A Concern? Boorman, SDRM An Update
Eichengreen (2002) Crisis
Resolution: A Krueger-Like Process, A Taylor-Like
Result
Dell'Ariccia, Schnabel, Zettelmeyer,
(2002) Moral
Hazard and International Crisis Lending
Rogoff, J. (1999) International Institutions for Global
Financial Stability, JEP, 13, Fall 1999 [CD].
Goldstein
"Asia Crisis" Chapter 4.IMF, ICM 1998, page 149-51.
Rodrik, Dani (1999) “Governing the Global Economy: Does One Style Fit All?”[CD]
14. Case Studies:
Case
study preparation page
14.1 Was
Managing Financial Crises: the Case of East Asia (IMF 2001)
Fischer, S. 2000 Asia and the IMF Dornbush: Malaysia: Was it Different?
*Kamin, Steve (1999) The Current Financial Crisis: How Much Is New? Board of Governors,
Federal Reserve, International Finance Discussion Papers
#636,
Steven Radelet and Jeffrey Sachs, "The Onset of the East Asian Financial Crisis," March 30, 1998 [CD]
Radolet, S. & Sachs J (1998) Asia Crisis Diagnosis and Remedies
IMF ICM, 1998 Chapt. 3, Emerging Markets—Implications of the Asian Crisis [CD]
Salvatore, Dominick. (1999) “Lessons From the Financial
Crisis in
Dornbush, R.(1999) “After
Stiglitz, Joseph E.(1999)
“Lessons From
Corsetti, Pesenti, and Roubini, N. (1998) "What Caused the Asian Crisis?" at the Asia crisis web page
14.2
M. Mussa Argentina’s Crisis: Triumph to Tragedy & LatAm’s Economic Crisis (www.iie.com)
Edwards, Sebastian (1999) “Crisis Prevention: Lessons from Mexico & Asia” *Part 1&3 (ERes)
Eichengreen 2002
“New Lessons from Argentina & Turkey?” V.
Andrés Velasco and Ricardo Hausmann (2001) Argentina’s Collapse..
Anne O. Krueger (2002) Crisis Prevention and Resolution: Lessons from Argentina
WDI Online database WEO Database September 2005
IMF WEO data for Russia, Bulgaria and Turkey Asia ctys LatAm ctys
Real Exchange Rate Template (use this spreadsheet to compute RERs)
Income Distribution data from the World Bank’s Global Poverty Monitoring database
Case Study Template Excel file (Mexico) Sample Figures WDI Query for Case Study Data
Growth Rates: LatAm vs. Asia, Turkey and Russia during the 1990s
Mexico Primary
Deficit Mexico Fiscal Sustainability Mexico Spreadsheet
Notable quotes: return to topics list
Joseph Stiglitz on the IMF “The countries that have managed globalization on their own, such
as those in
benefits were equitably shared; they were able substantially to control the terms on which they
engaged with the global economy. By contrast, countries that have, by and large, had globalization
managed for them by the International Monetary Fund and other international economic institutions
have not done so well. The problem is thus not with globalization but with how it has been managed.”
"Globalism's Discontents," The American Prospect v.13 no.1, January 1-14, 2002.
Rudi Dornbusch on Stiglitz:: "When countries arrive at the IMF, on a stretcher, this is not the
time for cute ideas. Drastic policies are necessary to avoid hemorrhage, currency collapse and
irreparable meltdown. Stabilization is neither a popularity contest nor a research seminar. Today
no finance minister will opt for the Stiglitz Clinic of Alternative Medicine; they have the ambulance
rush them to the IMF. And when they do, markets start taking confidence very soon and from
there it is a short step to normalization. (...)
that next time they should apply exactly the same remedies and enjoy as spectacular success."
Dornbusch 2001,letter to editor of the New Republic (full text)
last few years, which has occurred almost without public notice, but that is very important. Up to a few
years ago, there was almost never an occasion on which bread prices, or fuel prices, were raised by the
50 or 60 or 80 percent that may be necessary when countries have failed to adjust prices for too long,
without setting off a riot. Naturally these riots would be blamed on the IMF. Well, such riots are not
necessary. You can compensate people before hand, and you can inform the public of what is being done,
why, and how they are being compensated. And as a result, we have been able to help quite a few countries,
for example
There are no doubt other areas of program design where we can help countries do better, by paying careful
attention to offsetting the social costs of economically necessary measures.”
(Stanley Fischer’s “Farewell to the IMF Executive Board” August 30, 2001)
Michael Bruno on Stabilization and Multiple Equilibria, “The concept of economic reform is described
as a planned shift from one Pareto inefficient, but quasi-stable, Nash equilibrium (or "trap") to a new Pareto
superior equilibrium, which will also be stable. The concept is applied to recent "shock" stabilization programs,
with special reference to
with considerable inertia, to relative price stability with higher real growth, at only moderate adjustment costs,
by means of a "heterodox" plan. The idea is rationalized with a simple dual equilibrium inflation model, for
which some econometric estimates are also given.” From Bruno (1989) "Econometrics and the Design of Reform"
Econometrica, 57:2, 275-306
Stabilization Policy Classics
Bacha, E. (1987) "IMF Conditionality: Conceptual Problems, Policy Alternatives" WD 15:12, 1457-67.
Cline, W.R. and Weintraub (1981) Economic Stabilization in developing countries (Brookings)
Dornbusch, R. (1982) "Stabilization Policies in Develop Ctys: What Have We Learned?" WD, 10:2.
Diaz-Alejandro, C. (1984) "Latin-American Debt: I don't think we are in Kansas Anymore" BPEA,2,335-89.
Diaz-Aleandro, C.F., (1986) "Good-bye Financial Repression, Hello Financial Crash", JDE.
Flood and Garber (1984) Collapsing Exchange Rate Regimes" JIE 17, August, 1-17.
Jolly, Richard (1991) Adjustment with a Human Face”, WD,19:12, Dec.,1807-21.
Krugman, P. (1979) "A Model of Balance of Payments Crisis" JMCB,11, 311-25.
Krugman, P. and L. Taylor (1978) "The Contractionary Effects of Devaluation" JIE,8,445-56.
Sachs, J. (1985) "External Debt and Macroeconomic Performance” BPEA, 2, pp.523-574.
Office Hours and Course Requirements return to topics
Course Description: return to topics
This course examines how developing countries prevent, manage and recover from currency, debt
and financial crises. What makes emerging market countries particularly vulnerable to these crises?
What are the special macroeconomic constraints faced by less developed countries? How can
vulnerable groups be shielded from the worst effects of downturns using transfers, safety net
programs and a more equitable mix of adjustment policies? Can developing countries come to
“own” adjustment and reform programs instead of relying on the “one size fits all” approach
favored by the IMF and World Bank? Are open capital markets and local banks and financial
markets worth the risk? What have the IMF and developing countries learned from the numerous
crisis of the 1990s? Students of this course will become familiar with the special challenges of
designing and managing macroeconomic policy in developing countries.
Recommended,
Background
Bruno, Michael et. al. eds. (1991) Lessons of Economic Stabilization and After (MIT Press).
Cardoso, Eliana and Ann Helwege (1992) Latin America's Economy MIT Press,
Obstfeld M. & K. Rogoff (1998) Foundations of International Macroeconomics MIT Press.
Frenkel and Razin (1996) Fiscal Policy in the World Economy 2nd ed. (MIT Press)
Corbo, V., S. Fischer and S.B. Webb (1992) Adjustment Lending Revisited:
Policies to Restore Growth, World Bank Symposium,
Dornbusch, R. and F.L. Helmers (1988) The Open Economy: Tools for Policy Makers in Developing
Countries (
Dornbusch.
R. (1993) Stabilization, Debt and Reform,
Dornbusch,
R. ed. (1993) Policymaking in the Open Economy,
Haggard,S.
and S. Webb (1994) Voting for Reform: Democracy, Liberalization &
Adjustment (
IMF, International Capital Markets (ICM) various issues, IMF Washington D.C.
IMF, World Economic Outlook (WEO), various issues, IMF Publications, Washington.D.C.
Mills, Cadman A. and R. Nallari (1992) Analytical Approaches to Stbz & Adjust, EDI Paper #44, WB.
World Bank (1997) Private Capital Flows to
Developing Countries, (
Case Study Sources
You may find the following sites useful for preparing your case study:
IMF IFS Online: A wide range of financial and monetary time series for almost all countries.
IDB Statistics Page:includes data on trade, social indicators, debt etc. for almost all LatAm ctys.
IDB Research Page: this InterAmerican Development Bank page includes issues of IPES—
an annual “Economic and Social Progress” report on LatAm.
IMF Home Page: Just type a name into the country information box at the bottom of the page…
IMF Publications: Many of these working papers and WEO-ICM publications are available here—
see especially Finance and Development For useful research summaries and book reviews.
IMF DSBB Pages: Standardized country data pages sanctioned but not provided by the IMF—
a source for more up to date data or alternative local perspectives on crisis and IMF programs.
World Bank Data Page: A
wide range of country data—the
CD comes from the growth research page
World Bank Growth Research Page This page provides many useful papers and data sets—
see especially the new Global Development Network database—included on your CD as
HIPC Web Page: A
number of African countries plus
are HIPCs (highly indebted poor countries).
Acronymns:
AER: American Economic
Review
BPEA: Brookings Papers on Economic Activity
CPI: Contemporary Policy Issues (became CEP)
CEP: Contemporary Economic Policy
F&D: Finance and Development
IMFSP: IMF Staff Papers
JDE: Journal of Development
Economics
JEG: Journal of Economic
Growth
JEL: Journal of Economic Literature
JEP: Journal of Economic Perspectives
JIE: Journal of International Economics
JMCB: Journal of Money, Credit and Banking
JME: Journal of Monetary Economics
JPE: Journal of Political Economy
PUP:
QJE: Quarterly Journal of Economics
WB ABCDE Annual Bank Conference on Development
Economics
WB: World Bank
WBER: World Bank Economic Review
WBRO: World Bank Research Observer
WD: World Development
Reference and review:
Goldstein, Morris (1998) The Asian Financial Crisis, Institute for International
Economics, Policy Analyses in International Economics #55,
Eichengreen, Barry (1999) Toward a New International Financial Architecture
Inst for International Economics, Wash D.C. (www.iie.com)
Agenor, Pierre-Richard and Peter Montiel (1999) Development Macroeconomics 2nd Ed, PUP.
de Vries, Margaret G. (1987)
Balance of Payments Adjustment, 1945-86, IMF,
Boughton,
James (2002) The Silent Revolution: the IMF 1979-1989 (IMF,
Frankel & Razin (1996) Fiscal Policies & Growth in a World Economy, 3rd ed. MIT Press (F&R)
Dornbusch, R. and F.L. Helmers (1988) The Open Economy:
Tools for Policymakers in Open Economies,
Dornbusch. R. (1993) Stabilization, Debt and Reform, Prentice-Hall.
Dornbusch, R. ed. (1993) Policymaking in the Open Economy, OUP