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NEW YORK UNIVERSITY
LEONARD N. STERN SCHOOL OF BUSINESS
The Global Business Environment:
International Macroeconomics and Finance
SYLLABUS
Professor Daniel Diamond
Office:
Phone:
Fax:
Email:
Tisch Hall 314
(212) 998-0887
(212) 995-4218
[email protected]
Contents
1.
2.
3.
4.
5.
6.
Overview
Required and Suggested Materials
Group Assignments
Attendance and Class Participation
Grading
Weekly Lecture Topics, Reading Assignments,
Data Sources and Links
OVERVIEW
OBJECTIVES
This is one half of the Global Business Environment course. The basic
objective is to provide macroeconomic theories, models, tools of analysis and
applications that enable the student to understand and navigate the global business
environment. In particular, we will focus on the interaction and links between the
U.S. and the global economy.
In the process, we will apply macroeconomic tools to important issues and
questions confronting both developed and emerging economies. Some of these
are:
1. The relationship between a nation's saving and investment, and its trade and
current account balances with the rest of the world.
2. The changing nature of the business cycle since World War II and the causes of
recurring periods of unsustainable prosperity and recessions.
3. How negative demand and supply shocks can cause an economy to experience
inflation or recession.
4. How a nation can utilize monetary and fiscal policies to assist the economy in
returning to a natural (full employment) level of output and income.
5. The relative strengths and weaknesses of monetary and fiscal policies as
stabilization tools.
6. Why some countries experience significant economic growth and others do not.
7. The lessons both emerging and developed economies can learn from the socalled "miracle" growth of Singapore and other Asian Tigers in the 1965-1997
period.
8. The principle factors that determine (nominal) exchange rates between two
currencies e.g. the U.S. dollar and the Japanese Yen.
9. How a nation's decision to adopt a floating vs. a fixed exchange rate system
affects the impact of fiscal and monetary policies on the level of national
output.
10.The principle causes of the Asian Financial Crisis of 1997-98 and how the
countries affected are faring since 1998.
11.Is the U.S. trade/current account deficit sustainable?
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REQUIRED AND SUGGESTED MATERIALS
CLASS NOTES
The required readings consist of a set of six class notes. Each deals with a
major aspect of the global macroeconomy. Students will be provided with a hard
copy of each of the class notes prior to the discussion of the subject matter in
class. They should be read prior to the class so students can concentrate on the
amplification of the concepts during class. It will also enable students to focus on
the subject matter rather than taking extensive notes.
Application of the theories, concepts, and tools of analysis will be
integrated into each class session via “active learning” group discussions. The
instructor will divide the class into groups of 5 to 7. Each group will be directed
to respond to a question dealing with a current issue relating to the subject under
discussion. There will be one to two “active learning” modules during each of the
six classes in the course.
Not all of the material in the class notes will be discussed. Students will
only be responsible for those subjects covered in class. Note that the class notes
are on the instructor’s homepage on the Stern website. However, they do not
include graphs, tables and data. The hard copies do include these materials.
SUGGESTED MATERIALS
The macro global economy is a dynamic entity. Most, if not all, of the
topics deal with current problems and issues. Students are encouraged to keep
abreast of current issues by reading major media particularly, the Wall Street
Journal, the Financial Times, the New York Times and The Economist.
In addition, students who have a limited economics background may find it
helpful to access a textbook. N. Gregory Mankiw’s, Macroeconomics is the
leading MBA macro text. His latest edition is the fifth edition, 2003, published by
World Publisher. It is available at the NYU Professional Bookstore. However,
the latest as well as earlier editions differ primarily in the current case materials in
the book. There are little, if any, changes in the theoretical materials. Earlier
second hand copies are less expensive and should do as well as the latest edition.
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GROUP ASSIGNMENT
A group assignment is another component of the course. Most students
have already taken the first half of Global Business Environment: Trade and
Direct Investment, and used the micro version of the Singapore Case. We will use
the Harvard Business School’s macro Singapore Case. The groups will apply the
theories, concepts and tools of analysis of this course to explain the rapid rate of
economic growth of Singapore in the 1965-96 period and the subsequent period of
slower growth from 1997-2003. More information on the case will be provided at
the first class meeting.
ATTENDANCE
Given the course’s dynamic nature and the use of small group discussions of
current problems (which are not in the Class Notes), students should make every
effort to attend all classes. At the same time, it is recognized that work pressures,
illness, and family obligations may prevent you from doing so. It is better to
attend part of a class than to miss an entire class.
If you do have to enter a class after it has begun, please, out of respect for
fellow students, make every effort to do so with minimum disruption. Enter the
back door of the classroom and take the first available seat. Also, please wait until
a class break to pick up any handouts. Also notify the instructor in advance if you
have to leave class early. Your cooperation is appreciated.
GRADING
Group Assignment 30%
Final Examination 70%
The final will be scheduled during the final examination period.
Grade distribution. This is a core course. The Stern School suggested
grade distribution for core courses is as follows:
A’s
B’s
C’s
20% to 35%
55% to 75%
10% to 15%
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WEEKLY LECTURE TOPICS, READING ASSIGNMENTS,
DATA SOURCES AND LINKS
WEEK 1:
INTRODUCTION AND MEASURING ECONOMIC PERFORMANCE
1. Nominal vs. Real Prices
2. The National Income and Product Accounts (NIPA) and the National
Income Accounts Identity
3. Open vs. Closed Economies
4. The Long Run: Economic Growth, Measurement and Importance
5. The Short Run: Business Cycles, Unemployment and Inflation
6. The Balance of Payments, the Current and Capital Accounts and the Trade
Deficit
READINGS:
 Mankiw chapters 2, 3 &7; Case Studies: Inflation and Unemployment in
the United States pp. 368-9; The 1990 Recession pp. 385-86; Mistakes in
the Forecasting pp. 387-89; The Stock Market as an Economic Indicator p.
472-73
 Class Notes 1
DATA SOURCES AND LINKS:
 U.S. Department of Commerce Bureau of Economic Analysis
(http://www.bea.doc.gov)
 U.S. Department of Labor Bureau of Labor Statistics
(http://stats.bls.gov)
 White House Economic Statistics Briefing Room
(http://ww.whitehouse.gov/fsbr/esbr.html)
 The Conference Board
(http://www.tcb-indicators.org)
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WEEK 2:
STABILIZING THE SHORT RUN ECONOMY, MONETARY AND
FISCAL POLICIES
1. IS, LM and Aggregate Demand
2. Aggregate Supply
3. Shocks to the Economy
4. Money, The Federal Reserve and Monetary Policy
5. Fiscal Policy
READINGS:
 Mankiw chapters 11& 15, pp. 258-69, pp. 486-95; Case Studies: The
Puzzle of Sticky Magazine Prices pp. 238-39; How OPEC caused
Stagflation in the 1970's and Euphoria in the 1980's pp. 252-53; Did Paul
Volcker's Monetary Tightening Raise or Lower Interest Rates? p. 274; Can
World Financial Markets Usurp the Power of the Federal Reserve? p. 320;
Inflation Targetings: Rule or Constrained Discretion? p. 398; Central Bank
Independence p. 399-400
 Class Notes 2
DATA SOURCES AND LINKS:
 Board of Governors of the Federal Reserve System
(http://www.bog.frb.fed.us/)
 U.S. Department of Treasury
(http://www.access.gpo.gov/su_docs/budget99/index.html)
 Congressional Budget Office Economic Reports
(http://www.cbo.gov/index.html)
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WEEK 3:
ECONOMIC GROWTH: FACTS AND THEORY
1. Growth Rates Around the World
2. Why Some Nations Grow and Others Do Not
3. The Production Function
4. The Solow Neoclassical Growth Model
5. The Worldwide Slowdown in Economic Growth 1972-95
6. The Endogenous Growth Model
7. Growth Accounting
READINGS:
 Mankiw chapters 4 & 5 (including appendix to Chapter 5); Case Studies:
Steady State Growth in the United States p. 109; Will the World's
Economies Converge? pp. 109-10; The Worldwide Slowdown in Economic
Growth pp. 116-18; Growth of the Asian Tigers p. 130; Consumption and
the Saving of the Elderly pp. 454-55
 Class Notes 3
DATA SOURCES AND LINKS:
 U.S. Department of Commerce Bureau of Economic Analysis
(http://www.bea.doc.gov)
 U.S. Department of Labor Bureau of Labor Statistics
(http://stats.bls.gov)
 Organization for Economic Cooperation and Development
(http://www.oecd.org/std/gdpperca.htm)
 The World Bank
(http://www.worldbank.org)
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WEEK 4:
MONEY, INFLATION, INTEREST RATES AND EXCHANGE RATES
1. The Money Supply and Inflation
2. Inflation and Nominal and Real Interest Rates; The Fisher Effect
3. Exchange Rates: Nominal, Real, Trade Weighted and Purchasing Power
Parity
READINGS:
 Mankiw chapter 7, pp. 205-21; Case Studies: Inflation and Money Growth
pp. 170-71; Nominal Interest Rates in the Nineteenth Century p. 122; What
Economists and the Public Say About Inflation p. 176; Life during the
Bolivian Hyperinflation pp. 182-83; Hyperinflation in Interwar Germany
pp. 184-86; Inflation and Nominal Exchange Rates pp. 215-16; The Big
Mac Around the World pp. 218-19
 Class Notes 4
DATA SOURCES AND LINKS:
 U.S. Department of Labor Bureau of Labor Statistics
(http://stats.bls.gov)
 White House Economic Statistics Briefing Room
(http://ww.whitehouse.gov/fsbr/esbr.html)
 Board of Governors of the Federal Reserve System
(http://www.bog.frb.fed.us/)
 International Monetary Fund
(http://www.imf.org/about.htm)
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WEEK 5:
SAVING AND INVESTMENT IN THE LONG RUN IN A SMALL OPEN
ECONOMY AND A LARGE OPEN ECONOMY
THE IMPACT OF GOVERNMENT POLICIES IN A SMALL OPEN
ECONOMY AND A LARGE OPEN ECONOMY IN THE SHORT RUN
1. Saving and Investment in a Small Open Economy in the Long Run
2. Saving and Investment in a Large Open Economy in the Long Run
3. The Impact of Government Policies in a Small Open Economy in the Short
Run under Floating and Fixed Exchange Rate Systems: Mundell Fleming
Model
4. The Impact of Government Policies in a Large Open Economy in the Short
Run
READINGS:
 Mankiw pp. 197-205, pp. 224-232; chapter 12 including appendix; Case
Studies: The Twin Deficits pp. 201-203; Devaluation and Recovery from
the Great Depression p. 326
 Class Notes 5
DATA SOURCES AND LINKS:
 White House Economic Statistics Briefing Room
(http://ww.whitehouse.gov/fsbr/esbr.html)
 U.S. Department of Commerce Bureau of Economic Analysis
(http://www.bea.doc.gov)
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WEEK 6:
EXCHANGE RATE SYSTEMS, THE LATIN AMERICAN AND ASIAN
FINANCIAL CRISES, THE ROLE OF THE IMF AND THE EUROPEAN
MONETARY UNION
1. Exchange Rate Systems from the International Gold Standard to Currency
Boards and Dollarization
2. The Latin American and Asian Financial Crises, and the Role of the
International Monetary Fund
3. The European Union, the European Monetary Union and the Euro
4. Discussion of the Singapore Case
READINGS:
 Mankiw pp. 331-36; Case Studies: International Financial Crisis: Mexico
1994-95 pp. 331-32; International Financial Crisis: Asia 1997-98 pp. 33233; Monetary Union in the United States and Europe pp. 335-36
 Class Notes 6
DATA SOURCES AND LINKS:
 Nouriel Roubini's Home Page: International Monetary Fund
(http://www.stern.nyu.edu/~nroubini)
 European Monetary Union
(http://www.pei-intl.com/Research/EMU/EURO1097.HTM)
(http://www.cmutuel.com/cmutueva/html/c3.html)
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