Download SEMINAR IN INTERNATIONAL RELATIONS

SEMINAR IN INTERNATIONAL RELATIONS
PSCI 5820
Political Economy of International Finance
Fall 1995
Instructor: David A. Leblang, Wooten 145, x2313, email:[email protected]
Time and Location: 6:30-9:30 T, Wooten 130.
Office Hours: T and R 2:00-4:00, and by appointment
Course Description
This course explores the interaction of international monetary and financial
developments, on the one hand, and international and domestic politics, on the other. It
examines both theoretical perspectives on, and empirical evidence regarding stability of
the international monetary system, causes and consequences of exchange rate
fluctuations, and determinants of cross-border capital flows. We will also explore the
political economy of monetary integration, interest group politics, and international
banking. These issues will be investigated using a variety of methodological approaches
including case studies, formal models, and quantitative analysis.
Course Requirements
1. Classroom Discussion: This course is a seminar, not a lecture series. It is the student's
responsibility to be prepared to discuss the information and claims found in the readings
and explore the related research possibilities. If either of us shirks our responsibility, this
class cannot proceed. My evaluation of your performance in the course will depend
critically on the quality of your seminar participation.
2. Weekly Review Essays: Before class you should prepare a 2-3 page typed essay
critically evaluating/reviewing the assigned readings. When writing the essay, keep in
mind the following points: (1) what is the theory and method behind the research? (2)
what are the important claims made by the author? (3) has the author proven his/her case
to your satisfaction? (4) what are the possibilities for related research? Limiting
yourself to a small number of pages is not an easy task; this limit is designed to help you
focus on critical evaluations of the material, not on regurgitations of the readings. Works
that merely summarize the readings will receive poor marks. These essays will serve as
the basis for class discussion, and therefore should be taken seriously. There are fourteen
weeks of class. You must write 8 of these short papers. You must place sufficient copies
of your paper in Wooten 133 by 5p.m. Monday of the week you are writing. Everyone is
responsible for picking up and reading each paper before class on Tuesday.
3. Research Project: Since this is a course in a specialized area, you will be expected to
write an original research paper on some topic that interests you. The project will
comprise three parts:
A. Research Design/Outline Roughly six weeks into the semester, you will be
required to turn in a research design for your final paper. In this design, you will
indicate: (1) the theoretical issue/problem/question that you are going to address;
(2) the relevant literature that has addressed this question; (3) your approach to
answering this question; (4) the analytic/methodological strategy you will employ;
and (5) your expected results. OCTOBER 3
B. Rough Draft: Approximately one month after turning in your design, you will
turn in a preliminary draft of your final product. This will enable you to have
approximately one month with which to write your final paper. By rough draft, I
do not mean some preliminary results. Rather, I mean a preliminary version of the
final paper. NOVEMBER 7
C. Final Paper and Presentation: Everyone will present versions of their papers to
the class on dates to be decided. Hopefully, comments received will help improve
the quality of the final product. The papers will be turned in the final week of
class. Remember--there is no final examination in this class, so the paper is very
important in terms of your final grade. Presentations will be the final two weeks
of class; papers will be due on the date of the final exam.
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The following are available for purchase at the bookstore:
Aghevli, Bijan B., Mohsin S. Khan, and Peter J. Monietl. 1991. Exchange Rate Policy in
Developing Countries: Some Analytical Issues. Occasional Paper 78, Washington, D.C.:
International Monetary Fund. (REQUIRED)
Clark, Peter, Leonardo Bartolini, Tamim Bayoumi, and Steven Symanski. 1994.
Exchange Rates and Economic Fundamentals. Occasional paper 115, Washington, D.C.:
International Monetary Fund. (REQUIRED)
Claassen, Emil-Maria, ed. 1991. Exchange Rate Policies in Developing and PostSocialist Countries. San Francisco, CA: International Center for Economic Growth.
(OPTIONAL)
Corden, W. Max. 1994. Economic Policy, Exchange Rates, and the International System.
Chicago: University of Chicago Press. (REQUIRED)
Dornbusch, Rudiger and F. Leslie C. H. Helmers, eds. 1988. The Open Economy: Tools
for Policymakers in Developing Countries. New York: Oxford University Press.
(OPTIONAL)
Eichengreen, Barry. 1994. International Monetary Arrangements for the 21st Century.
Washington, D.C.: The Brookings Institution. (REQUIRED)
Henning, C. Randall. 1994. Currencies and Politics in the United States, Germany, and
Japan. Washington, D.C.: Institute for International Economics. (REQUIRED)
Herring, Richard J, and Robert E. Litan. 1995. Financial Regulation in the Global
Economy. Washington, D.C.: The Brookings Institution. (REQUIRED)
Copies of the rest of the assigned readings will be available for you to read and/or
photocopy in Wooten 125.
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COURSE OUTLINE AND READINGS
Week 1: Introduction
Syllabus
Course Requirements
What is IR, Political Economy, IPE, Comparative Politics, International Finance?
Week 2: The International Financial System
Required:
 Corden, chapters 1-6
 Eichengreen, chapters 1-3
 Grabbe, J. Orlin. 1996. International Financial Markets, Third Edition. New Jersey:
Prentice Hall. Chapters 1, 4, 21.
 Kenen, Peter B. 1994. The International Economy, Third Edition. New York:
Cambridge University Press. Chapter 12.
 Oye, Kenneth. 1992. “The Politics of Debt and Deficits: Financial and
Macroeconomic Relations in the 1980s.” Chapter 8 in Economic Discrimination and
Political Exchange. Princeton: Princeton University Press.
Week 3: History of the System until Bretton Woods
Required:
 Eichengreen, Barry. 1992. “The International Economy: Historical Perspectives and
Future Prospects.” Paper presented at the College of William and Mary Conference
on EC 1992 and Beyond.
 Eichengreen, Barry. 1990. Elusive Stability: Essays in the History of International
Finance, 1919-1939. Cambridge: Cambridge University Press. (chaps: intro, real
exchange rate behavior under alternative regimes, international policy coordination).
 Goldthwaite, Richard. 1973. “Italian Bankers in Medieval England,” Journal of
European Economic History 2:763-771.
 Schwartz, Anna. 1987. “Alternative Monetary Regimes: The Gold Standard,” in
Anna J. Schwartz, (ed.) Money in Historical Perspective. Chicago: University of
Chicago Press.
 Oye, Kenneth. 1985. “The Sterling-Dollar-Franc Triangle: Monetary Diplomacy
1929-1937,” World Politics 38:173-199.
 Viner, Jacob. 1928. “Political Aspects of International Finance,” Journal of Business
of the University of Chicago, 1, No. 2 (April 1928) and 1, No. 3 (July 1928).
 Kennedy, Paul. 1981. “Strategy versus Finance in Twentieth-Century Britain,”
International History Review.
 Eichengreen, Barry. 1989. “Hegemonic Stability Theories of the International
Monetary System,” in Richard Cooper, et.al (eds.) Can Nations Agree? Washington,
D.C.: Brookings Institution.
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Optional:
 Glassman, Debra and Angela Redish. 1988. “Currency Depreciation in Early Modern
England and France.” Explorations in Economic History 25:75-97.
 Bordo, Michael D. 1986. “Explorations in Monetary History: A Survey of the
Literature.” Explorations in Economic History 23:339-415.
 McKinnon, Ronald I. 1993. “The Rules of the Game: International Money in
Historical Perspective.” Journal of Economic Literature 31:1-44.
Week 4. The Bretton Woods System and After
Required:
 Helleiner, Eric. 1994. States and the Reemergence of Global Finance: From Bretton
Woods to the 1990s. Ithaca: Cornell University Press. (Book is photocopied)
 Bordo, Michael D. 1993. “The Bretton Woods International Monetary System: A
Historical Overview,” in Bordo and Eichengreen (eds.) A Retrospective on the Bretton
Woods System. Chicago: University of Chicago Press.
 Corden, chapters 10 & 11
 Frankel, Jeffrey A. 1989. “The Flexible Exchange Rate System: Experience and
Alternatives,” in Frankel (ed.) On Exchange Rates. Cambridge: MIT Press.
Week 5. International Capital Markets and Regulations
Required:
 Herring and Litan, all
 Sobel, Andrew C. 1995. “The Capital Pool: Sink or Swim? Political Institutions and
International Capital Markets. Paper presented at the Midwest Political Science
Association Annual Meeting, Chicago, IL.
 Freeman, John. n.d. “Globalization, Welfare, and Democracy.” Manuscript:
University of Minnesota.
 Kapstein, Ethan B. 1989. “Resolving the Regulator’s Dilemma: International
Coordination of Banking Regulations.” International Organization 43:323-347.
 Steil, Benn. 1992. “Regulatory Foundations for Global Capital Markets,” in Richard
O’Brien (ed.) Finance and the International Economy. Oxford: Oxford University
Press.
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Week 6. Domestic Politics I: Developed Countries
Required:
 Alesina, Alberto. 1994. “Political Models of Macroeconomic Policy and Fiscal
Reforms,” in S. Haggard and S. Webb (eds.) Voting for Reform: Democracy, Political
Liberalization, and Economic Adjustment. Washington, D.C.: World Bank
 Henning, all
 Frieden, Jeffry. 1993. “Exchange Rate Politics: Contemporary Lessons from
American History.” Unpublished manuscript.
 Gowa, Joanne. 1988. “Public Goods and Political Institutions: Trade and Monetary
Policy Processes in the United States.” In The State and American Foreign Economic
Policy, ed. G. John Ikenberry, et.al. Ithaca: Cornell University Press.
Week 7: Domestic Politics II: Developing Countries (theory and case studies)
Required:
 Haggard, Stephan and Steven B. Webb. 1994. “Introduction,” in S. Haggard and S.
Webb (eds.) Voting for Reform: Democracy, Political Liberalization, and Economic
Adjustment. Washington, D.C.: World Bank
 Williamson, John. 1994. “In Search of a Manual for Technopols,” in J. Williamson
(ed.) The Political Economy of Policy Reform. Washington, DC: Institute for
International Economics.
 Williamson, John and Stephan Haggard. 1994. “The Political Conditions for
Economic Reform,” in J. Williamson (ed.) The Political Economy of Policy Reform.
Washington, DC: Institute for International Economics.
 Bates, Robert and Anne Krueger. 1993. “Introduction,” in Bates and Krueger (eds.)
Political and Economic Interactions in Economic Policy Reform. Oxford, UK:
Blackwell.
 Haggard, Stephan and Sylvia Maxfield. 1993. “The Political Economy of Capital
Account Liberalisation, “ in H. Reisen and Bernhard Fischer (eds.) Financial
Opening: Policy Issues and Experiences in Developing Countries. Paris: OECD.
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Week 8: Capital Mobility I: Theory and Case Studies
Required:
 Gultekin, Mustafa, N., N. Bulent Gultekin, and Alessandro Penati. 1989. “Capital
Controls and International Capital Market Segmentation: The Evidence from the
Japanese and American Stock Markets.” The Journal of Finance 94:849-869.
 Mathieson, Donald J. and Liliana Rojas-Suarez. 1994. “Capital Controls and Capital
Account Liberalisation in Industrial Countries.” in Leonardo Leidermand and Assaf
Razin (eds.) Capital Mobility: The Impact on Consumption, Investment, and Growth.
Cambridge University Press
 Goodman, John B. And Louis W. Pauly. 1993. “The Obsolescence of Capital
Controls? Economic Management in an Age of Global Markets.” World Politics
46:50-82.
Week 9: Capital Mobility II: Empirical/Statistical Studies
Required:
 Quinn, Dennis P. and Carla Inclan. 1995. “Liberalizing Capital: A Twenty-One
Country Study of International Financial Regulation, 1950-1988. Manuscript. School
of Business: Georgetown University.
 Alesina, Alberto, Vittorio Grilli, and Gian Maria Milesi-Ferretti. 1994. “The Political
Economy of Capital Controls.” in Leonardo Leidermand and Assaf Razin (eds.)
Capital Mobility: The Impact on Consumption, Investment, and Growth. Cambridge
University Press
 Epstein, Gerald A. and Juliet B. Schor. 1992. “Structural Determinants and
Economic Effects of Capital Controls in OECD Countries.” in Tariq Banuir and Juliet
B. Schor (eds.) Financial Openness and National Autonomy. Oxford: Clarendon
Press.
 Reisen, Helmut. 1994. “On Liberalizing the Capital Account: Experiences with
Different Exchange Rate Regimes. in Helmut Reisen (ed.) Debt, Deficits and
Exchange Rates: Essays on Financial Interdependence and Development. Paris:
OECD.
 Leblang, David. 1995. “Are Capital Controls Obsolete? Evidence from the Developed
and Developing World, 1967-1986.” Unpublished Manuscript.
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Week 10: Exchange Rate Politics I: Theory and Case Studies
Required:
 Aghevi, et.al., all
 Clark, et.al., all
 Balassa, Bela. 1990. “Exchange Rate Regimes for LDCs. in Emil-Maria Claassen
(ed.) International and European Monetary Systems. New York: Praeger.
 Portnoy, Brian. 1995. “Credibility, Institutions, and Exchange Rate Commitments in
Developing Countries.” Paper presented at the Midwest Political Science Association
Annual Meeting, Chicago, IL.
 Rodrik, Dani. 1989. “Promises, Promises: Credible Policy Reform Via Signaling.”
The Economic Journal 99:756-772.
 Wickham, Peter. 1985. “The Choice of Exchange Rate Regime in Developing
Countries: A Survey of the Literature.” IMF Staff Papers 32:248-88.
 Kenen, Peter B. 1993. “Financial Opening and the Exchange Rate Regime.” in
Helmut Reisen and Bernard Fischer (eds.) Financial Opening: Policy Issues and
Experiences in Developing Countries. Paris: OECD.
 Joshi, Vijay. 1990. “Exchange Rate Regimes in Developing Countries. in Maurice
Scott and Deepak Lal (eds.) Public Policy and Economic Development. Oxford:
Clarendon Press.
 Reisen, Helmut. 1994. “On Liberalizing the Capital Account: Experiences with
Different Exchange Rate Regimes. in Helmut Reisen (ed.) Debt, Deficits and
Exchange Rates: Essays on Financial Interdependence and Development. Paris:
OECD.
 Kenen, Peter B. 1994. “Floating Exchange Rates Reconsidered: The Influence of
New Ideas, Priorities, and Problems. .” in Peter Kenan, et.al. (eds.) The International
Monetary System. Cambridge: Cambridge University Press.
Week 11: Exchange Rates II: Empirical/Statistical Studies
Required:
 Edwards, Sebastian. 1994. “The Political Economy of Inflation and Stabilization in
Developing Countries,” Economic Development and Cultural Change __235-66.
 Edwards, Sebastian. 1989. “Real Exchange Rates, Exchange Controls, and
Devaluation Crises.” chapter 6 in Real Exchange Rates, Devaluation, and
Adjustment: Exchange Rate Policy in Developing Countries. Cambridge: MIT Press.
 Edwards, Sebastian. 1994. “Real and Monetary Determinants of Real Exchange Rate
Behavior: Theory and Evidence from Developing Countries.” in John Williamson
(ed.) Estimating Equilibrium Exchange Rates. Washington, DC: Institute for
International Economics.
 Klein, Michael and Nancy Marion. 1994. “Explaining the Duration of Exchange-Rate
Pegs.” NBER Working Paper #4651.
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Week 12: Developed Countries: Policy Coordination and Exchange Rates
Required:
 Corden, chaps 12 & 13.
 Bryant, Ralph C. 1995. “International Cooperation in the Making of National
Macroeconomic Policies: Where Do We Stand?” in Peter Kenen (ed.) Understanding
Interdependence: The Macroeconomics of the Open Economy. Princeton: Princeton
University Press.
 Claassen, Emil-Maria. 1990. “Exchange Rate Management and International
Coordination. in Emil-Maria Claassen (ed.) International and European Monetary
Systems. New York: Praeger.
 Frankel, Jacob A., Morris Goldstein, and Paul R. Masson. 1990. “The Rationale for,
and Effects of, International Economic Policy Coordination.” in William Branson,
et.al. (eds.) International Policy Coordination and Exchange Rate Fluctuations.
Chicago: University of Chicago Press.
 Kenen, Peter B. 1990. “The Coordination of Macroeconomic Policies.” in William
Branson, et.al. (eds.) International Policy Coordination and Exchange Rate
Fluctuations. Chicago: University of Chicago Press.
Week 13: EMS and Monetary Integration
Required:
 Corden, chaps 7-9
 Eichengreen, chaps 5-9
 Goodhart, Charles A. E. 1995. “The Political Economy of Monetary Union.” in Peter
Kenen (ed.) Understanding Interdependence: The Macroeconomics of the Open
Economy. Princeton: Princeton University Press.
 Eichengreen, Barry, and Jeffry Frieden. 1994. “The Political Economy of European
Monetary Unification: An Analytical Introduction.” In Eichengreen and Frieden (eds.)
The Political Economy of European Monetary Integration. Boulder, CO: Westview
Press.
 Hamada, Koichi and David Porteous. 1993. “Monetary Integration in Historical
Perspective.” Yale University Economic Growth Center, Discussion paper no. 680.
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