Syllabus

Economics 70
Seminar in International Monetary Economics
Wednesdays: 2:00 to 4:30 p.m.
Room: Red Room, Converse

Edwin M. Truman
Visiting Lecturer

Office Hours: Wednesday 12:00 to 2:00 p.m.

Converse 309: 542-5446
E-mail: etruman@Amherst.edu, ttruman@piie.com, or TnTTruman@yahoo.com
(When in doubt use more than one e-mail address!)

Organization

The seminar is designed to explore various aspects of the international economic policy
coordination process.

Students are expected to do the required reading and to participate actively in the seminar
discussions.

Each student will make a presentation on his/her paper topic and prepare a final paper on that
topic.

Grades will be based 50 percent on the final paper, 25 percent on the seminar presentation, and
25 percent on seminar participation.

The first few sessions of the seminar will be based on general discussion and reading. I
generally will circulate about a week in advance of each session some questions to motivate your
reading and our subsequent discussion. When no student presentation is scheduled during the
first part of the semester, I will assign students in advance to lead the discussion based on these
questions, for example, one question each out of a set of four or five questions. The remaining
sessions will focus on student presentations. I will assign a student in advance to lead the
discussion of each student presentation; the discussion leader will be required to circulate
his/her topics for discussion at least 24 hours in advance of the class.

On March 31, we will have a guest Steven R. Weisman, editorial director and public policy
fellow at the Peterson Institute for International Economics and former chief international
economics correspondent of the New York Times, who will discuss with us the global economic
and financial crisis of 2007-09.

Presentations and Papers

Each student will be required to make a presentation and write a paper on one of 18 episodes in
international economic policy coordination listed below.

1
Each student should select the episode that she/he will address by February 10 and inform me,
preferably by e-mail. Assuming there will be at least 18 students in the class, two students will
have to make presentations on February 17. I expect that earlier presentations will be less
complete and will make allowance for that fact. These students will have more time available to
produce the final paper in light of my comments reactions. Therefore, it pays to make your
choice early! This is an exercise in responding to tradeoffs and incentives!

If absolutely necessary, because there are more than 18 students in the seminar, more than one
student may choose a particular episode; in that case, I will endeavor to suggest different
orientations. There will be a maximum of two topics per session. I will rigorously enforce this
requirement in order to ensure that there is some time for discussion.

Except for the presentations on February 17 and 24, students should distribute electronically to
me and to others in the seminar at least an outline of their presentations one week in advance.
For example, outlines of presentations on March 3 (the first such session) should be circulated by
February 24. For February 17 and 24 sessions, the outlines should be distributed by Monday
morning February 15th and 22nd respectively.

Structure of Presentation and Paper: With respect to each episode, the class presentation and
paper should cover the following eight elements: (1) description of the “problem,” (2) diagnosis
of the problem, (3) whether the analytical framework was widely agreed among authorities, (4)
whether that diagnosis was right, (5) description and evaluation of any policy actions or
inactions, (6) the nature of any policy coordination, (7) the lessons to be learned, and how what
you learned about this episode connects with other episodes the seminar has considered. With
the exception of the presentations on April 14, 21, and 28, students will be expected to use
this common framework in their presentations and papers.

Final papers are due to me electronically by May 12 at the latest!

Reading

All “Required” reading is on Electronic Reserve; except as noted or where links are provided.

All “other” reading is on Regular Reserve, except as noted or where links are provided. The
“other” reading is designed primarily to assist students in the research for their presentations and
papers.

Items marked * are posted on Blackboard under “Course Documents.”

I may circulate/post a few other items during the semester.

The last page contains information on some useful reference sources.

2
Outline of the Course

January 27 – Introductory Meeting

Background Reading:

Truman, Edwin M. 2004. “A Critical Review of Coordination Efforts in the Past” in

Macroeconomic Policies in the World Economy, ed. Horst Siebert. Berlin: Springer
Verlag.
* Truman, Edwin M. 2006. “What Can Exchange Rates Tell Us?” in C. Fred Bergsten and the
World Economy, ed. Michael Mussa. Washington: Peterson Institute for International
Economics (pages 161- 213).

3
February 3 – Economic Policy Coordination: Instruments

Reading:
Required:
* Woglom, Geoffrey. Notes on Open Economy, based on Mankiw textbook on
Macroeconomics; see below

REVIEW (on Regular Reserve in Frost if students do not have a copy)

Mankiw, N. Gregory. 2003. “Aggregate Demand in the Open Economy,” including appendix.
Chapter 12 in Macroeconomics. New York: Worth Publishers.
OR
Yarbrough, Beth V., and Robert M. Yarbrough. 2006. “Prices and Output in an Open
Economy.” Chapter 15, in particular pages 498-507 in The World Economy: Trade and
Finance. Mason, OH: Thomson South-Western.

Other:
Edison, Hali J. 1993. The Effectiveness of Central Bank Intervention: A Survey of the Literature
after 1982. Special Papers in International Economics 18 (July). Princeton: Princeton
University, International Finance Section.
* Dominquez, Kathryn M. 2003. “Foreign Exchange Market Intervention: Did it Work in the
1990s?” In Dollar Overvaluation and the World Economy, eds. C. Fred Bergsten and
John Williamson. Washington, DC: Institute for International Economics (pages 217-
245).
Henderson, Dale W. and Stephanie Sampson. 1983. “Intervention in Foreign Exchange
Markets: A Summary of Ten Staff Studies.” Federal Reserve Bulletin 69 (November):
pages 830-836.
Kenen, Peter B. 1988. “Coordinating National Economic Policies.” In Managing Exchange
Rates. New York: Council on Foreign Relations (pages 74-93).
Obstfeld, Maurice. 1995. “International Currency Experience: New Lessons and Lessons
Relearned.” Brookings Papers on Economic Activity: 1 (pages 119-196).
* Truman, Edwin M. 2003. “The Limits of Foreign Exchange Market Intervention.” In Dollar
Overvaluation and the World Economy, eds. C. Fred Bergsten and John Williamson.
Washington: Institute for International Economics (pages 247-265).
* Williamson, John. 2007. “The Reference Rate Proposal” (Chapter 2, pages 5-12) and
“Hypothetical History” (Chapter 7, pages 39-51). In Reference Rates and The
International Monetary System. Washington: Peterson Institute for International
Economics.

4
February 10 – Economic Policy Coordination: Theory and Institutions

Reading:
Required:
Bryant, Ralph C. 1995. “Preface” (pages xiii-xxv) and “Alternative Forms of Cooperation”
(pages 6-34). International Coordination of National Stabilization Policies.
Washington: Brookings Institution.
Meyer, Laurence H., Brian M. Doyle, Joseph E. Gagnon, and Dale W. Henderson. 2002.
International Coordination of Macroeconomic Policies: Still Alive in the New
Millennium? International Finance Discussion Papers 723. Washington, DC: Board of
Governors of the Federal Reserve System.
http://www.federalreserve.gov/pubs/ifdp/2002/723/ifdp723.pdf
Sobel, Mark, and Louellen Stedman. 2006 The Evolution of the G-7 and Economic Policy
Coordination. Department of the Treasury, Office of International Affairs, Occasional
Paper No. 3 (July). http://www.ustreas.gov/offices/international-affairs/occasional-paper-series/07-07-
06%20Occasional%20Paper%203.pdf

Other:
Bryant, Ralph C. 1987. “Intergovernmental Coordination of Economic Policies: An Interim
Stocktaking.” In Paul A. Volcker, Ralph C. Bryant, Leonard Gleske, Gottfried Haberler,
Alexandre Lamfalussy, Shijuro Ogata, Jesus Silva-Herzog, Ross M. Starr, James Tobin
and Robert Triffin. International Monetary Policy Cooperation: Essays in Honor of
Henry C. Wallich. Essays in International Finance 169. Princeton University:
International Finance Section (December) (pages 4-15).
Branson, William H., Richard N. Cooper, Michael Emerson, and Louka T. Katseli. 1985. “Panel
Discussion: The Prospects for International Economic Policy Coordination.” In
International Economic Policy Coordination, eds. Willem H. Buiter and Richard C.
Marston. Cambridge: Cambridge University Press (pages 366-83).
Frenkel, Jacob A., Morris Goldstein, and Paul R. Masson. 1996. “International Coordination of
Economic Policies.” In Functioning of the International Monetary System, eds. Jacob A.
Frenkel and Morris Goldstein. Washington: International Monetary Fund (pages 17-59).
Fischer, Stanley. 1988. “International Macroeconomic Policy Coordination.” In International
Economic Cooperation, ed. Martin Feldstein. Chicago: Chicago University Press (pages
11-43).
Horne, Jocelyn and Paul R. Masson. 1988. “Scope and Limits of International Economic
Cooperation.” International Monetary Fund Staff Papers 15, no. 2: 259-296.
Boughton, James M. 2001. “Policy Cooperation: The Fund and the Group of Seven” Chapter 4 in
The Silent Revolution: The International Monetary Fund 1979-89. Washington:
International Monetary Fund. http://www.imf.org/external/pubs/ft/history/2001/ch04.pdf
NOTE: This and other histories of the IMF are very useful reference volumes. The
chapters of this volume are available online. http://www.imf.org/external/pubs/ft/history/2001/
* Truman, Edwin M. 2006. “The Agenda for IMF Reform.” In A Strategy for IMF Reform.
Washington: Institute for International Economics (pages 1-21).
* Truman, Edwin M. 2006. “Role in the International Monetary System.” In A Strategy for IMF
Reform. Washington: Institute for International Economics (pages 45-59).
* C. Fred Bergsten. 2006. “A New Steering Committee for the World Economy.” In
Reforming the IMF for the 21st Century. Washington: Institute for International
Economics (pages 279-292).

5
* C. Fred Bergsten and C. Randall Henning. 1996. “Introduction” and “The Role and Record of
the G-7.” In Global Economic Leadership and the Group of Seven by C. Fred Bergsten
and C. Randall Henning. Washington: Institute for International Economics (pages 1-
25).
Bryant, Ralph C. 2004. Crisis Prevention and Prosperity Management for the World Economy.
Washington: Brookings Institution.
Crockett, Andrew. 1989. “The Role of International Institutions in Surveillance and Policy
Coordination.” In Macroeconomic Policies in an Interdependent World eds. Ralph C.
Bryant, David A. Currie, Jacob A. Frenkel, Paul R. Masson, and Richard Portes.
Washington: International Monetary Fund (pages 343-80).
Dobson, Wendy. 1991. Economic Policy Coordination: Requiem or Prologue? Policy
Analyses in International Economics 30. Washington: Institute for International
Economics.

6
February 17 – The Late 1960s and Mid 1970s

Episodes:
1. Breakdown of the Bretton Woods System: 1969-73
2. Oil Crisis and Global Recession: 1973-75

Reading:
#
Required:
Solomon, Robert. 1982. “The Road to Camp David” and “From Camp David to the
Smithsonian.” In Robert Solomon The International Monetary System: 1945-1981. New
York: Harper & Row (pages 176-215).
Solomon, Robert. 1982. “Inflation, Recession, and Stagflation in the 1970’s.” In Robert
Solomon The International Monetary System: 1945-1981. New York: Harper & Row
(pages 298-315).
Review as appropriate relevant portions of Truman readings from January 27.

Other:
Garber, Peter M. “The Collapse of the Bretton Woods Fixed Exchange Rate System.” In A
Retrospective on the Bretton Woods System: Lessons for International Monetary Reform,
eds. Michael D. Bordo and Barry Eichengreen (pages 461-93).
Obstfeld, Maurice. 1993. “The Adjustment Mechanism.” In A Retrospective on the Bretton
Woods System: Lessons for International Monetary Reform, eds. Michael D. Bordo and
Barry Eichengreen (pages 201-264).
Solomon, Robert. 1982. The International Monetary System: 1945-1981. New York: Harper &
Row (Chapters VI to XIV).
Volcker, Paul A., and Toyoo Gyohten. 1992. “Breakdown.” In Paul A. Volcker and Toyoo
Gyohten Changing Fortunes: The World’s Money and the Threat to American
Leadership. New York: Times Books (pages 59-100).


To the extent that presentations will be made on each of the episodes.
7
February 24 – The Late 1970s

Episodes:
3. Locomotives: 1976-77
4. The Bonn Summit: 1976-78

Reading:
#
Required:
Holtham, Gerald. 1989. “German Macroeconomic Policy and the 1978 Bonn Economic
Summit.” In Richard N. Cooper, Barry Eichengreen, C. Randall Henning, Gerald
Holtham, and Robert D. Putnam Can Nations Agree: Issues in International Economic
Cooperation. Washington, DC: Brookings Institution (pages 141-177).
“The Bonn Summit Conference Declaration.” In Richard N. Cooper, Barry Eichengreen, C.
Randall Henning, Gerald Holtham, and Robert D. Putnam Can Nations Agree: Issues in
International Economic Cooperation. Washington, DC: Brookings Institution (pages
118-126).
Review as appropriate relevant portions of Truman readings from January 27.

Other:
Putnam, Robert D. and C. Randall Henning. 1989. “The Bonn Summit of 1978: A Case Study
in Coordination.” In Richard N. Cooper, Barry Eichengreen, C. Randall Henning, Gerald
Holtham, and Robert D. Putnam Can Nations Agree: Issues in International Economic
Cooperation (pages 12-140). Washington, DC: Brookings Institution.
Romer, Christina D., and David H. Romer. 2002. “The Evolution of Economic Understanding
and Postwar Stabilization Policy.” In Rethinking Stabilization Policy. Federal Reserve
Bank of Kansas City: pages 11-78.


To the extent that presentations will be made on each of the episodes.
8
March 3 – Global Debt Crises

Episodes:
5. The Global Debt Crisis: 1982-83
6. The Asian Financial Crisis: 1997-98

Reading:
#
Required:
* Cline, William R. 1983. “Origins of the Problem” and “Systemic Vulnerability and
Emergency Response.” In International Debt and the Stability of the World Economy.
Washington: Institute for International Economics (pages 13-44).
* Roubini, Nouriel, and Brad Setser. 2004. “New Nature of Emerging-Market Crises” chapter 2
in Bailouts or Bailins? Responding to Financial Crises in Emerging Markets.
Washington: Peterson Institute for International Economics (pages 25-72).

Other:
Kindleberger, Charles P., and Robert Z.Aliber. 2005. Manias, Panics, and Crashes: A History of
Financial Crises. New York: Wiley.
Reinhart, Carmen M., and Kenneth S. Rogoff. 2008. This Time is Different: A Panoramic View
of Eight Centuries of Financial Crises. NBER Working Paper 13882 (March).
http://www.nber.org/papers/w13882
Reinhart, Carmen M. and Kenneth S. Rogoff. 2009. This Time Is Different: Eight Centuries of
Financial Folly. Princeton: Princeton University Presss.
Cline, William R. 1995. International Debt Reexamined. Washington: Institute for
International Economics.
Krugman, Paul. 1994. “U.S. Policy on Developing-Country Debt.” In American Economic
Policy in the 1980s, ed. Martin Feldstein. Chicago: Chicago University Press (pages 691-
722).
Sachs, Jeffrey D. 1988. “International Policy Coordination: The Case of the Developing
Country Debt Crisis.” In International Economic Cooperation, ed. Martin Feldstein.
Chicago: Chicago University Press (pages 233-78).
Blustein, Paul. 2003. The Chastening: Inside the Crisis that Rocked the Global Financial
System and Humbled the IMF. See in particular “The Committee to Save the World”
pages 1-18. New York: Public Affairs.
DeLong, J. Bradford, and Barry Eichengreen. 2002. “Between Meltdown and Moral Hazard:
The International Monetary and Financial Policies of the Clinton Administration.” In
American Economic Policy in the 1990s, eds. Jeffrey A. Frankel and Peter R. Orszag.
Cambridge: MIT Press (pages 191-254).
Geithner, Timothy. 2007. “Reflections on the Asian Financial Crisis.” Remarks at the Federal
Reserve Bank of San Francisco, June 20, 2007.
http://www.newyorkfed.org/newsevents/speeches/2007/gei070620.html
Ghosh, Atish, Timothy Lane, Marianne Schulze-Ghattas, Ales Bulir, Javier Hamann, and Alex
Mourmouras. 2002. IMF-Supported Programs in Capital Account Crises. Washington:
International Monetary Fund.
Glick, Reuven and Michael Hutchinson. 1999. Banking and Currency Crises: How Common Are
Twins? Federal Reserve Bank of San Francisco Pacific Basin Conference.
http://www.frbsf.org/economics/conferences/990923/papers/glick_hutchison.pdf


To the extent that presentations will be made on each of the episodes.
9
U.S. Council of Economic Advisors. 1999. “Capital Flows in the Global Economy” and “The
Evolution and Reform of the International Financial System.” Economic Report of the
President, Chapters 6-7 (pages 219-303).
http://origin.www.gpoaccess.gov/usbudget/fy00/pdf/1999_erp.pdf

10
March 10 – The Strong-Weak Dollar, Global Adjustment and Recession

Episodes:
7. The Plaza, the Louvre, and Bringing Down the Dollar: 1985-89
8. Global Adjustment and U.S. Recession: 1989-92

Reading:
#
Required:
Frankel, Jeffrey A. 1994. “The Making of Exchange Rate Policy in the 1980s.” In American
Economic Policy in the 1980s, ed. Martin Feldstein. Chicago: Chicago University Press
(pages 293-341).
* Krugman, Paul. 1991. “Has the Adjustment Process Worked?” (pp. 277-93 and 309-14). In C.
Fred Bergsten editor, International Adjustment and Financing: The Lessons of 1985-91.
Washington: Institute for International Economics
* Henning, C. Randall. 1994. “The Bush Administration.” In C. Randall Henning, Currencies
and Politics in the United States, Germany, and Japan. Washington: Institute for
International Economics (pages 290-303).
Review as appropriate relevant portions of Truman readings from January 27.

Other:
Destler, I. M. and C. Randall Henning. 1989. Dollar Politics: Exchange Rate Policymaking in
the United States. Washington: Institute for International Economics.
Fratzscher, Marcel. 2008. How Successful is the G7 in Managing Exchange Rates? European
Central Bank Working Paper 952 (October). http://www.ecb.int/pub/pdf/scpwps/ecbwp952.pdf
Funabashi, Yoichi. 1988. Managing the Dollar: From the Plaza to the Louvre. Washington:
Institute for International Economics.
Marris, Stephen. 1985. Deficits and the Dollar: The World Economy at Risk. Washington:
Institute for International Economics.
Obstfeld, Maurice. 1996. “Effectiveness of Foreign Exchange Intervention, 1985-88. In
Functioning of the International Monetary System, eds. Jacob A. Frenkel and Morris
Goldstein. Washington: International Monetary Fund (pages 743-88).
Volcker, Paul A. 1995. “The Quest for Exchange Rate Stability: Realistic or Quxotic.” Stamp
Lecture. Senate House. University of London. November 29.
http://www.iie.com/publications/papers/paper.cfm?ResearchID=278
* Williamson, John. 1994. “Introduction.” In Estimating Equilibrium Exchange Rates, ed. John
Williamson. Washington: Institute for International Economics (pages 1-17).
* Black, Stanley. 1994. “On the Concept and Usefulness of the Equilibrium Exchange Rate.”
In Estimating Equilibrium Exchange Rates, ed. John Williamson. Washington: Institute
for International Economics (pages 279-292).
U.S. Council of Economic Advisors. 1992. “Recent Developments and Economic Outlook”
Economic Report of the President, Chapters 2 (pages 35-80).
http://fraser.stlouisfed.org/publications/ERP/issue/1584/download/5988/ERP1992_Chapter2.pdf


To the extent that presentations will be made on each of the episodes.
11
March 24 – Bubbles, Booms and Busts in the 1990s

Episodes:
9. The Japanese Bubble: 1989-20021
10. The U.S. Boom and Bust: 1995-2001

Reading:
#
Required:
Ahearne, Alan, Joseph Gagnon, Jane Haltmaier, and Steve Kamin. 2002. Preventing Deflation:
Lessons from the Japanese Experience in the 1990s. International Finance Discussion
Papers 729. Washington, DC: Board of Governors of the Federal Reserve System.
http://www.federalreserve.gov/pubs/ifdp/2002/729/ifdp729.pdf
IMF (International Monetary Fund). 1999. “Growth Divergences in the United States, Europe,
and Japan: Trend or Cyclical?” In World Economic Outlook. October (pages 72-91).
http://www.imf.org/external/pubs/ft/weo/1999/02/1099ch3.pdf
Review as appropriate relevant portions of Truman readings from January 27.

Other:
Mikitani, Ryoichi, and Adam S. Posen editors. 2000. Japan’s Financial Crisis and Its Parallels
to U.S. Experience. Washington: Institute for International Economics.
* Posen, Adam S. 1998. “Diagnosis: Macroeconomic Mistake, Not Structural Stagnation.” In
Adam Posen. Restoring Japan’s Economic Growth. Washington: Institute for
International Economics (pages 13-28).
Hoshi, Takeo, and Anil K. Kashyap. 2004. “Japan’s Financial Crisis and Economic Stagnation.
Journal of Economic Perspectives, Winter, pages 3-26.
IMF (International Monetary Fund). 2000. “Asset Prices and the Business Cycle.” In World
Economic Outlook. May (pages 72-91).
http://www.imf.org/external/pubs/ft/weo/1999/02/1099ch3.pdf
IMF (International Monetary Fund). 2003. Japan: 2003 Article IV Consultation.
(September) http://www.imf.org/external/pubs/ft/scr/2003/cr03281.pdf
IMF (International Monetary Fund). 2003. “Japan’s Experience with Deflation
and Associated Costs” Chapter 3 in Japan: Selected Issues
(September). http://www.imf.org/external/pubs/ft/scr/2003/cr03282.pdf
Syed, Murtaza, and Kenneth Kang, and Kiichi Tokuoka . 2009. “Lost Decade”
in Translation: What Japan’s Crisis Could Portend about Recovery from
the Great Recession. IMF WP/09/282.
http://www.imf.org/external/pubs/ft/wp/2009/wp09282.pdf
IMF (International Monetary Fund). 2002. United States: 2002 Article IV
Consultation (August) (See pages 1-11 in particular)
http://www.imf.org/external/pubs/ft/scr/2002/cr02166.pdf

1
This should be either the bursting of the bubble (1989 until the early 1990s) or recovery (mid-1990s to early
2000s). It could be two episodes if absolutely necessary.

To the extent that presentations will be made on each of the episodes.
12
March 31 – Introduction to the Global Financial Crisis of 2007-09

Guest:
Steven R. Weisman, editorial director and public policy fellow at the Peterson Institute for
International Economics and former chief international economics correspondent for the New
York Times.
+
Reading:
Required:
Johnson, Simon. 2009. The Quite Coup. Atlantic (May).
http://www.theatlantic.com/doc/200905/imf-advice
*Stiglitz, Joseph E. 2009. The Challenge of Creating Jobs in the Aftermath of the “Great
Recession.” Testimony before the Joint Economic Committee (December 10).
*Roberts, Russell. 2009. The Challenge of Creating Jobs in the Aftermath of the “Great
Recession.” Testimony before the Joint Economic Committee (December 10).
Truman, Edwin M. 2009. Lessons from the Global Economic and Financial Crisis. Keynote
Address, Seoul, Korea (November 11) (pages 1-3)
http://www.iie.com/publications/papers/truman0911.pdf

Other:
Bernanke, Ben. 2010. Monetary Policy and the Housing Bubble. Remarks at the American
Economic Association (January 3).
http://www.federalreserve.gov/newsevents/speech/bernanke20100103a.pdf
Krugman, Paul. 2009. The Return of Depression Economics and the Crisis of 2008. See, in
particular, The Taming of the Business Cycle (pages 15-22). W.W. Norton and
Company.

General:
Federal Reserve Bank of New York’s “Crisis Timelines”
http://www.newyorkfed.org/research/global_economy/Crisis_Timeline.pdf
http://www.newyorkfed.org/research/global_economy/IRCTimelinePublic.pdf
If you click on the elements in these two timelines you will be linked to the relevant
announcements and press reports.

Commentaries on the crisis can also be found at Vox-EU http://www.voxeu.org or at Baseline

Scenario http://baselinescenario.com/ . Be careful not to confuse opinion with fact!


The readings for March 31 and April 14, 21, and 28 overlap and are not repeated. I have included them roughly
where they are most relevant, but there are overlaps.
13
April 7 – Exchange Rates and Global Imbalances in the 21st Century

Episodes:
11. Global Imbalances: 2001-2010
12. Exchange Rate Policies: 2002-2010
+
Reading:
#
Required:
IMF (International Monetary Fund). 2007. Staff Report on the Multilateral
Consultation on Global Imbalances with China, the Euro Area, Japan,
Saudi Arabia, and the United States (June 29)
http://www.imf.org/external/np/pp/2007/eng/062907.pdf
Cline, William R., and John Williamson. 2008. New Estimates of Fundamental Equilibrium
Exchange Rates. Peterson Institute for International Economics Policy Brief 08-7 (July).
http://www.iie.com/publications/pb/pb08-7.pdf

Other:
Statement of G-7 Finance Ministers and Central Bank Governors and Agenda for Growth,
Dubai, September 20, 2003. http://www.g7.utoronto.ca/finance/fm030920.htm
Statement of G-7 Finance Ministers and Central Bank Governors and Annex on Global
Imbalances, Washington, April 21, 2006. http://www.g7.utoronto.ca/finance/fm060421.htm
Ahearne, Alan, William R. Cline, Kyung Tae Lee, Yung Chul Park, Jean Pisani-Ferry, and John
Williamson. 2007. “Global Imbalances: Time for Action,” Peterson Institute for
International Economics Policy Brief 07- 4 http://www.iie.com/publications/pb/pb07-4.pdf
Warnock, Francis E. 2006. “How Might a Disorderly Resolution of Global Imbalances Affect
Global Wealth?” IMF Working Paper wp/06/170. Washington: International Monetary
Fund. http://www.imf.org/external/pubs/ft/wp/2006/wp06170.pdf
Gruber, Joseph W., and Steven B. Kamin. 2008. Do Differences in Financial Development
Explain the Global Pattern of Current Account Imbalances? International Finance
Discussion Papers 923. Washington, DC: Board of Governors of the Federal Reserve
System. http://www.federalreserve.gov/pubs/ifdp/2008/923/ifdp923.pdf
Cline, William R. 2005. The United States as a Debtor Nation. Washington: Institute for
International Economics.
Truman, Edwin M. 2005. “Postponing Global Adjustment: An Analysis of Pending
Adjustment of Global Imbalances.” Working Paper WP 05-6. Washington: Institute for
International Economics. http://www.iie.com/publications/wp/wp05-6.pdf
IMF (International Monetary Fund). 2002. “How Worrisome are Global Imbalances.” In
World Economic Outlook. September (pages 65-81).
http://www.imf.org/external/pubs/ft/weo/2002/02/pdf/chapter2.pdf
IMF (International Monetary Fund). 2005. “Global Imbalances: A Saving and Investment
Perspective.” In World Economic Outlook. September (pages 91-124).
http://www.imf.org/external/pubs/ft/weo/2005/02/pdf/chapter2.pdf
Truman, Edwin M. 2009. The International Monetary Fund and Regulatory Challenges. Peterson
Institute for International Economics Working Paper 09-16 (December): pages 7-11 in
particular. http://www.iie.com/publications/wp/wp09-16.pdf
Bergsten, C. Fred, and John Williamson editors. 2004. Dollar Adjustment: How Far? Against
What? Washington: Peterson Institute for International Economics.

See also readings for March 31 and April 14 and 21, and in particular April 28. I have included them roughly where
they are most relevant.

To the extent that presentations will be made on each of the episodes.
14
IMF (International Monetary Fund). 2006. Methodology for CGER Exchange Rate Assessments
http://www.imf.org/external/np/pp/eng/2006/110806.pdf
IMF (International Monetary Fund). 2007. “Exchange Rates and the
Adjustment of External Imbalances.” In World Economic Outlook. April
(pages 81-120). http://www.imf.org/external/pubs/ft/weo/2007/01/pdf/c3.pdf
Isard, Peter. 2007. Equilibrium Exchange Rates: Assessment Methodologies,
IMF Working Paper 07/296
http://www.imf.org/external/pubs/ft/wp/2007/wp07296.pdf
*Goldstein, Morris and Nicholas R. Lardy. 2008. “China’s Exchange Rate Policy: An Overview
of Some Key Issues” Chapter 1 in Debating China’s Exchange Rate Policy. Washington:
Peterson Institute for International Economics.
*Goldstein, Morris and Nicholas R. Lardy. 2009. “Policy Implications and Options” Chapter 3 in
The Future of China’s Exchange Rate Policy. Washington: Peterson Institute for
International Economics.
*Mussa, Michael. 2008. IMF Surveillance over China’s Exchange Rate Policy. ” Chapter 8 in
Debating China’s Exchange Rate Policy. Washington: Peterson Institute for International
Economics.
Cline, William R., and John Williamson. 2009. 2009 Estimates of Fundamental Equilibrium
Exchange Rates. Peterson Institute for International Economics Policy Brief 09-10 (July).
http://www.iie.com/publications/pb/pb09-10.pdf
Cline, William R. 2008. Estimating Consistent Fundamental Equilibrium Exchange Rates.
Peterson Institute for International Economics Working Paper 08-6 (July)
http://www.piie.com/publications/wp/wp08-6.pdf

15
April 14 – The Global Economic and Financial Crisis of 2007-09: Origins

Episodes:2
13. Macroeconomic Origins
14. Microeconomic Origins
+
Reading:
Required:
IMF (International Monetary Fund). 2007. “Assessing Global Financial Risks” Chapter 1in
Global Financial Stability Report (April) (pages 1-15 in particular).
http://www.imf.org/External/Pubs/FT/GFSR/2007/01/pdf/chap1.pdf
IMF (International Monetary Fund). 2007. “Global Prospects and Policies” Chapter 1 in World
Economic Outlook (October). http://www.imf.org/external/pubs/ft/weo/2007/02/pdf/c1.pdf
Washington G-20 Summit Declaration. 2008. Financial Markets and the World Economy
(November 15). http://www.g20.org/Documents/g20_summit_declaration.pdf

Other:
European Central Bank. 2007. Financial Stability Review (December): pages 1-80 in particular.
http://www.ecb.int/pub/pdf/other/financialstabilityreview200712en.pdf. See also Lucas
Papademos. 2007. Opening remarks at the press briefing on the occasion of the
publication of the December 2007 ECB Financial Stability Review (December 12)
http://www.ecb.int/press/key/date/2007/html/sp071212.en.html and associated PowerPoint
http://www.ecb.int/press/key/date/2007/html/sp071212.pdf
Carmassi, Jacopo, Daniel Gros, and Stefano Micossi. 2009. The Global Financial Crisis: Causes
and Cures. Journal of Common Market Studies 47, no 5: 977-996
http://www3.interscience.wiley.com/cgi-bin/fulltext/122655214/PDFSTART
Obstfeld, Maurice and Kenneth Rogoff. 2009. Global Imbalances and the Financial Crisis:
Products of Common Causes. Paper delivered at Federal Reserve Bank of San Francisco
Asia Economic Policy Conference, October 18-20.
http://www.frbsf.org/economics/conferences/aepc/2009/09_Obstfeld.pdf
Issing Committee. 2008. New Financial Order: Recommendations of the Issing Committee :
White Paper No. 1 (October). http://www.ifk-
cfs.de/fileadmin/downloads/publications/white_paper/White_Paper_No_1_Final.pdf
Bank of England. 2008. Financial Stability Report No.24 (October): pages 1-33 in particular.
http://www.bankofengland.co.uk/publications/fsr/2008/fsrfull0810.pdf
Visco, Ignazio. 2009. Global Imbalances in the Financial Crisis and the International Monetary
System (December 4). http://www.bis.org/review/r091211d.pdf
Truman, Edwin M. 2009. The Global Financial Crisis: Lessons Learned and Challenges for
Developing Countries. Remarks at the Eighteenth Cycle of Economics Lectures, Banco
de Guatemala (June). http://www.iie.com/publications/papers/print.cfm?researchid=1240&doc=pub
Financial Stability Forum. 2008. Report on Enhancing Market and Institutional Resilience
(April). http://www.financialstabilityboard.org/publications/r_0804.pdf

2
These presentations and papers should focus on the description of the origins of the crisis, its diagnosis, whether it
was agreed, whether or in what respects it was correct, and how this episode relates to other episodes we have
examined. One student should focus on macroeconomic diagnoses (macroeconomic policies and global imbalances)
and the other should focus on microeconomic diagnoses (the financial system and its supervision and regulation).

The readings for March 31 and April 14, 21, and 28 overlap and are not repeated. I have included them roughly
where they are to be most relevant, but there are overlaps.
16
Gorton, Gary. 2009. Slapped in the Face by the Invisible Hand: Banking and the Financial Panic
of 2007. Paper presented at the Federal Reserve Bank of Atlanta’s Financial Market
Conference (May). http://www.frbatlanta.org/news/CONFEREN/09fmc/gorton.pdf
Senior Supervisors Group. 2008. Observations on Risk Management Practices during the Recent
Market Turbulence (March).
http://www.ny.frb.org/newsevents/news/banking/2008/SSG_Risk_Mgt_doc_final.pdf
Senior Supervisors Group. 2009. Risk Management Lessons from the Global Banking Crisis of
2008 (October). http://www.ny.frb.org/newsevents/news/banking/2009/SSG_report.pdf

17
April 21 – The Global Economic and Financial Crisis of 2007-09: Responses

Episodes:3
15. Economic Repair
16. Financial System Repair
+
Reading:
Required:
IMF Staff Note to G-20 Deputies on Outlook and Actions. 2009. January 31.
http://www.imf.org/external/np/g20/pdf/020509.pdf
IMF (International Monetary Fund). 2009. “Stabilizing the Global Financial System and
Mitigating Spillover Risks” Chapter 1 in Global Financial Stability Report (April).
http://www.imf.org/External/Pubs/FT/GFSR/2009/01/pdf/chap1.pdf
London G-20 Summit Declaration. 2009. The Global Plan for Recovery and Reform (April 2).
[See also the annexes.] http://www.g20.org/Documents/final-communique.pdf

Other:
Kohn, Donald L. 2010. Monetary Policy in the Crisis: Past, Present, and Future (January).
http://www.federalreserve.gov/newsevents/speech/kohn20100103a.pdf
Ito, Takatoshi. 2009. Fire, Flood, and Lifeboats: Policy Responses to the Global Crisis of 2007-
09. Paper delivered at Federal Reserve Bank of San Francisco Asia Economic Policy
Conference, October 18-20. http://www.frbsf.org/economics/conferences/aepc/2009/09_Ito.pdf
Klyuev, Vladimir, Phil de Imus, and Krishna Srinivasan. 2009. Unconventional Choices for
Unconventional Times: Credit and Quantitative Easing in Advanced Economies. IMF
Staff Position Note 09/27 (November 4) http://www.imf.org/external/pubs/ft/spn/2009/spn0927.pdf
Freedman, Charles, Douglas Laxton, and Jaewoo Lee. 2009. The Case for Global Fiscal
Stimulus. IMF Staff Position Note 09/03 (March 6).
http://www.imf.org/external/pubs/ft/spn/2009/spn0903.pdf
Financial Stability Forum. 2007. FSF Working Group on Market and Institutional Resilience
Preliminary Report to the G7 Finance Ministers and Central Bank Governors (October
15). http://www.fsforum.org/publications/FSFWGPreliminaryreportG715Octt.pdf
Guerra, Ivan, R. Barry Johnston, André O. Santos, and Karim Youssef. 2009. Policies to
Address Financial Sector Weakness: Evolution of Financial Markets and Institutional
Indicators. IMF Staff Position Note 09/24 (October 7).
http://www.imf.org/external/pubs/ft/spn/2009/spn0924.pdf
Landier, Augustin and Kenichi Ueda. 2009. The Economics of Bank Restructuring:
Understanding the Options. IMF Staff Position Note 09/12 (June 5).
http://www.imf.org/external/pubs/ft/spn/2009/spn0912.pdf
Truman, Edwin M. 2008. On What Terms is the IMF Worth Funding. Peterson Institute for
International Economics Working Paper 08-11 (December).
http://www.iie.com/publications/wp/wp08-11.pdf

3
These presentations and papers should focus on the description of the policy actions in response to the crisis, the
extent and nature of their coordination, whether the actions and coordination contributed to their success or failure,
and how this episode relates to other episodes we have examined. One student should focus on responses using
macroeconomic policies directed at economic growth and the other should focus on responses using policies
designed to repair or support the financial system.

The readings for March 31 and April 14, 21, and 28 overlap and are not repeated. I have included them roughly
where they are most relevant, but there are overlaps.
18
Truman, Edwin M. 2009. How the Fund Can Help Save the World Economy. Op-Ed in the
Financial Times (March 5). http://www.iie.com/publications/opeds/print.cfm?
researchid=1140&doc=pub
Financial Stability Board. 2009. Press Release on Recommendations and Principles to
Strengthen Financial Systems (April 2) [See links to reports.]
http://www.financialstabilityboard.org/press/pr_090402a.pdf

19
April 28 – The Global Economic and Financial Crisis of 2007-09: Lessons

Episodes:4
17. Financial Reform
18. International Monetary Reform
+
Reading:
Required:
Financial Stability Board. 2009. Progress since the Pittsburgh Summit in Implementing the G20
Recommendations for Strengthening Financial Stability (November 7).
http://www.financialstabilityboard.org/publications/r_091107a.pdf
Mateos y Lago, Isabelle, Rupa Duttagupta, and Rishi Goyal. 2009. The Debate on the
International Monetary System. IMF Staff Position Note 09/26 (November 11)
http://www.imf.org/external/pubs/ft/spn/2009/spn0926.pdf

Other:
Pittsburgh G-20 Summit Statement ,September 25, 2009.
http://www.g20.org/Documents/pittsburgh_summit_leaders_statement_250909.pdf
Communiqué of the G-20 Ministers and Governors, November 7, 2009.
http://www.g20.org/Documents/2009_communique_standrews.pdf
IMF. 2009. The G-20 Mutual Assessment Process and the Role of the Fund (December).
http://www.imf.org/external/np/pp/eng/2009/120209A.pdf
*Helleiner, Eric. 2010.What Role for the New Financial Stability Board? The Politics of
International Standards after the Crisis (January).5
*Hersh, Adam S. 2010. Introduction to the Financial Stability Board and the International
Financial Reform Agenda.6
Johnston, R. Barry, Effie Psalida, Phil de Imus, Jeanne Gobat, Mangal Goswami, Christian
Mulder, and Francisco Vasquez. 2009. Addressing Information Gaps. IMF Staff Position
Note 09/06 (March 26). http://www.imf.org/external/pubs/ft/spn/2009/spn0906.pdf
Carvajal, Ana, Randall Dodd, Michael Moore, Erlend Nier, Ian Tower, and Luisa Zanforlin.
2009. The Perimeter of Financial Regulation. IMF Staff Position Note 09/07 (March 26).
http://www.imf.org/external/pubs/ft/spn/2009/spn0907.pdf
De Larosiere, Jacques. 2009. Report of the High-Level Group on Financial Supervision in the
EU. http://ec.europa.eu/internal_market/finances/docs/de_larosiere_report_en.pdf
Pew Financial Reform Task Force. 2009. Principles on Financial Reform. (December)
http://www.pewfr.org/admin/section_introductions/files/FRP-POLICY-STATEMENT-FINAL.pdf
Group of Thirty. 2009. Financial Reform: A Framework for Financial Stability (January).
http://www.group30.org/pubs/reformreport.pdf
Brunnermeier, Markus, Andrew Crockett, Charles Goodhart, Avinash D. Persaud, and Hyun
Shin. 2009. The Fundamental Principles of Financial Regulation. Geneva Reports on the
World Economy.

4
These presentations and papers should focus on lessons to be learned or in the process of being learned, and how
this episode relates to other episodes we have examined, but they should also revisit the issues of the definition of
the problem, the diagnosis, and whether there is a common diagnosis. One student should focus on lessons and
efforts to reform of financial systems, national and international. The other student should focus on lessons and
efforts to reform the international monetary system, including the IMF.

The readings for March 31 and April 14, 21, and 28 overlap and are not repeated. I have grouped them roughly
where they appear to be most relevant, but there are overlaps.
5
This is a draft paper. Please treat accordingly.
6
This is a preliminary draft paper. Please treat accordingly. If you have any comments, I have been asked to
forward them to the author.
20
Financial Services Authority. 2009. The Turner Review: A Regulatory Response to the Global
Banking Crisis (March). http://www.fsa.gov.uk/pubs/other/turner_review.pdf
Issing Committee. 2009. New Financial Order: Recommendations of the Issing Committee :
White Paper No. 2 (February). http://www.ifk-
cfs.de/fileadmin/downloads/publications/white_paper/White_Paper_No_2_2009_Final.pdf
Blanchard, Olivier and Gian Maria Milesi-Ferretti. 2009. Global Imbalances in Midstream? IMF
Staff Position Note 09/29 (December 22).
http://www.imf.org/external/pubs/ft/spn/2009/spn0929.pdf
Crockett, Andrew. 2009. Reforming the Global Financial Architecture. Remarks delivered at
Federal Reserve Bank of San Francisco Asia Economic Policy Conference, October 18-
20. http://www.frbsf.org/economics/conferences/aepc/2009/09_Crockett.pdf
Eichengreen, Barry. 2009. The Financial Crisis and Global Policy Reforms. Paper delivered at
Federal Reserve Bank of San Francisco Asia Economic Policy Conference, October 18-
20. http://www.frbsf.org/economics/conferences/aepc/2009/09_Eichengreen.pdf
Bergsten, C. Fred. 2009. The Dollar and the Deficits: How Washington Can Prevent the Next
Crisis. Foreign Affairs (November). http://www.iie.com/publications/papers/print.cfm?
researchid=1312&doc=pub
Zhou, Xiaochuan. 2009. Reform of the International Monetary System (March 23).
http://www.pbc.gov.cn/english/detail.asp?col=6500&id=178
Williamson, John. 2009. Understanding Special Drawing Rights (SDRs). Peterson Institute for
International Economics Policy Brief 09-11 (June). http://www.iie.com/publications/pb/pb09-
11.pdf
Williamson, John. 2009. Why SDRs Could Rival the Dollar. Peterson Institute for International
Economics Policy Brief 09-20 (September). http://www.iie.com/publications/pb/pb09-20.pdf
Cooper, Richard N. 2009. The Future of the Dollar. Peterson Institute for International
Economics Policy Brief 09-21 (September). http://www.iie.com/publications/pb/pb09-21.pdf
United Nations. 2009. Report of the [Stiglitz] Commission of Experts of the President of the
United Nations General Assembly on Reforms of the International Monetary and
Financial System (September 21). Chapter 4 on International Institutions (pages 87-108)
and Chapter 5 on International Financial Innovations (pages 109-31), including
International Monetary Reform (pages 109-121).
http://www.un.org/ga/econcrisissummit/docs/FinalReport_CoE.pdf
Truman, Edwin M. 2009. The International Monetary Fund and Regulatory Challenges. Peterson
Institute for International Economics Working Paper 09-16 (December).
http://www.iie.com/publications/wp/wp09-16.pdf
Truman, Edwin M. 2010. The International Monetary System and Global Imbalances. Remarks
delivered at IMF conference on the International Monetary System (January).
http://www.iie.com/publications/papers/truman0110.pdf
Truman, Edwin M. 2009. It’s Time to Recognize Reserve Currency Realities. Peterson Institute
for International Economics Real Time Economic Issues Watch (July).
http://www.iie.com/realtime/?p=854
McKinsey Global Institute. 2009. Exorbitant Privilege? Implications of Reserve Currencies for
Competitiveness (December).
http://www.mckinsey.com/mgi/reports/pdfs/reserve_currencies/reserve_currencies_full_discussion_paper.p
df

21
May 5 – Economic Policy Coordination: Concluding Discussion

In this final session of our seminar we will focus on what we think we have learned.

I will provide a list of topics for discussion in advance of this session.

Please review your notes from January 27.

22
 Useful Additional Reference Materials

Bank for International Settlements, Annual Report, 1997-2009 issues available online.
http://www.bis.org/publ/arpdf/ar2006e.htm

Board of Governors of the Federal Reserve System, Monetary Policy Report to Congress and
accompanying testimony is available on line
http://www.federalreserve.gov/monetarypolicy/mpr_default.htm semiannually since July 1996.
First issued in March 1979. Both can be found in the Federal Reserve Bulletin of the
Board of Governors as well as in the Annual Report of the Board of Governors of the
Federal Reserve System. From May 1977 to March 1979, quarterly testimony can be
found in the same sources.

Board of Governors of the Federal Reserve System Transcripts of Meetings of the Federal Open
Market Committee and related documents including “Greenbook” staff forecasts are
available online starting in 1964 http://www.federalreserve.gov/monetarypolicy/fomc_historical.htm

Treasury and Federal Reserve Foreign Exchange Operations are available four times a year in the
Federal Reserve Bulletin of the Board of Governors or in the Quarterly Review of the
Federal Reserve Bank of New York (first published in the early 1960s) and contain a lot
of useful contemporary information. They available on line starting in 1999
http://www.newyorkfed.org/markets/quar_reports.html

IMF (International Monetary Fund). World Economic Outlook (WEO), published twice a year,
starting in April 1980. See also IMF, Annual Report before that date or as a supplement.
The IMF also has a very useful WEO database
http://www.imf.org/external/pubs/ft/weo/2006/01/data/index.htm.

IMF (International Monetary Fund), International Financial Statistics (a monthly and annual
publication for additional data). The library probably has an electronic subscription.

Financial Stability Board, Documents on Financial System Reform and Stability,

http://www.financialstabilityboard.org/ includes documents of the Financial Stability
Forum for three previous years.

Organization for Economic Cooperation and Development (OECD), OECD Economic Outlook.
Published twice a year starting in mid-1960s. Recent Outlooks are available online
http://www.oecd.org/department/0,3355,en_2649_33733_1_1_1_1_1,00.html

University of Toronto G7, G8 and G20 Information Centers. Summit Statements and
Documents and G-7 Finance Ministers and Central Bank Governors Statements and
Documents. Documents related to G20 meetings. http://www.g8.utoronto.ca/summit/index.htm
& http://www.g7.utoronto.ca/finance/index.htm & http://www.g20.utoronto.ca/

23