040672 UK Theory and Empirics of Monetary Integration (E) (2011S)

Course Outline:

Friday, March 4, 2011

15:30-17:00 UK1 and SE1: Introductory session

Friday, March 18, 2011: OCA 1

15:30-17:00 UK2: The theory of optimum currency areas: the benefit side
- De Grauwe, Chapter 3.
- Smets, J., I. Maes and J. Michielsen, 2000, EMU from a historical perspective, in: The Economic and Business Consequences of the EMU - A Challenge for Governments, Financial Institutions and Firms, by H. Ooghe, F. Heylen, R. Vander Vennet and J. Vermaut (eds.), Chapter 4, 53-92.

17:30-19:00 UK3: The theory of optimum currency areas: the cost side
- De Grauwe, Chapter 1

19:30-21:00 SE2: Presentations
I Price level convergence
- Haskel, J. and H. Wolf, 2001, The Law of One Price - A Case Study, Scandinavian Journal of Economics 103(4), 545-58.
- Deutsche Bundesbank, 2009, Price convergence in the euro area, Deutsche Bundesbank Monthly Report, March 2009, 33-47.
II A single global currency?
- Bonpasse, M., 2006, The Single Global Currency: Common Cents for the World, MPRA Paper No. 1175, Chapter 5.
- Rogoff, K., 2001, Why Not a Global Currency, The American Economic Review 91 (2), 243-247.
- Roubini, N., 2004, A Single Global Currency? Not Any Time Soon Nor in the Long Run in Which We Are All Dead, Nouriel Roubini's Global Economics Blog, August 23, 2004.

Saturday, March 19, 2011: OCA 2

8:00-9:30 UK4: OCA critiques - The Barro Gordon model; Is EMU an OCA?
- De Grauwe, Chapters 2, 4.
- Barro, R. J. and D. B. Gordon, 1983, A Positive Theory of Monetary Policy in a Natural Rate Model, Journal of Political Economy 91 (4), 589-610.
- Blanchard, O., 2009, Macroeconomics, 5th edition, Chapter 8, 163-182.
- Fidrmuc J., and I. Korhonen, 2003, Similarity of supply and demand shocks between the euro area and the CEECs, Economic Systems 27, 313-334.

10:00-11:30 UK5: The endogeneity of OCA criteria: effects of monetary union on trade and business cycle synchronization
- De Grauwe, Chapters 4, 5.
- Frankel, J. A. and A. K. Rose, 1998, The Endogeneity of the Optimum Currency Area Criteria, The Economic Journal 108 (449), 1009-1025.
- Fidrmuc, J., 2004, The endogeneity of the optimum currency area criteria, intra-industry trade, and EMU enlargement, Contemporary Economic Policy 22 (1), 1-12.
- Mongelli, F.P. and J.L. Vega, 2006, What effects is EMU having on the euro area and its member countries?, ECB Working Paper 599.
- Baldwin, R., 2006, The Euro's trade effects, ECB Working Paper 594.
- Duval, R. And J. Elmeskov, 2006, The effects of EMU on structural reforms in labour and product markets, ECB Working Paper 596, March.

12:00-13:30 SE3: Presentations
III The UK and the euro
- De Grauwe, Chapters 4.6 and 7.6
- UK membership of the single currency - An assessment of the five economic tests, HM Treasury, June 2003 (Executive Summary).
- Buiter, W. H., 2008, Why the United Kingdom Should Join the Eurozone, International Finance 11:3, 269-282.
IV Endogeneity of EMU: Will EMU lead to business cycle synchronization and foster structural reforms?
- De Haan, J. R. Inklaar and O. Sleijpen, Have Business Cycles Become Mores Synchronized?, Journal of Common Market Studies 40(1), 23-42.
- Bednarek-Sekunda, E., R. Jong-A-Pin and J. de Haan, 2010, The European Economic and Monetary Union and Labour Market Reform, European Union Politics 11(1), 3-27.

14:00-15:30 SE4: Group work: OCA

Friday, April 1, 2011: Exchange rates

15:30-17:00 UK6: Exchange rate strategies and exchange rate intervention
- De Grauwe, Chapter 6.
- Sarno L. and M. P. Taylor, 2001, Official intervention in the foreign exchange market: Is it effective and, if so, how does it work?, Journal of Economic Literature XXXIX (3), 839-868.
- Frankel A.F., 1999, No single currency regime is right for all countries or at all times, NBER Working Paper 7338.
- Levy-Yeyati, E. and F. Sturzenegger, 2005, Classifying Exchange Rate Regimes: Deeds vs. Words, European-Economic-Review 49 (6), 1603-1635.

17:30-19:00 UK7: EMS, ERM and the predictability of currency crises
- De Grauwe, Chapter 6.
- Eichengreen, B., 2000, The EMS crisis in retrospect, NBER Working Paper 8035.
- Égert, B., L. Halpern and R. MacDonald, 2005, Equilibrium Exchange Rates in Transition Economies: Taking Stock of the Issues, Oesterreichische Nationalbank, Working Paper 106.

19:30-21:00 SE5: Group work: Choice of exchange rate regimes

Saturday, April 2, 2011: Inflation, fiscal policy and the Maastricht criteria

8:00-9:30 UK8: The costs of inflation and measures of inflation
- De Grauwe, Chapter 7.5.
- Crespo Cuaresma, J. and M. A. Silgoner, 2004, Growth effects of inflation in Europe: How low is too low, how high is too high?, Working Paper 0411, Department of Economics, University of Vienna.
- Fluch, M. And H. Stix, 2005, Perceived Inflation in Austria - Extent, Explanations, Effects, Monetary Policy & the Economy Q3/05, 22-47.
- Égert, B., I. Drine, K. Lommatzsch and C. Rault, 2003, The Balassa-Samuelson effect in Central and Eastern Europe: myth or reality? Journal of Comparative Economics 31 (3), 552-572.

10:00-11:30 UK9: The transition to a monetary union: the role of fiscal policy and the Maastricht Criteria
- De Grauwe, Chapter 7 and 10.
- Convergence Report 2010, ECB, Frankfurt am Main.
- Calmfors, L., 2005, What Remains of the Stability Pact and What Next?, SIEPS Report 2005:8.
- Beetsma, R. and H. Uhlig, 1999, An Analysis of the Stability and Growth Pact, The Economic Journal, Vol. 109, No. 109, 546-571.

12:00-13:30 SE6: Presentations
V The breakdown of the Argentine currency board
- Spiegel, M.M., 2002, Argentina's Currency Crisis: Lessons for Asia, Latin America/Caribbean and Asia/Pacific Economics and Business Association, Working Paper 2.
- Hanke, St. And K. Schuler, 2002, What went wrong in Argentina?, Central Banking Journal XII (3), February.
VI The Austrian Hard Currency Policy
- Hochreiter, E. and G. Winckler, 1995, The advantages of tying Austria's hands: The success of the hard currency strategy, European Journal of Political Economy 11, 83-111.
- Gnan, E., C. Kwapil and M. T. Valderrama, 2005, EU and EMU Entry: A Monetary Policy Regime Change for Austria?, Monetary Policy & the Economy Q2/05, 53-68.

14:00-15:30 SE7: Presentations
VII Dollarization - Euroization
- Edwards, S. and I. I. Magendzo, 2003, Dollarization and Economic Performance: What Do We Really Know?, International Journal of Finance and Economics 8, 351-363.
- Dvorsky, S., Scheiber, Th. And H. Stix, 2008, Euroization in Central, Eastern and Southeastern Europe - First Results from the New OeNB Euro Survey, Focus on European Economic Integration 1/08, 48-60.
VIII A critical view on the Maastricht inflation criterion
- ECB, 2010, Convergence Report May 2010, Box 1, 8-9.
- Bulír, A. and J. Hurník, 2006, The Maastricht Inflation Criterion: How Unpleasant Is Purgatory?, IMF Working Paper WP/06/154.
- Lewis, J. and K. Staehr, 2007, The Maastricht Inflation Criterion: What is the Effect of Expansion of the European Union?, Bank of Estonia Working Paper Series 11/2007.

16:00-17:30 SE8: Group work: Chinas exchange rate strategy

Friday, April 8, 2011: Monetary policy strategies worldwide

15:30-17:00 UK10: Goals of monetary policy, the monetary policy strategy of the euro area
- De Grauwe, Chapters 8, 9.
- Friedman, B. M., 2000, Monetary policy, NBER Working Paper 8057.
- ECB, 2004, The monetary policy of the ECB, Frankfurt am Main, Chapter 3.
- ECB, 2002, Recent findings on monetary policy transmission in the euro area, ECB Monthly Bulletin October 2002, 43-53.
- ECB, 2008, Monthly Bulletin, 10th Anniversary of the ECB, Chapter 3, 33-63.

17:30-19:00 UK11: Monetary policy rules, central bank independence, transparency and accountability
- De Grauwe, Chapter 8.
- Clarida, R., J. Galí and M. Gertler, 1998, Monetary policy rules in practice - Some international evidence, European Economic Review 42 (6), 1033-1067.
- Belke, A, W. Kösters, M. Leschke and Th. Polleit, 2005, Back to the rules, ECB Observer VIII, Part 2: How the ECB and the US Fed set interest rates.
- ECB, 2004, The monetary policy of the ECB, Frankfurt am Main, Chapter 4.
- ECB, 2008, Monthly Bulletin, 10th Anniversary of the ECB, Chapter 3, 33-63.
- Eijffinger, S. C. W. and P. M. Geraats, 2005, How transparent are central banks? mimeo, January 2005.

19:30-21:00 SE9: Group work: Central banks worldwide

Saturday, April 9, 2011: Monetary policy and the financial crisis

8:00-9:30 UK12: Monetary policy and the financial crisis
- De Grauwe, Chapter 9, 11
- ECB, 2008, The Eurosystem’s Open Market Operations During the Recent Period of Financial Market Volatility, ECB Monthly Bulletin May 2008, 89-104.
- ECB, 2008, Financial Stability Review.

10:00-11:30 SE10: Presentations
IX Lessons of the financial crisis for macroeconomic policy
- Blanchard, O., G. Dell'Ariccia and P. Mauro, 2010, Rethinking Macroeconomic Policy, IMF Staff Position Note SPN/10/03.
- De Grauwe, Chapter 9.3, pages 204-209.
X Introduction of the euro in Estonia in 2011
- ECB, 2010, Convergence Report May 2010, Chapter 5.3 - Estonia, 89-109.
- European Commission, 2010, Flash Eurobarometer 307, Introduction of the euro in the new Member States.

12:00-13:30 SE11: Presentations
XI The course of financial crises
- Reinhart, C. M. and K. S. Rogoff, 2008, Is the 2007 US Sub-Prime Financial Crisis So Different?, American Economic Review 98 (2), 339-344.
-Reinhart, C. M. and K. S. Rogoff, 2009, The Aftermath of Financial Crises, American Economic Review 99 (2), 466-472.
XII Implications of the financial crisis for potential output growth
- Koopman, G. J. and I. P. Székely, 2009, The financial crisis and potential growth: Policy challenges for Europe, ECFIN Economic Brief, Issue 3, June 2009, European Commission.
- ECB, 2009, Potential output estimates for the euro area, ECB Monthly Bulletin July 2009, Box 4, 44-48.

14:00-15:30 SE12: Group work, part I: Simulation of a Governing council meeting: preparation

16:00-17:30 SE13: Group work, part II: Simulation of a Governing council meeting