Michael K. Salemi, Gardner 301
Office Hours: 1:00-2:00 TWR, and by appointment
Phone: 966-5391 (off), 929-9504 (home)
Email: Michael_Salemi@unc.edu

Patrick Conway, Gardner 300f
Office Hours: 2-3 MTWR
Phone: 966-5376(off), 967-4009 (home)
Email: Patrick_Conway@unc.edu

Potential Participants: The course is designed both for students who have yet to take a 300 level course in their major field and for students who have already done so. Students in the former group are expected to participate in all parts of the course and will receive a grade on the H-P-L scale. Students in the latter group are welcome to participate in all parts of the course but required to participate in the workshop. They will receive a grade on the pass/no pass scale.
 

Course Goals:

1.     Students should become familiar with topics that may lead to dissertation research. They should become more familiar with the current literature on theories of domestic and international money and finance, open economy macroeconomics, and international trade.

2.     Students should become more familiar with techniques, and especially econometric techniques, used in the literature to analyze questions of current importance.

3.     Students should present their own work in the workshop.
 

Course Organization and Meetings:
We will meet to organize the course at 12:30 on Thursday, August 22, 2002 in Gardner 007. After the organizational meeting, the course will meet once per week for approximately two hours. We will choose a time and day at the organizational meeting. Our current thinking is to hold the first eight meetings on Tuesday, 3:00-5:00 and the remaining meetings during sessions of the fall macro workshop which will be held at various times on Fridays (in order to coordinate with the macro-money seminar at Duke) and the international workshop which will be held on Thursdays.

There will be three parts of the course:
1.     Four Meetings. Professors Conway and Salemi will make presentations on topics of mutual interest that we select at our course organizational meeting.
2.     Four Meetings. We will discuss papers selected by mutual consent. Students will take turns leading discussion.
3.     Six Meetings. Seminar participants will attend a workshop (macro-money or international) and prepare written evaluations of all the papers presented. Each student will present a paper in the workshop.
 

Grading:
Repeat enrollees are graded only on their participation in the workshop component. First-time enrollees are graded on their papers, their workshop presentation, and their participation in discussion.
 

Potential Topics Professors Conway and Salemi are willing to talk about the following topics or to consider alternative topics proposed by students.

1. Saving, investment and real interest rate determination in an open economy
Obstfeld, M. and K. Rogoff, Foundations of International Macroeconomics, Cambridge, MA: MIT Press, 1996, Chapter 5, Sections 1,2,3.
Svennson, L., "Trade in Risky Assets," American Economic Review 78/3, May 1988, pp. 375-394.
Ong, L., K. Clements and H. Izan, "AThe World Real Interest Rate: Stochastic Index Number Perspectives", Journal of International Money and Finance 18/2, 1999, pp. 225-249.
Lewis, K., " International Home Bias in International Finance and Business Cycles," NBER Working Paper 6351, January 1998. (Especially part II, beginning p. 28.)

2. Econometric policy evaluation
Rotemberg and Woodford, "An Optimization-Based Framework for the Evaluation of Monetary Policy," NBER Macroeconomics Annual 1997, MIT Presss, 297-346.
Christiano, Eichenbaum, and Evans, "Nominal Rigidies and the Dynamic Effects of a Shock to Monetary Policy," Working Paper, May 2001.
Gali and Gertler, "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, 1999, 195-222.
Gali and Monacelli, "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," Working Paper, March 2002.
McCallum, Bennett T. and Edward Nelson, "An optimizing IS-LM Specification for Monetary Policy and Business Cycle Analysis," Journal of Money, Credit and Banking, 31, 3, Part 1, 1999, 277-431
McCallum and Nelson, "Nominal income targeting in an open-economy optimizing model," JME, 1999, 553-578.
Evi Pappa, "Do the ECB and the Fed really need to cooperate: Optimal monetary policy in a two-country world," Working Paper, February 2002

3. Excess demand and stabilization policies
Agenor, P. and P. Montiel, Development Macroeconomics. Princeton, NJ: Princeton University Press, 1996, chapter 10.
Stiglitz, J.: "The East Asia Crisis: How IMF Policies Brought the World To the Verge of a Global Meltdown", chapter 4 in Globalization and its Discontents. New York, NY: WW Norton, 2002.
Edwards, S.: "Two Crises: Inflationary Inertia and Credibility," Economic Journal 108, May 1998, pp. 680-702.
 

4. Generalized Methods of Moments
Hamilton, James, Time Series Analysis, Princeton University Press, 1994, Chapter 14
Lucas, Robert E., Jr., "Asset Prices in an Exchange Economy," Econometrica, November 1978, 1429-46
Blake, Robert and Clarida, Richard, "Real Interest Differentials and Macro Fundamentals: Empirical Estimates," International Journal of Finance and Economics 1(2), April 1996, pages 103-16.
Tauchen, George, "Statistical Properties of Generalized Method-of-Moment Estimators of Structural Parameters Obtained from Financial Market Data," Journal of Business and Economic Statistics, 4, 4, 1986, 397-416.
 

5. Issues and methods encountered in modern financial market research.
Backus, David K. and A. W. Gregory, "Theoretical Relations between Risk Premiums and Conditional Variances," Journal of Business and Economic Statistics, April 1993, 177-85
Engle, Robert F., D. M. Lilien and R. P. Robbins, "Estimating Time Varying Risk Premia in the Term Structure: The ARCH-M Model, Econometrica, Volume 55, March 1987, 1-21.
Kim, InBae and Michael K. Salemi, " Estimation and Simulation of Risk Premia in Equity and Foreign Exchange Markets," Journal of International Money and Finance, 1999.
Salemi, Michael K., "Estimating the Natural Rate of Unemployment and Testing the Natural Rate Hypothesis," Journal of Applied Econometrics, Volume 14, 1999, 1-25.
 

6. Transactions costs in International Finance
Maurice Obstfeld and Kenneth Rogoff, "The Six Major Puzzles in International Finance: Is There a Common Cause?", NBER Macroeconomics Annual, 15 (2000).