International Political Economy

Department of Political Science – Leiden University
Agustin Mackinlay - amackinlay@umail.leidenuniv.nl
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SESSION 1 – February 5

Theoretical approaches to International Political Economy: A brief introduction

Readings:

. C. Roe Goddard & al. International Political Economy. State-Market Relations in a Changing Global Order (New York: Macmillan, 2003). Chapters 1, 2, 4, 12, 13 and 14 (*)

An Introduction to the credit market

· Demand for credit, supply of loanable resources
· Changes in behavior and long-term interest rates
· Schumpeter’s theory of innovation

Readings:

. Horace W. Brock: “Determinants of interest rates”, Euromoney, 1988 (*)

. Frank J. Jones & Benjamin Wolkowitz: “The Determinants of Interest Rates on Fixed-Income Securities”, in Frank J. Fabozzi (ed.) The Handbook of Fixed Income Securities (Homewood, Ill.: Irwin, 1991), pp. 147-151

. Thomas K. McCraw. Prophet of Innovation. Joseph Schumpeter and Creative Destruction (Harvard University Press, 2007) [web] [prologue].

(*) Required readings.
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SESSION 2 – February 12

The credit market (continued)

· Innovation and the credit market (continued).
· Inflation expectations and the credit market.
· Governance, property rights and the credit market.

Readings:

. Horace W. Brock: “Determinants of interest rates”, Euromoney, 1988 (*)

. Charles G. Leathers & J. Patrick Raines: "The Schumpeterian role of financial innovations in the New Economy's business cycle", Cambridge Journal of Economics, 2004 28 (5): 667-681.

. Hernando de Soto. The Mystery of Capital. Why Capitalism Triumphs in the West and Fails Everywhere Else (New York: Basic Books, 2000).

. John D. Burger & Francis E. Warnock: “Local Currency Bond Markets”, IMF Staff Papers, Vol. 53, Special Issue, 2006, especially pp. 141-142.

(*) Required readings
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SESSION 3 – February 19

The credit market (continued)

· Flight-to-quality episodes
· Credit spreads and country risk
. A debate on risk management

Readings:

. Ambrose Evans-Pritchard: "EU mulls action as Ukraine crumble triggers contagion fears for Europe", The Telegraph

. Ambrose Evans-Pritchard: “Failure to save East Europe will lead to worldwide meltdown”, The Telegraph

. Laura Cochrane & Denis Maternosvky: “Dead’ Russian Bond Market’s 80% Yields Squeeze Firms”, Bloomberg

. Chiara Cavaglieri. “Islamic finance accelerates into motor policies”, The Independent

. Roger Boyes: "Age of Testosterone comes to end in Iceland", TimesOnline

. Gilian Wilmot: “Men have messed up. Let women sort it out”, Financial Times

. Lloyd Blankfein: “Do not destroy the essential catalyst of risk”, Financial Times

. Eric Dash & Julie Creswell: “Citigroup Saw No Red Flags Even as It Made Bolder Bets”, The New York Times

More info:

. For comments on current events (and forecasts) in credit markets, check out Bill Gross’s monthly Investment Outlook. Mr. Gross is the CEO of PIMCO, one of the largest bond investors in the world – these guys do affect the supply of loanable resources! In fact, the whole website is a gold mine in terms of credit market analysis on a global basis.

. For charts and statistics, one of the best websites is FRED, run by the St. Louis Federal Reserve Bank; for U.S. interest rates, click here.
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SESSION 4 – February 26

Central Banks (I)

· A (very brief) history of money & central banks’ balance sheets
· The market for bank reserves & monetary policy
· The Federal Reserve: institutional framework
· The European Central Bank: institutional framework

Readings:

. Madeleine O. Hosli: The Euro. A concise introduction to European Monetary Integration. (Boulder, Colorado: Lynne Riener), 2005. Chapters 3 and 4 (*)

. Federal Reserve Bank of Philadelphia. A Day in the Life of the FOMC. An Inside Look at the Federal Reserve’s Monetary Policy Making Body (*)

. Carl Menger: “On the Origins of Money”, Economic Journal, volume 2,(1892) p. 239-55

. Manuel Johnson & Robert Keleher. Monetary Policy. A Market Price Approach (Newport: Connecticut: Quorum Books, 1996)

. Marius van Nieuwkerk. Dutch Golden Glory. The Financial Power of the Netherlands Through the Ages (Haarlem: Becht, 2006), chapter 7

. John Taylor: “Expectations, Open Market Operations, and Changes in the Federal Funds Rate,” Review, Federal Reserve Bank of St. Louis, Vol. 83, No. 4, July-August 2001, pp 33-48

More info:

. Most central banks’ websites are full of useful information. Check out, in particular: European Central Bank, Federal Reserve Board, Reserve Bank of Australia, Sveriges Riksbank. Another interesting website is provided by the Bank of International Settlements, with its very useful section on “Central bankers speeches”.

. There are countless professional commentators on monetary policy. Among the very best: Paul McCulley’s Global Central Bank Focus.

(*) Required readings

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SESSION 5 – March 5

Central Banks (II)

· Central banks & inflation expectations
· Monetary policy & exchange rate crisis
· Monetary collaboration: swap agreements
· Central Bank independence

Readings:

. Madeleine O. Hosli: The Euro. A concise introduction to European Monetary Integration. (Boulder, Colorado: Lynne Riener), 2005. Chapter 4 (*)

. Stefan Ingves. “The relationship between the Riksbank and the Riksdag”, Bank for International Settlements, June 2007. (*)

. Manuel Johnson & Robert Keleher. Monetary Policy. A Market Price Approach (Newport: Connecticut: Quorum Books, 1996)

. Werner Bonefeld. “Europe, the Market and the Transformation of Democracy”, Journal of Contemporary European Studies, Vol. 13, No. 1, 93-106, April 2005

. John Taylor: “The Need to Return to a Monetary Framework”, Business Economics, Vol. 43, No. 2, January 2009

. Daniel L. Thornton: “The Fed, Liquidity and Credit Allocation”, Federal Reserve Bank of St. Louis Review, January/February 2009, 91(1), pp. 13-21.

. Steve Hanke. “From John Law to John Maynard Keynes”, Globe Asia, February 2009

(*) Required readings

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SESSION 6 – March 12

International Reserve Currencies

· Bretton Woods & the dollar: Jacques Rueff
· China and the “New Bretton Woods”
· The current crisis as a global monetary problem

Readings:

. Robert Mundell: “The Euro: How Important?”, Cato Journal, Vol. 18, No. 3, Winter 1999 (*)

. Madeleine O. Hosli. The Euro. A concise introduction to European Monetary Integration. (Boulder, Colorado: Lynne Riener), 2005. Chapter 6 (*)

. Alan Greenspan. The Age of Turbulence. Adventures in a New World (New York: Penguin, 2007). Chapter 7 (*)

. Michael P. Dooley, David Folkerts-Landau & Peter Garber: “An Essay on the Revived Bretton Woods System”, NBER Working Paper 9971, 2003 (*)

. Gregory Fossedal: “The Lehrman-Mueller Hypothesis”, Policy Review, Winter 1992, pp. 2-12

. Michael P. Dooley, David Folkerts-Landau & Peter Garber: “International Financial Stability. Asia, Interest Rates, and the Dollar”, Deutsche Bank Global Markets Research, October 2005

. Michael P. Dooley & Peter Garber: “Is it 1958 or 1968? Three Notes on the Longevity of the Revived Bretton Woods System”, BPEA, June 2005

. Francis J. Gavin. Gold, Dollars, & Power. The Politics of International Monetary Relations 1958-1971 (The University of Carolina Press, 2004).

(*) Required readings

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SESSION 7 – March 19

Connectivity & Globalization

· The Pentagon’s New Map: a review
· Connectivity & globalization
· Trade, financial markets and … power

Readings:

. Thomas P.M. Barnett. The Pentagon’s New Map. War and Peace in the Twenty-First Century (New York: Putnam, 2004). Chapter 4 (*) [info]

. Thomas P.M. Barnett. Blueprint for Action. A Future Worth Creating (New York: Putnam, 2005). Chapter 4 (*) [info]

. Roger Altman: “The Great Crash, 2008. A Geopolitical Setback for the West”, Foreign Affairs, January-February 2009 (*)

. Eriksen, Thomas Hylland. Globalization. The key concepts (Oxford: Berg, 2007) [web] [prologue] [introduction].

(*) Required readings