mac-lec - International Macroeconomics MEF 2007/2008...

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International Macroeconomics MEF 2007/2008 Saverio Simonelli
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Some information E-mail: savsimon@unina.it Course webpage: http://wpage.unina.it/savsimon/teaching/International- macro/international-macro.htm Textbook: Maurice Obstfeld and Kenneth Rogoff, Foundations of International Macroeconomics (MIT Press, 1996) Office hours: Monday 13-15 (stanza 4 ex presidenza) Schedule of Classes (12 May – 3 June): – Monday 15:15 – 16:45 – Tuesday 9:00 – 10:30 and 11:00 – 12:30
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Topics of the course The building blocks of open-economy 1. intertemporal trade and the current account balance 2. dynamics of small open economies 3. real exchange rate and the terms of trade 4. uncertainty and international financial markets 5. money and exchange rates under flexible prices: the Cagan Model
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First Lesson: Dynamics of Small Open Economies A small two period endowment economy A small two period production economy A two-region world economy: the Metzler diagram A stochastic current account model Firms, labor market and investment (perfect foreseight)
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A Small Two-Period Endowment Economy • An individual i maximizes lifetime utility, which depends on consumption levels • Consumption must be choosen subject to the lifetime budget constraint
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A Small Two-Period Endowment Economy To solve the problem of maximizing eq. (1) subject to eq. (2), use the latter to substitute for c2 The first order condition for this problem is: At the utility maximum, the consumer cannot gain from feasible shifts of consumption between periods.
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A Small Two-Period Endowment Economy An alternaive interpretation of the Euler equation: The left-hand side is the consumer marginal rate of substitution of present for future consumption, while the right-hand side is the price of future consumption in terms of present consumption
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A Small Two-Period Endowment Economy We assume that all individuals are identical and that populazion size is1. Î We focus on differences between residents of different countries.
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This note was uploaded on 10/16/2011 for the course ECONOMICS 640 taught by Professor Kepang during the Fall '11 term at Wilfred Laurier University .

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mac-lec - International Macroeconomics MEF 2007/2008...

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