0 Introduction and overview
Reading list for MSc International Macro [updated 07.12.2015]
Sample questions for end of year exam
1 The Dornbusch-Mundell-Fleming model and exchange rate overshooting
2 Clarida-Gali: testing the Dornbusch-Mundell-Flemming model using long run restrictions in a VAR
3 Debt-deleveraging and low global real rates in a two-region economy with borrowers and lenders: a re-interpretation of Eggertson-Krugman
4 The intertemporal approach to the current account in a micro-founded small open economy
5 Time series tests of the intertemporal approach to the current account
6 Uncovered/covered interest parity in a 2 period small open economy model: UIP, CIP etc
7 Deviations from PPP, LOOP explored and explained
Reading for this lecture: SGUW chapter 9
8 Sovereign debt and default
9 Revision and links to contemporary international macro debates
Note no assignment for this lecture.
Sample exam questions for end of year exam
Sample exam questions to be posted for each prior topic in the course, posted by the end of March. NB no solutions will be posted as these will be based on the assignments.
Facebook group for those resitting the June Macro exam
This group is for you to share questions and resources. Join it and help each other, and post your questions here, and not on this wordpress site, and not by email. Don’t send a facebook friends request to me as I use facebook in that way for personal friends and family only. Here is the link to the group.
Tony Yates: research, teaching, media, blog, Twitter 
A question about EK model: why is β(s)< β(b)? β means time preference. If one is patient, his β should higher.
beta(s) should be >beta(b) as you say. This must be a typo. [Check the paper itself, which you should be reading too].
I updated the slides with the correct statement about the betas. The lecture notes were already ok. Thanks again for pointing this out.
I’m quite confused with the meaning of beta here. Shouldn’t a person with a high discount factor focuses more on his present well being? If so, why beta (s) > beta (b)? Which means one with a high beta saves rather than consumes more today with borrowed money?
but beta is discount rate as u said below, so should beta(s) be lower than beta(b)?
Check the original paper, which you must read anyway, and you will see that beta_s>beta_b.
I know we need to answer 2 questions for open economy part，but 2 out x？
4
Hi Tony, how are you doing? I am wondering if it is alright that I use the sentences or the paragraphs in notes to answer the questions in final? I mean answer by even using the same words (every single).
Hard to answer this. First, it’s always best to put things in your own words. Second, it’s best to learn concepts and ideas, rather than lots of precise sentences or paragraphs. Third, and partly because of the second reason, remember that you don’t know what the question is, so you don’t know how your knowledge will be called on exactly. The questions require you to have understood the lecture notes, the exercises, the slides, and the literature referenced in the course, such that you can put that understanding to flexible use in an exam.
Hi, Tony, you put in the DMF lecture notes for the intuitively analysis that the exchange
rate jumps lower than its steady state and then rises up to it. I think the exchange rate should jump higher than its steady state and then falls down to its steady state for overshooting.
This is a language convention…. When money supply rises, purchasing power of the home currency (how much foreign currency you can buy) falls, and by more in the long than in the short run.
Hi, Tony, I have the same doubt. Because in your slides(the last sentence of the 20th slide in topic1 ) is that ‘ e initially jump HIGHER than its steady state, then falls.’ However, in the notes ( P7 the head paragraph) is ‘ the exchange rate jumps lower than its steady state and then rises up to it.’ I think they are not the same meaning and ‘Higher’ in the slide is right, because in the last paragraph of notes P6 is ‘et+1 is lower than et’.
Thanks. But there should never be any doubt despite my typos as you should read the source material, in this case O and R chapter 9.
Hi, Tony. About the first topic DMF model, i have some questions lists below:
1. Can i use the Graphical solution of the model to explain overshooting in the exam?
2. About figure 9.4 in OR, how does the saddle path line come out and why the slope is below 45 degrees ?
3. Do i need to explain the saddle path line in the exam?
looking forward to your reply. Many thanks.
Hi. Thanks for posting the questions here.
1. It’s hard to answer this without revealing something about the exam. Remember that there are only 4 questions on my side of the exam, from which you choose 2, and there are 8 topics in my course. Whatever question comes up, obviously you have to do what the question says, and not reply with methods appropriate for another question.
2. The saddle path material, and the graphical solution were not emphasised by me in the course materials. I think this was the approach taken by one of the teaching assistants. I don’t want to spend time answering questions about material that was not a core part of my course material.
3. See answer to 1 and 2. I can’t answer this without revealing what may or may not be in the exam.
My advice is: study the material emphasised by me in the exercises, slides and lecture notes, and the reading referred to, and be prepared for the many possible angle that a question could take within the material that I have emphasized.
hi, in the EK model, with price stickiness, when at the zero bound we ought to have a conclusion that short run price level drops below the long run, i.e that Ps/P* =1+Rs<1 ,Ps <P* , so it suppose to be an inflation rather than a deflation. But in the Page 9 of Lecture 3 it is written as deflation
Prices can fall,yes. Depending on the size of the fall in the debt limit and other parameters.
Hi, Tony,
The questions about the sample paper Topic 3:
(f) asks us why r<0 thus the equation <1, why this is likely to be met
(g)why is it worrying that one could easily need a negative real rate
There may be a language barrier among me and my classmates.
I think (f) is similar with assignment, about the size of beta.
But we confuse that what is the difference between (g) and (f). Whether the meaning of question (g) is asking us the negative impact from negative real rates (maybe deflation and others), or the question (g) means someone likes negative real rates and asking us why people likes such negative rates or the meaning is just asking us how to easily get negative rates as (f)?
Thanks a lot.
hi tony, in Solution 7, why it costs more to have a haircut in Nairobi than
in London.? The productivity of nontradable goods are relativly high in UK than inNairobi , accompanied by a same relatively high demand of local haircut which pushes up the Price of haircut, so the w, equals P mutiply alpha, should be higher in UK than in Nairobi which is a developing country.
Not sure what you mean by ‘solution 7’.
This is covered in the Balassa-Samuelson lecture, and in the relevant O/R chapter. Productivity in non-tradables is no different in the two countries. What is different is productivity in tradables. The intuition of why this then affects the relative price of tradables takes some explaining and this is gone through in the lecture notes.
Hi tony~ Is regressing nominal exchange rate changes on the money stock;or regressing nominal exchange rate changes on the residuals from another regression of the money stock on lagged values of various economic variables useful or not ?
Hi
This is answered in the lecture notes for topic 2, where we considered a lot of strategies that were not right [the ones you mention] and explained why they were not right, on the way to explaining the Clarida-Gali paper. If I answer in full I will just end up repeating those notes, so suggest you go back and read those….
Hi. That’s your problem. Ask around. You can use an alternative programming language if you need to, like Python, R. But I know these barely, so I will be less able to check your code.