Master of Science in European Economy & Business Law
Economics of European Integration & Economic Integration and Structural Reforms
Academic Year 2014-2015
Lecturer: Dr. Barbara Annicchiarico
E-mail address: barbara.annicchiarico@uniroma2.it
My e-mail policy: Please visit the course webpage for details.
Room: Building B, 2nd floor, Dipartimento di Economia, Diritto e Istituzioni, Room 45/B.
Office Hour: Thursday 12:45-13:45 during term time otherwise by e-mail appointment.
Credits: 12
Syllabus Updates and Material: Students are advised to regularly check the course webpage for syllabus updates. Handouts and presentations will be available in due course.
Exams: Written examinations. See Presentation #0 for details. A specimen exam paper is available here.
Assignment: Each regularly attending student is required to give a presentation on an assigned topic. See Presentation #0. Details and instructions are available on the course webpage.
Academic Honesty: Students who commit an act of academic dishonesty will receive a failing grade.
Grading Policy: Please note that a grade of 30/30 represents achievement that is outstanding relative to the level necessary to meet course requirements (students must show an excellent knowledge of the subject, all written work must be well written, competent and accurate; sloppiness of any kind will prevent a student from getting 30/30 as final grade, no matter if the student feels she/he is well prepared).
Learning Objectives
Knowledge and Understanding: In-depth understanding of the monetary integration process, the fiscal rules, the economic implications of the rules and treaties governing the economic functioning of the European Union and of the related implications for the conduct of monetary and fiscal policies (euro crisis, fiscal compact, austerity). Deep understanding of the economic integration process on growth, spatial allocation of economic activity, cohesion and convergence. Knowledge of the role played by reforms on product and labor markets, of the importance of R&D activity and of human capital accumulation as engines of growth; understanding of the common agricultural policy; understanding and critical evaluation of the objectives of Europe 2020 economic strategy.
Applying Knowledge and Understanding: To give students familiarity with a broad range of European policy issues; to ensure a good knowledge of the economic grounding of European economic integration; to show students the usefulness of simple analytical models in understanding the relevant aspects of European integration and to give them the ability to apply these analytical tools intelligently. What is learned can be applied to other situations and to actual work in the context of European Institutions and/or National and local public administrations subject to European directives and regulations.
Making Judgements: What is learned can be used to assess critically and without prejudices the activity and the decisions of national and European policy makers.
Communication Skills: be able to rigorously present facts and complex mechanisms; learn how to present complex facts in a comprehensive manner and communicate the relative conclusions, knowledge and rationale to specialists and non-specialized audiences.
Learning Skills: The course aims at providing students with the tools necessary for future learning. At the end of the course students are expected to be able to read and understand official documents, scientific articles and databases. Students are also expected to be develop autonomous learning abilities.
It is expected that students work on their own to develop a sound understanding of the material through lecture notes, readings, and assignments.
Last update: 20 November 2014
IMPORTANT: This syllabus will be subject to changes and updates during the semester. The full reading list for each topic will be available step by step. In this way I'll be able to tailor the contents of this course to students' needs and background. Please check this syllabus on a regular basis for any updates.
Please notice that
Starred (*) readings are required.
Double starred (**) readings are STRONGLY required
Other readings are optional and are provided for your interest and benefit.
Logarithms
Derivative w.r.t. time and the notion of growth rates in continuous time
Growth Rates
Some derivative rules
First-order differential equations
First-order difference equations
Rational expectations hypothesis
For rational expectations: see Handout #1* (subsections 3.1, 3.3, 3.3 4.1, 4.2 are optional)
For the rest: any text on basic maths for economists is fine plus Handout #0*. You can also look at Appendix A of the Jones book Introduction to Economic Growth.
**BW-2012: chapters 1-3.
Interest rate parity
Money demand and money supply
PPP
Balassa-Samuelson effect
The impossible trinity
Rational bubbles
BW-2012: chapter 13**
Presentation #1**
**Kenneth Rogoff (1996) The Purchasing Power Parity Puzzle, Journal of Economic Literature, Vol. 34, No. 2. pp. 647-668.
**Maurice Obstfeld, Jay C. Shambaugh & Alan M. Taylor (2005). "The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility" in The Review of Economics and Statistics, Vol. 87, No. 3, pp. 423--438.
*Olivier J. Blanchard, Mark W. Watson (1983). Bubbles, Rational Expectations and Financial Markets NBER Working Paper No. 945
Lothian, James R. & Wu, Liuren, 2011. "Uncovered interest-rate parity over the past two centuries," Journal of International Money and Finance, Elsevier, vol. 30(3), pp 448-473.
Flexible-price monetary model
Portfolio balance model
*Meese, Richard A. & Rogoff, Kenneth, 1983. Empirical exchange rate models of the seventies: Do they fit out of sample? Journal of International Economics, vol. 14(1-2), pages 3-24: In particular: Section 1** and sub-section 2.1**
Goals, targets and instruments of monetary policy
Interest rate rules, monetary targeting, inflation targeting
Central banking: Independence, time consistency and credibility
Monetary policy transmission mechanism
Presentation #2**
** Appendix to chapter 16 - F. S. Mishkin (2013), The Economics of Money, Banking and Financial Markets, Pearson, ed. 10th.
F. S. Mishkin The Economics of Money, Banking and Financial Markets, Pearson, ed. 8th, chapters 14*, 15** and 16**
Handa 2008: chapter 12** (without the technical parts)
The transmission mechanism of monetary policy** - The Monetary Policy Committee - Bank of England.
Handa2008: chapters 14-17.
Facts of monetary integration
Europe's snake
The European Monetary System
The crisis of 1992-1993
Benefits and costs
Is Europe an OCA?
Future prospects... the future is now.
Presentation #3**
Macro indicators in Italy after the crisis of 1992-1993, here
BW-2012: chapters 14**-15**
Maurice Obstfeld (1996) Models of Currency Crises with Self-Fulfilling Features, European Economic Review, vol. 40, pp. 1037-1047, sections 1**, 2**
**Paul Krugman (2012) "The revenge of optimum currency area", available at http://www.economics.cornell.edu/arazin/Paul%20Krugman2012.pdf
Kenen, P. (1969) "The Theory of Optimum Currency Areas: An Eclectic View" in R.Mundell and A. Swoboda eds, Monetary Problems of the International Economy, The University of Chicago Press.
Mundell, R. (1961) A theory of Optimum Currency Areas, American Economic Review, 51 (4).
For trade specialization indicators, see here.
See also Eurobarometer for a survey on public opinion about the state of the union.
The 5 entry conditions
The functioning of the Eurosystem
Independence and accountability
**Presentation #4
**BW-2012: chapter 16
**BAG-2013: chapter 19
DG-2012: chapters 7-9
The Government Budget Constraint
Fiscal and monetary policy interactions
Fiscal policy in a monetary union
Fiscal policy externalities
**BW-2012: chapter 17
**DG-2012: chapter 10
** Handout #5
** Handout #6
**Presentation #5
**BAG-2013: chapter 21.
*Thomas J. Sargent & Neil Wallace (1981) Some Unpleasant Monetarist Arithmetic, Federal Reserve Bank of Minneapolis Quarterly Review vol. 5, no 3.
**Buiter, W.H. & Corsetti, G. & Roubini, N., 1992. Excessive Deficits: Sense and Nonsence in the Treaty of Maastricht, available here.
**Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 65-113, 04.
**Eric Leeper (1993) The Policy Tango: Toward a Holistic View of Monetary and Fiscal Effects, Atlanta Fed Economic Review.
*M. Wickens (2008), Macroeconomic Theory, Princenton University Press, chapter 5.
*Andrew Mountford & Harald Uhlig, 2009. "What are the effects of fiscal policy shocks?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(6), pages 960-992.
Romer2011: chapter 12.
Capital markets
Microeconomics of capital market integration
Financial institutions and markets
The international role of the euro
**Presentation #6
**BW-2012: chapter 18
*DG-2012: chapters 11
The subprimes follies
Sovreign Debt Crisis and Fiscal Austerity
Managing the Crisis and the EMS
The dark sides of a major success
Black swan scenarios
**Presentation #7
**BW-2012: chapter 19
**BAG-2013: chapter 20.
*Barry Eichengreen (2008), Sui generis EMU, European Economy, Economic Papers 303, February 2008.
**Barry Eichengreen (2010), The Breakup of the Euro Area, in Europe and the Euro (A. Alesina and F. Giavazzi, editors), The University of Chicago Press.
**Charles Wyplosz, (2006). "European Monetary Union: the dark sides of a major success," Economic Policy, CEPR & CES & MSH, vol. 21(46), pages 207-261, 04
**Paul De Grauwe, Yuemei Ji, Fiscal implications of the ECB's bond-buying programme, 14 June 2013, VoxEU.
**Pierre Pâris, Charles Wyplosz, To end the Eurozone crisis, bury the debt forever, 6 August 2013, VoxEU.
**BW-2012: chapters 4-5.
**AN-2005: chapter 2.
Market size and scale effects
Growth effects and factor market integration
Labour markets and migration
The EU Single Market
*AN-2005: chapter 3.
**BW-2012: chapter 6-8.
**European Commission, The Macroeconomic Effects of the Single Market Programme after 10 Years, available at http://ec.europa.eu/internal_market/top_layer/historical_overview/background_en.htm
**Presentation #8
Allen, C., Gasiorek, M. and Smith, A. (1998), European Single Market: How the programme has fostered competition, Economic Policy, 441-486.
Badinger, H., (2005). Growth Effects of Economic Integration: Evidence from the EU Member States," Review of World Economics (Weltwirtschaftliches Archiv), 41(1),50-78.
Badinger, H., (2007). Has the EU's Single Market Programme Fostered Competition? Testing for a Decrease in Mark-up Ratios in EU Industries, Oxford Bulletin of Economics and Statistics, 69(4), 497-519.
Baldwin, R. E. & Forslid, R-, (2000),. Trade liberalisation and endogenous growth: A q-theory approach, Journal of International Economics, 50(2), 497-517, .
Clemente, J., Pueyo, F., Sanz, F., (2009), Market potential, European Union and growth, Journal of Policy Modeling, 31(5), 719-730.
Vanhoudt, P. (1999), Did the European unification induce economic growth? In search of scale effect and persistent changes Weltwirtschaftliches Archiv, 135 , 193--220
Links
Location Theories
A workhorse tool for NEG and competition analysis in macro: the Dixit-Stiglitz Model
Agglomeration and dispersion forces
A simple footloose capital (FC) model
Labour market pooling
Special topics
Cohesion Policies
**BW-2012: chapter 10 (Annex 13.1** of the previous edition)
**K-1991, pp. 29-33 (section: History versus Expectations, chapter 1), pp. 38-49 (section: Labor Market Pooling, chapter 2), Appendixes** B & C.
*GT-2013, chapter 16.
**Presentations #9-10
**Neary, J. Peter, (2001),. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
*Baldwin, Richard E. & Venables, Anthony J., (1995). "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644 Elsevier (selected sections).
*Baldwin, Richard E. & Krugman, Paul, (2004),. "Agglomeration, integration and tax harmonisation," European Economic Review, Elsevier, vol. 48(1), pages 1-23, February.
Dixit, A.K., Stiglitz, J.E., (1977) Monopolistic competition and optimum product diversity. American Economic Review 67 (3), 297--308.
Trionfetti, Federico (2001), "Public Procurement, Market Integration, and Income Inequalities," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 29-41, February.
*Krugman, Paul, (1991), "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
*Krugman, Paul, (1991), "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
Annicchiarico, Barbara, Orioli, Federica &Trionfetti, Federico (2012), "National Oligopolies and Economic Geography",The Annals of Regional Science , 48(1), 2012.
Measuring convergence
Sigma-Convergence
Beta-Convergence
Evidence for the EU
*BSiM-2004: chapter 11, sections 11.1, 11.2, 11.3, 11.4
** Convergence of EU Regions - Measures and Evolution WP no. 1 - 2008.
**Presentation #11
*Mankiw, N Gregory & Romer, David & Weil, David N, 1992. A Contribution to the Empirics of Economic Growth", The Quarterly Journal of Economics, vol. 107(2), pages 407-37, available here.
Internal Markets
Labour markets
**BW-2012 chapter 11.
BCFG-2006: chapters 2., **6.
**Presentations #12, #13
AN-2005: chapter 9.
Bannerman, Edward (2002), "The Future of EU Competition Policy", Centre for European Reform.
R&D
Human capital
*AN-2005: chapter 8.
*Jones, C. I. (1995), R&D-Based Models of Economic Growth, Journal of Political Economy, Vol. 103, No. 4, pp. 759-784.
*Lucas, R.E. (1988), On the Mechanics of Economic Development, Journal of Monetary Economics, Vol. 22, No. 1, pp. 3-42.
Ageing
PAYG system
Fully funded system
**Handout 17
** Presentation 14
Ageing in the EU - European Commission on Ageing
The 2012 Ageing Report: Economic and budgetary projections for the 27 EU Member States (2010-2060)
The functioning of the CAP
CAP reform
Today's CAP
**BW-2012: chapter 9
**Presentation 15
**European Commission (2013), Overview of the CAP Reform 2014-2020
National Reform Programmes (NRPs)
Quantifying the Potential Macroeconomic Effects of the Reforms
**Presentation 16
*Visit thie page: http://ec.europa.eu/europe2020/index_en.htm
AH-2009: Aghion, P., and P. Howitt (2009), The Economics of Growth, MIT Press.
AN-2005: Altomonte, Carlo and Nava, Mario (2006), Economics and Policies of an Enlarged Europe, Edward Elgar.
BAG-2013: Blanchard, O., Amighini A., Giavazzi F., (2013), Macroeconomics, A European Perspective,2nd edition, Pearson.
BW-2012: Baldwin, Richard and Wyplosz, Charles (2012), The Economics of European Integration, 4th edition, McGraw Hill. This book represents an ESSENTIAL READING for this course.
BSiM-2004: Barro, R.J., and Sala-i-Martin, X. (2004), Economic Growth, MIT Press.
BCFG-2006: Boeri, Tito,Castanheira, Micael, Faini, Riccardo and Galasso,Vincenzo, (2006), Structural Reforms without Prejudices, Oxford University Press.
DG-2012: De Grauwe Paul (2012), The Economics of Monetary Union, 9th edition, Oxford University Press.
GT-2013: Gandolfo Giancarlo, Federico Trionfetti (2013), International Trade Theory and Policy, Springer.
K-1991:Krugman Paul (1991) Geography and Trade, The MIT Press.
Handa-2008: Handa, Jagdis (2008), Monetary Economics, Routledge; 2 edition.
Jones-2013 Jones, C.I. (2013), Introduction to Economic Growth, W. W. Norton & Company.
Romer2011: Romer David (2011) Advanced Macroeconomics, The Mcgraw-Hill Series in Economics.