MACRO

DEBATE: FALL 2014

STEPHEN ROACH AND ALEH TSYVINSKI

CONTENTS
Course policies and Information ................................................................................................................................... 2
Lecture 1 (August 27): Introduction .............................................................................................................................. 3
Lectures 2-3 (August 29 and September 3): Crises: Historical Context ........................................................................ 3
Lecture 4 (September 8): The Great Depression .......................................................................................................... 4
Lecture 5 (September 10): The Modern Crisis: The Great Moderation and the Great Recession ............................... 5
Lecture 6 (September 15): Lessons learned: Fiscal Multipliers ..................................................................................... 5
Lecture 7 (September 17): Debt in the Aftermath of Crises ......................................................................................... 6
Lecture 8 (September 22): Lessons Learned: Monetary Policy ..................................................................................... 7
Lecture 9 (September 24 ): Macro Effects of Financial Regulations ............................................................................ 7
Lectures 10 (September 29): Global Imbalances .......................................................................................................... 8
Lecture 11 (October 1): Unemployment: Jobless Recoveries and the Global Labor Arbitrage .................................... 9
Lecture 12 (October 6): Productivity ............................................................................................................................ 9
Lecture 13 (October 8): Mid-term Examination ......................................................................................................... 10
Lecture 14 (October 13): The Globalization Debate ................................................................................................... 10
Lecture 15 (October 15): Inflation .............................................................................................................................. 10
Lecture 16 (October 20): Japan: Zombies, Lost Decade and Beyond ...................................................................... 11
Lecture 17 (October 27): Europe: Reform or Decline? ............................................................................................... 12
Lecture 18 (October 29): United States: A New Generation of Zombies and Another Lost Decade? ........................ 12
Lecture 19 (November 3): China ................................................................................................................................. 13
Lecture 20 (November 5): Emerging Markets: Export-led Growth Models ............................................................... 13
Lecture 21 (November 10): Emerging Markets: Post-Socialst Transitions ................................................................. 14

Lecture 22 (November 12): The Growth Debate: Quanity vs. Quality? ..................................................................... 14
Lecture 23 (November 17): Demographic Challenges: Aging and Retirement Funding ............................................ 15
Lectures 24-25 (November 19 and December 1): Inequality..15
Lecture 26 (December 3): Summing Up ..................................................................................................................... 16

COURSE POLICIES AND INFORMATION

This class is co-taught by Professors Stephen Roach and Aleh Tsyvinski. This course focuses on the most
pressing and important issues that the global economy faces.
The class will be presented in a debate style between the practitioner (Roach) and the theorist (Tsyvinski).
We encourage participation and questions to us at any time during the lectures.
Lectures will be held in WLH-116 on Mondays and Wednesdays from 4:00 to 5:15 pm.
Discussion sections will be held according to the time slots for which you sign up when registering.
The teaching fellow for this course is Nick Werquin (Nicolas.werquin@yale.edu)
Grading. Your grade will consist of four parts.
1.
2.
3.
4.

There will be five homework assignments, which collectively count for 30% of your grade.
The midterm will count for 25% of your grade.
The final exam will count for 35% of your grade.
Participation in classroom discussions will count for 10% of your grade.

NOTE: The grading will not be on a curve. Homework assignments are 3-page op-ed style analytical
essays that argue the pro and con sides of selected policy issues; format will be detailed in class.
Readings. The course has an extensive reading list. You are responsible to read only the starred papers
(indicated in the reading list as *). The rest of the reading is optional (we encourage you to read it but do not
require it). Some of the papers and books are very technical we will explain in the class the most important
takeaways from them and will indicate the parts that can be read without additional preparation. If you are
having trouble accessing the readings, please contact carla.mills@yale.edu .
Communication policy. As this is a large class, your primary contact will be your TF. We encourage you to
speak to your TF about all of the issues and concerns that arise. If you want to come to our office hours you
will have to do it in two steps. First, please come to the office hour of your TF and try to resolve the issue
with him/her. Second, if the issue or question is not resolved, please schedule a time to meet with the
professors during our office hours. Please note that due to capacity constraints we will not be able to
accommodate unscheduled walk-ins to the office hours.

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Prof. Roach will have office hours on MW from 1-2:30PM in 307 Horchow Hall.
Prof. Tsyvinski office hours are by appointment only. Please email your TF to schedule.

LECTURE 1 (AUGUST 27): INTRODUCTION

Macro Debate: The world economy as we see it. The state of global macro theory. The science of modeling.
http://www.youtube.com/watch?v=GTQnarzmTOc
Overview of Course structure:
Big Issues: Lectures 2 to 15
Big countries: Lectures 16 to 21
Big Synthesis: Lectures 22 to 25
* J. Bradford DeLong, Economics in Crisis, Project Syndicate, April 2011
* Paul Krugman, How Did Economists Get it So Wrong?, The New York Times Magazine, September 5, 2009.
* Stephen S. Roach, The Stall-Speed Syndrome, Project Syndicate, August 26, 2014.
* Robert Skidelsky, Post-Crash Economics, Project Syndicate, June 18, 2014
* Martin Eichenbaum, What Lessons Emerged From the Recent Crisis for Macroeconomics Researchers,
Remarks at ECB Panel

LECTURES 2-3 (AUGUST 29 AND SEPTEMBER 3): CRISES
Issue: Is modern macroeconomics a theory of the steady state? Does an ever-increasing incidence of crises
suggest that steady-state theories are meaningless? Can crises be predicted? Do private and public
forecasts work? Should crises be viewed as multiple equilibria? History of crises: (1) Reveals rare events
(black swans); (2) Gives the best forecast of what to expect. The crisis of 1907 is eerily similar to the Great
Crisis of 2007-2008. Lecture 2 is a 100-year retrospective on major crises. Lecture 3 addresses the impact of
the crisis on modern macroeconomic theory and the policy debate.
Andrew Berg, Eduardo Borensztein, and Catherine Pattillo, 2004, Assessing Early Warning Systems: How
Have They Worked in Practice?, IMF Working Paper, Research Department. (Technical paper, will be
discussed in the class)
*Andrew K Rose, Mark M. Spiegel, 2009, Could an early warning system have predicted the crisis?, VOX EU
(a more technical version, not required, is The Causes and Consequences of the 2008 Crisis: Early Warning)

History of crises:

Carmen Reinhardt and Ken Rogoff, This Time Is Different: A Panoramic View of Eight Centuries of Financial
Crises, Princeton University Press, 2009 (Optional, but highly recommended)
* Carmen Reinhardt and Ken Rogoff The Aftermath of Financial Crises (with Carmen M. Reinhart),
AMERICAN E CONOMIC R EVIEW 99 (May 2009) 466-472. Also available as NBER Working Paper No. 14656,
January 2009
* Robert Barro and Jose Ursua, 2008. Macroeconomic Crises since 1870, NBER Working Paper No. 13940
(Some parts of these paper are quite technical, you can skip them).
Barro, Robert J., and Jos F. Ursa. Stock-market crashes and depressions. No. w14760. National Bureau of
Economic Research, 2009.
O.M.W. Sprague(1910) History of crises under the national banking system. (A great but quite long book;
not required).
Crisis of 1907:
* Ellis Tallman and Jon Moen, Lessons from the Panic of 1907, Federal Reserve Bank of Atlanta, 1990.
Robert Brunner and Sean Carr, The Panic of 1907: Lessons Learned from the Market's Perfect Storm (A very
interesting book, suggested but not required).

LECTURE 4 (SEPTEMBER 8): THE GREAT DEPRESSION
Issue: Did the Great Depression end in 1933? What caused a more prolonged Great Depression? Did
Roosevelts policies extend the Depression? Modern-day policy activism was borne out of the Keynesian
response to the 1930s. Yet the world and its major economies has changed dramatically over the
ensuing 80 years. Are we trapped in a past that limits our understanding of a new and very different world?
An introduction to Business Cycle Accounting as a diagnostic macroeconomic tool.
*Harold Cole and Lee Ohanian, How Government Prolonged the Depression, Wall Street Journal, February
2, 2009.
* Lee Ohanian Herbert Hoover and the Start of the Great Depression, VoxEU.
* Harold Cole and Lee Ohanian, The Great Depression in the United States From A Neoclassical Perspective,
Federal Reserve Bank of Minneapolis Quarterly Review, Winter 1999, vol. 23, no. 1, pp. 224. (Only pages 1-4
are required but you can read the rest, skipping the formulas)
More technical papers (not required):
V.V. Chari, Ellen McGrattan, and Patrick Kehoe, Accounting for the Great Depression, Federal Reserve Bank
of Minneapolis Quarterly Review, Spring 2003, Vol. 27, No. 2, pp. 28. (The paper is somewhat technical, but
you can read abstract and intro.)

Timothy Kehoe and Edward Prescott, 2007, Great Depressions of the XXth century.

LECTURE 5 (SEPTEMBER 10): THE MODERN CRISIS: THE GREAT MODERATION AND THE
GREAT RECESSION
Issue: What are the main macroeconomic factors behind the Great Recession? Were financial frictions
the main culprit? The role of uncertainty. Did anti-crisis policies and their pronouncement worsen the crisis?
What was the impact of the crisis on international trade? As financial systems and instruments become
more complex and as the world economy becomes more interdependent, are we doomed to an ever-
increasing frequency and severity of crises?
HOMEWORK ASSIGNMENT #1 IS DUE
* Alan Greenspan, The Crisis, Brookings Papers on Economic Activity, Spring 2010.
* Lee Ohanian, The Economic Crisis from a Neoclassical Perspective, Journal of Economic Perspectives, Fall
2010. Also (You can read this paper skipping the formulas)
* The Economist, Wasted potential: Counting the long-term costs of the financial crisis, Jun 14th 2014
* Jason Furman, Whatever Happened to the Great Moderation? April 10, 2014
* Robert Hall, 2014, Quantifying the Lasting Harm to the U.S. Economy from the Financial Crisis, NBER
Working Paper 20183, May 2014, NBER Macro Annual 2014, forthcoming. (Pages 1-6 are required reading,
the rest will be discussed in the class)
G Gorton, A Metrick, 2012 Getting Up to Speed on the Financial Crisis: A One-Weekend-Reader's Guide,
Journal of Economic Literature
* Andrei Levchenko, Logan Lewis, Linda Tesar, The collapse of US trade: In search of the smoking gun
VoxEU, 27 November 2009

LECTURE 6 (SEPTEMBER 15): LESSONS LEARNED: FISCAL MULTIPLIERS
Issue: During the crisis, policymakers turned to old-fashioned Keynesian models. An important
presumption is that the fiscal multiplier is high as large as 1.5. Yet was increased government spending a
failure, especially, considering that the public debt dramatically increased? Policy lags, rational
expectations, and Ricardian equivalence all raise serious questions about the wisdom and efficacy of
counter-cyclical fiscal policy. Does fine tuning work in steering large economies? The austerity debate.
Conclusions on the size of the fiscal multiplier?
* Barro, Robert "The Stimulus Evidence One Year On," T HE W ALL S TREET JOURNAL, February 23, 2010

* Barro, Robert Stimulus Spending Doesnt Work," (with C.J. Redlick) T HE W ALL S TREET J OURNAL, October 1,
2009
* Stephen S. Roach, Asias Take on Austerity, Project Syndicate, February 2012
* Valerie Ramey, 2011 Identifying Government Spending Shocks: It's All in the Timing, Quarterly Journal of
Economics February 2011. (Read the paper, skipping the technical parts)

The rest of the papers are quite technical and will be discussed in the lecture.
Valerie Ramey and Sarah Zubairy Government Spending Multipliers in Good Times and in Bad: Evidence from U.S.
Historical Data , 2014.

Valerie A. Ramey, 2012, Government Spending and Private Activity

Valerie A. Ramey, Can Government Purchases Stimulate the Economy?, Journal of Economic Literature,
September 2011.
Barro, Robert J., Redlick, Charles J., February 2010, Macroeconomic Effects from Government Purchases and
Taxes, Quarterly Journal of Economics.
Christina Romer and David Romer The Macroeconomic Effects of Tax Changes: Estimates Based on a New
Measure of Fiscal Shocks, American Economic Review, June 2010.

LECTURE 7 (SEPTEMBER 17): DEBT IN THE AFTERMATH OF CRISES
Issue: History warns of post-crisis debt quagmires and perilous endgames of default or inflation. Debt
pressures are manifested both in terms of stocks and flows. Are crisis-prone economies doomed to fall into
a low-interest rate liquidity trap? What policies can be used to escape the trap? Is there a connection
between high level of debt and growth? At what debt threshold does economic growth come under serious
pressure? What do historical episodes of default and restructuring teach about the post-crisis high-debt
world economy?
* John Lipsky, Fiscal Policy Challenges in the Post-Crisis World, IMF speech, March 21, 2011
* Carmen Reinhardt and Ken Rogoff From Financial Crash to Debt Crisis (with Carmen M. Reinhart),
AMERICAN E CONOMIC R EVIEW. Also available as NBER working paper 15795, March 2010.
* Carmen Reinhardt and Ken Rogoff, Growth in a Time of Debt (with Carmen M. Reinhart), American
Economic Review 100 (2), May 2010, 573-578. Also available as NBER working paper 15639, January 2010.
* Carmen M. Reinhart and Kenneth S. Rogoff (2013) Errata: Growth in A Time of Debt.
T Herndon, M Ash, R Pollin Does high public debt consistently stifle economic growth? A critique of Reinhart and
Rogoff Cambridge journal of economics, 2014

* Government Reform Subcommittee on Regulatory Affairs, February 16, 2011

LECTURE 8 (SEPTEMBER 22): LESSONS LEARNED: MONETARY POLICY
Issue: The two pillars of monetary policy before the crisis were inflation targeting and commitment to rules.
Should monetary policy also react to asset markets? The debate over policy tools benchmark lending
rates and/or quantitative tools. The debate over policy mandates history, theory, and multiple goals.
Coping with asset and credit bubbles to lean or clean? Discretion vs. Rules.
* Alan Ahearne, Joseph Gagnon, Jane Haltmaier, Steve Kamin, et.al., Preventing Deflation: Lessons from Japans
Experience in the 1990s, Federal Reserve Board International Finance Discussion Papers No. 729, June 2002.
* Ben S. Bernanke, Deflation: Making Sure It Doesnt Happen Here, speech before the National Economists Club,
November 2002.
* Stephen S. Roach, The Financial Stability Imperative for Central Banks, presentation before a workshop
sponsored by the Central Bank of Netherlands, Amsterdam, September,2009.
* William, R. White, Should Monetary Policy Lean or Clean? Federal Reserve Bank of Dallas Globalization and
Monetary Policy Institute, Working Paper No. 32, August 2009.
* Edward Prescott, 2004, THE TRANSFORMATION OF MACROECONOMIC POLICY AND RESEARCH, Nobel Prize
Lecture.
* Robert E. Lucas, Jr. and Nancy L. Stokey , Liquidity Crises. Understanding sources and limiting consequences: A
theoretical framework Minneapolis Fed Policy Paper, 2011.
*Ricardo Reis, 2013 Central Bank Design, Working Paper.

LECTURE 9 (SEPTEMBER 24 ): MACRO EFFECTS OF FINANCIAL REGULATIONS
Issue: The fundamental principles of financial regulation. The crisis-prone regulatory fix is inherently
backward looking. It addresses the problems of the last crisis never the next one. What is the right
balance between stabilization policy and macro-prudential regulations? Financial regulations reduce both
volatility and the number of black swans but what are their effects on growth? Dangers of
overregulation.
HOMEWORK ASSIGNMENT #2 IS DUE

* Stephen S. Roach, The Post-Crisis Fix: Regulatory or Monetary Policy Remedies? paper presented at a
conference sponsored by the Reserve Bank of India, Mumbai, February 2010.
* Marcus Brunnermeier, Andrew Crockett, Charles Goodhart, Avi Persaud and Hyun Shin The
Fundamental Principles of Financial Regulation, 11th Geneva Report on the World Economy, 2009 (Only
the Executive Summary is required, the rest is optional).

Ragu Rajan and Luigi Zingales, Saving capitalism from capitalists, 2003 (Optional but highly recommended)
The rest of the papers are technical and will be discussed in the lecture.
Garey Ramey and Valery Ramey, 1995, Cross-Country Evidence on the Link Between Volatility and Growth,
American Economic Review.
Romain Ranciere, Aaron Tornell, and Frank Westermann, Systemic Crises and Growth, Quarterly Journal of
Economics, 2007.

LECTURES 10 (SEPTEMBER 29): GLOBAL IMBALANCES
Issue : Linkages between asset-dependent growth, income-based saving, and current-account imbalances. Are
global imbalances malign or benign? Local vs. Global policy architecture. The risks of trade frictions and
protectionism. Global imbalances and the Crisis of 2008-09. Dark matter and Bretton Woods II. What can (will)
unravel global imbalances? The exorbitant privilege of the US what is it and is it overstated? Effects of
financial regulations and financial market development around the world on global imbalances.
* Michael P. Dooley, David Folkerts-Landau, Peter M. Garber, Bretton Woods II Still Defines the International
Monetary System, NBER Working Paper No. 14731, February 2009.
* Barry J. Eichengreen, Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International
Financial System, January 2011.
* Ricardo Haussman and Federico Sturznegger, The Implications of Dark Matter for Assessing the US External
Imbalance, Harvard CID Working Paper No. 137, November 2006.
* Stephen S. Roach, The Perils of Asymmetrical Rebalancing, Handlesblatt, July 2009.
* Stephen S. Roach, Americas Other 87 Deficits, Project Syndicate, October 2011
* Frank Warnock, Global Imbalances: The Next Crisis? AEI
* Pierre-Olivier Gourinchas and Helene Rey, External Adjustment, Global Imbalances and Valuation Effects,
Chapter for the Handbook of International Economics eds G. Gopinath, H. Helpman and K. Rogoff, 2012 (Only
pages 1-8 are required)
The rest of the papers are quite technical and will be discussed in the lecture.
Ricardo J. Caballero, Emmanuel Farhi, and Pierre-Olivier Gourinchas, An Equilibrium Model of Global Imbalances
and Low Interest Rates, American Economic Review 2008, 98:1, 358393

Enrique G. Mendoza, Vincenzo Quadrini, Jose-Victor Rios-Rull, Financial Integration, Financial Deepness and
Global Imbalances NBER Working Paper No. 12909, February 2007
Pierre-Olivier Gourinchas and Helene Rey, From World Banker to World Venture Capitalist: US External
Adjustment and The Exorbitant Privilege
Stephanie E. Curcuru, Tomas Dvorak, Francis E. Warnock Cross-Border Returns Differentials, American Economic
Review.

LECTURE 11 (OCTOBER 1): UNEMPLOYMENT: JOBLESS RECOVERIES AND THE GLOBAL

LABOR ARBITRAGE
Issue: Jobless recoveries and the global labor arbitrage from blue-collar production workers to white-collar
manufacturing workers. Offshoring vs. trade theory and comparative advantage. The natural unemployment
rate.
* Stephen S. Roach, The Global Labor Arbitrage, in Thomas R. Keene (ed.), Flying on One Engine, Bloomberg
Press, 2005.
* Janet Yellen, Labor Market Dynamics and Monetary Policy, Jackson Hole Symposium, August 2014
Stephen S. Roach, Labor vs. Capital, in The Next Asia, Wiley 2009.
* Alan S. Blinder and Alan B. Krueger, Alternative Measures of Offshorability: A Survey Approach, Princeton
University CEPS Working Paper No. 190, August 2009.
Paul A. Samuelson, Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting
Globalization, Journal of Economic Perspectives, Summer 2004.
*Narayana Kocherlakota, 2011 Labor Market and Monetary Policy, Annual Essay, Minneapolis Fed.
*James Bullard The rise and fall of labor force participation
*Nir Jaimovich and Henri Siu, 2012, The trend is the cycle: job polarization and jobless recoveries, Working paper.
(read the nontechnical parts; also explained in a blog post)

LECTURE 12 (OCTOBER 6): PRODUCTIVITY

Issue: Why productivity matters as one of the key drivers of economic growth. Overview of productivity and
barriers across countries. Misunderstanding the tradeoff productivity vs. employment. Measuring white-
collar-productivity working longer or harder? IT-enabled productivity enhancement resolving the Solow
paradox. The future of US economic growth.
* William W. Lewis, The Power of Productivity: Wealth, Poverty and the Threat to Global Stability, 2005 (Only
Prologue and pp. 1-23 are required, the rest is optional).

Erik Brynjolfsson, The Productivity Paradox of Information Technology: Review and Assessment, 1994
* Stephen S. Roach, The Productivity Paradox, New York Times op-ed, November 30, 2003
* Jack E. Triplett, The Solow Productivity Paradox: What Do Computers Do to Productivity? 1998.
*John Fernald and Chad Jones, 2014 "The Future of U.S. Economic Growth" May 2014. American Economic
Review Papers and Proceedings
* Robert J. Gordon, Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds, NBER
Working Paper 18315, August 2012

LECTURE 13 (OCTOBER 8): MID-TERM EXAMINATION

LECTURE 14 (OCTOBER 13): THE GLOBALIZATION DEBATE

th

st

Issue: History of inequality. Globalization 2.0: Early 20 century vs early 21 centurybreadth, speed, and
political backlash. IT-enabled productivity enhancement and the blurring of distinction between tradable
manufactured products and once non-tradable services. Distributional effects of globalization. Globalization and
inequality. Political economy of globalization. Post-crisis backlash? Financial globalization. Americanization or
globalization?
Daniel Cohen Globalisation and its enemies , MIT Press, 2006.
*Michael D. Bordo, Alan M. Taylor and Jeffrey G. Williamson, editors, 2001 Globalization in Historical Perspective
(Chapters 1-6)
Joseph E. Stiglitz, Making Globalization Work, Norton, 2006 (Chapter 10).
Martin Wolf, Why Globalization Works, Yale University Press, 2004 (Chapters 3-4, 8)
* Stephen S. Roach, Unbalanced: The Codependency of America and China, Yale University Press, January 2014,
Chapters 6-7Perils of a Different Globalization, in The Next Asia, Wiley 2009.
Stephen S. Roach, Global Speed Trap, in The Next Asia, Wiley 2009.
The rest of the papers are technical and not required.
Andrew Rose, International Financial Integration and Crisis Intensity
Francisco Buera, Alex Monge and Giorgio Primiceri (2011) "Learning the Wealth of Nations," Econometrica

LECTURE 15 (OCTOBER 15): INFLATION

Issue : Is inflation solely a monetary phenomenon? Globalization and disinflation temporary or

permanent compression of pricing? Wage-price linkages. Commodity inflation vs. CPI inflation. The role of oil
prices. Core inflation and its impact on policy. The politics of inflation in the US blaming trading partners
and protecting the middle class. The Fed and the Congress. Transmission of inflation across countries and the
exchange rate pass-through? Inflation as an implicit default on debt.
Stephen S. Roach, Asias Inflation Trap, Project Syndicate, January 2011.
* Matthias Doeppke and Martin Schneider, Inflation and the Redistribution of Nominal Wealth, Journal of
Political Economy.
* Olivier J. Blanchardy and Jordi Gali, The Macroeconomic Effects of Oil Price Shocks: Why are the 2000s so
different from the 1970s?, NBER Working Paper No. 13368
* Christian Broda, China and Wal-Mart: Champions of equality
*Atkeson, Andrew, and Patrick J. Kehoe, 2004, Deflation and Depression: Is there an Empirical Link?, American
Economic Review, Papers and Proceedings 94, 99-103.
* Bordo, Michael, and Andrew Filardo. "Deflation and monetary policy in a historical perspective: Remembering
the past or being condemned to repeat it?." Economic Policy 20.44 (2005): 799-844.
Fleckenstein, Matthias, Francis A. Longstaff, and Hanno Lustig. Deflation risk. No. w19238. National Bureau of
Economic Research, 2013.
Hilscher, Jens, Alon Raviv, and Ricardo Reis. "Inflating Away the Public Debt? An Empirical Assessment." (2014).

LECTURE 16 (OCTOBER 20): JAPAN: ZOMBIES, LOST DECADE AND BEYOND
Issue: The demise of modern Asias first growth miracle. Policy blunders vs. structural malaise.
Mercantalist growth and currency suppression. Is deflation and high debt to blame for the Lost Decade?
The role of slow productivity growth. Meet Japans zombies - birth, rise, and persistence of the zombie
firms and their effect on the rest of the economy. How government policy creates zombies. Japans dual
economy: stellar multinational performers versus overregulated and inefficient domestic companies. The
future of the Japanese economy.
HOMEWORK ASSIGNMENT #3 IS DUE
* Fumio Hayashi and Edward Prescott, The 1990s in Japan: A Lost Decade (you can skip the technical parts).
*Ricardo J. Caballero, Takeo Hoshi and Anil K. Kashyap, Zombie Lending and Depressed Restructuring in
Japan American Economic Review, Vol. 98, No. 5, December 2008
* Takeo Hoshi and Anil K Kashyap , Japans Financial Crisis and Economic Stagnation, Journal of Economic
PerspectivesVolume 18, Number 1Winter 2004Pages 326

*Fukuda and Nakamura (2013), Why did zombie firms recover in Japan, The World Economy.
* Ulriche Schaede, Show Me the Money: Japan's Most Profitable Companies of the 2000s.
* Christian Broda, David E. Weinstein Happy News from the Dismal Science: Reassessing the Japanese Fiscal
Policy and Sustainability
* Why the Japanese Economy is not Growing: Micro barriers to productivity growth, McKinsey Global
Institute. (Only Executive Summary is required)

Stephen S. Roach, Asias Sleeping Giant, McKinsey, Reimagining Japan, 2011.

Stephen S. Roach, The Japan Syndrome Goes Global, Morgan Stanley, October 2010

LECTURE 17 (OCTOBER 27): EUROPE: REFORM OR DECLINE?

Issue: The main factors behind sluggish growth in Europe. Is the problem productivity or policies? One size
doesnt fit all. A sub-optimal currency union single currency and central bank but fragmented fiscal
policies, labor markets, and regulatory governance. The sovereign debt crisis, failed convergence, and
Europes vulnerability to asymmetrical shocks. Kicking the can or facing the music?
Alberto Alesina and Francesco Giavazzi, The Future of Europe: Reform or Decline (Highly recommended but
not required)
Otmar Issing, The Birth of the Euro, Cambridge University Press, 2008.

*Edward Prescott, European Vacation: Why Americans Work More Than Europeans and a more technical
version (not required): Why Do Americans Work So Much More Than Europeans?, Minneapolis Fed QR,
2004. Also
* PerspectiveA road map for European economic reform McKinsey Global Institute.

LECTURE 18 (OCTOBER 29): UNITED STATES: A NEW GENERATION OF ZOMBIES AND ANOTHER
LOST DECADE?
Issue: From true to false prosperity the perils of bubble-dependent growth. Over-extended American
consumers and a new generation of zombies. Micro evidence and macro insights. The reserve currency

and the arrogance of the hegemon. US state and local government debt. Corrosive effects of policy
uncertainty. Taking stock: The four horsemen of the lost decade: zombies, inflation, high taxes, and high
debt.
Stephen S. Roach, The Great Unraveling, Morgan Stanley Global Economic Forum, March 15, 2007.
* Stephen S. Roach, The Great American Mirage, Project Syndicate, June 2012.

* Stephen S. Roach, Americas Zombie Consumers, Financial Times, June 2011

* Atif Mian and Amir Sufi, House of Debt, The University of Chicago Press, 2014, Parts I and II.
* Novy-Marx, Robert and Joshua Rauh. The Liabilities and Risks of State-Sponsored Pension Plans. Journal of
Economic Perspectives. 23(4): 191-210.
*Scott R. Baker, Nicholas Bloom, and Steven J. Davis Measuring Economic Policy Uncertainty,NBER Working
paper. (the op-ed which is much easier to read)
*Timothy Kehoe and Kim Ruhl, 2013 What Will Happen When Foreigners Stop Lending to the United States?,
Minneapolis Fed Policy Paper.
Atif Mian and Amir Sufi, 2012, What Explains High Unemployment?
Alessandra Fogli, Enoch Hill, Fabrizio Perri , 2012 The Geography of the Great Recession, NBER Working Paper.
Lorenzo Caliendo, Fernando Parro, Esteban Rossi-Hansberg and Pierre-Daniel Sarte, 2014, The Impact of
Regional and Sectoral Productivity Changes on the U.S. Economy

LECTURE 19 (NOVEMBER 3): CHINA
Issue: China in transition: Strong on the surface but beneath the surface, unstable, unbalanced,
uncoordinated, and unsustainable. The Next China the worlds greatest consumption story arises in
response to internal and external pressures. Global impacts of this transition. Is a growth slowdown
inevitable? Chinas untapped growth potential. What accounts for the high Chinese savings rate? The
impact of Chinese growth on innovation and productivity in other countries.

* Stephen S. Roach, Unbalanced: The Codependency of America and China, Yale University Press, 2014,
Chapters 1-5 and 11-12
Chang-Tai Hsieh and Pete Klenow, "Misallocation and Manufacturing TFP in China and India" Quarterly
Journal of Economics 124, November 2009, 1403-1448.

LECTURE 20 (NOVEMBER 5): EMERGING MARKETS: EXPORT-LED GROWTH MODELS

Issue: Economics of growth: the birds eye view. The BRICs fallacy: The dangers of mindless generalization and
extrapolation. Decoupling or recoupling? China-centric Asian supply chain producers vs consumers. From
external to internal demand in a post-crisis world. Emerging economies and the changing pattern of the global
trade
HOMEWORK ASSIGNMENT #4 IS DUE
Stephen S. Roach, Hitting a BRIC Wall, in The Next Asia, Wiley, 2009.
* Stephen S. Roach, Asia Exposed, Project Syndicate, May 2012.
* Andrew Rose Debunking Decoupling, Vox EU
* M. Ayhan Kose, Christopher Otrok, Eswar Prasad, Dissecting the decoupling debate, VoxEU
Fabrizio Perri and Vincenzo Quadrini (2013) International Recessions
Mark Aguiar and Gita Gopinath Emerging market business cycles: The cycle is the the trend, Journal of Political
Economy 2007.

LECTURE 21 (NOVEMBER 10): EMERGING MARKETS: LONG VIEW
Issue: Models of Big Pushes: Russia (Stalin) vs China (Mao). Which comes first economic or political reforms?
Does higher income lead to democracy or does democracy lead to higher income? Modernizations and critical
junctures.

* A. Cheremukhin, M. Golosov, S. Guriev, A. Tsyvinski, The Economy of the Peoples Republic of China from
1953, Working paper, January 2014
* A. Cheremukhin, M. Golosov, S. Guriev, A. Tsyvinski, Industrialization and the Economic Development of
Russia through the lens of the Neoclassical Growth Model, Working paper, January 2014
Daron Acemoglu, Simon Johnson, James A. Robinson, and Pierre Yared "Income and Democracy," (2008, American
Economic Review, 98(3),808-842.
Daron Acemoglu, Simon Johnson, James A. Robinson, and Pierre Yared "Reevaluating the Modernization
Hypothesis 2009, J OURNAL O F M ONETARY E CONOMICS, 56(8), 1043-1058
Daron Acemoglu, Suresh Naidu, Pascual Restrepo, James A. Robinson, 2014 Democracy Does Cause Growth

LECTURE 22 (NOVEMBER 12): CLIMATE CHANGE AND THE GROWTH DEBATE: QUANITY VS.
QUALITY?
Issue: Perils of fixating on the quantity of growth. Climate externalities, environmental degradation, and
global warming what are the options? Is GDP a good measure of welfare? Growth metrics beyond GDP.

Stiglitz, Sen, and Fitoussi, Report by the Commission on the Measurement of Economic Performance and
Social Progress
* William Nordhaus, The Climate Casino: Risk, Uncertainty, and Economics for a Warming World, Yale
University Press, 2013, Chapters 3-5
* Chad Jones and Peter Klenow, "Beyond GDP? Welfare Across Countries and Time", February 2011.
(this paper is quite technical but you can skip the equations).

Michael Golosov, John Hassler, Per Krusell, and Aleh Tsyvinski, 2011, Optimal taxes on fossil fuel in general
equilibrium

LECTURE 23 (NOVEMBER 17): DEMOGRAPHIC CHALLENGES: AGING AND RETIREMENT
FUNDING
Issue: The economics of population aging: facts and forecasts. Fertility, mortality, immigration. Effects on social
welfare and unfunded pension programs. Aging societies: opportunity or a challenge? Changing demographics
and impacts on the business cycle. Getting old before getting rich China and other developing economies.
Demography and macro options policies, productivity, immigration, and external demand.
Robert Stowe England, Aging China, The Washington Papers 182, 2005.
st

* Richard Jackson and Neil Howe, The Graying of Great Powers: Demography and Geopolitics in the 21 Century,
CSIS, 2008.
*IMF, World Economic Outlook, September 2004, Chapter 3 How will demographic change affect the global
economy

LECTURE 24-25 (NOVEMBER 19 AND DECEMBER 1): INEQUALITY

Issue: Widening disparities in the income distribution are global in scope afflicting developed and developing
economies, alike. Role of technology? Globalization? Deficiencies in human capital. Distributional issues:
Income disparities vs the Harmonious Society. 1% vs 99%. Occupy or reinvent?
NOVEMBER 19: HOMEWORK ASSIGNMENT 5 IS DUE
* Stephen S. Roach, A Veteran Wall-Streeter Confronts the Occupy Movement, Financial Times, January 29, 2012.
* Congressional Budget Office, Trends in the Distribution of Household Income Between 1979 and 2007,
October 2011. http://www.cbo.gov/sites/default/files/cbofiles/attachments/10-25-HouseholdIncome.pdf
*Thomas Piketty, Capital in the Twenty-First Century, Harvard University Press, 2014, Parts 2 and 3
*Thomas Pikketty and Emmanuel Saez, "Inequality in the Long-Run" Science 344, 2014, 838-843
*Raj Chetty, Nathan Hendren, Patrick Kline, Emmanuel Saes and Nicholas Turner, Is the United States Still a Land of
Opportunity? Recent Trends in Intergenerational Mobility'' NBER Working Paper No. 19844, January 2014 (shorter
published version American Economic Review, Papers and Proceedings, 104(5), 2014, 141-147)

* Toni Atkinson, Thomas Pikketty, and Emmanuel Saez, Top Incomes in the Long Run of History", Journal of
Economic Literature, 49(1), 2011, 3-71
* W. Kopczuk and Emmanuel Saez, Top Wealth Shares in the United States, 1916-2000: Evidence from Estate Tax
Returns" short version National Tax Journal, 57(2), Part 2, June 2004, 445-487 (long NBER Working Paper No.
10399, March 2004)
* Bjrklund, Anders, Jesper Roine, and Daniel Waldenstrm. "Intergenerational top income mobility in Sweden:
Capitalist dynasties in the land of equal opportunity?." Journal of Public Economics 96.5 (2012): 474-484.
* Dal B, Ernesto, Pedro Dal B, and Jason Snyder. "Political dynasties." The Review of Economic Studies 76.1
(2009): 115-142.
*Fabrizio Perri , 2013 Inequality, Recessions and Recoveries, Annual Essay Minneapolis Fed.
* Per Krusell and Anthony Smith, 2014, IS PIKETTY'S "SECOND LAW OF CAPITALISM" FUNDAMENTAL?

LECTURE 26 (DECEMBER 3): SUMMING UP