Faculty
Professor Matthew J. Slaughter
Objectives
Global Economics for Managers will expand your knowledge of economics in two directions. First, we expand the scope of inquiry to cover the economics of the nation in a global economy. This portion of the course will cover international economics and macroeconomics. We will study the larger economic forces that shape production, trade flows, capital flows, interest rates, exchange rates, and other variables that create the global economic landscape.
Second, we will analyze firm decisions in the face of these global forces, i.e. international microeconomics. This part of the course will apply the tools of microeconomics and international economics to illustrate how globalization influences performance, strategy, and policy within firms. Our ultimate objective is to help you develop a framework for analyzing both opportunities and risks in a global economic environment.
Requirements
Required Text
The Choice: A Fable of Free Trade and Protectionism, Russell D. Roberts, Prentice-Hall, revised and updated Third Edition, 2006.
Materials
The Academic Honor Principle
We take the Academic Honor Principle very seriously and have very clear policies for this course.
• In preparing for class or exams you may not use notes from any previous offering of this, or a similar, course. You also may not discuss the material with students who have already taken the course. This restriction extends to case-related information obtained from other sources. Because the class meets in multiple sections, there should be no communication among sections until all sections have met. After that, of course, a full flow of ideas is encouraged.
• Quiz and Final Exam: You must do your own work. You may use only materials that have been explicitly authorized in advance in writing. If you wish to use group assignments during the exams, you must have your own copy (in advance). During the quiz and final exam, no sharing of any material is permitted. Your quiz must be turned in at the start of your section’s assigned class time on January 26. Your exam must be turned in by 8:30 a.m. on Monday, February 23. Failure to hand in either the quiz or the final exam will result in a failing grade for the course.
Attendance and Class Participation
You are required to attend the course section to which you are assigned. See MBA Student Handbook Section III for a full statement of school policy. The MBA Program Office or your professor must be notified in advance if you are unable to attend class due to illness or family emergency. Class participation is 10% of your grade. An unexcused absence will result in a failing grade for that day.
It is Tuck School policy that missing a class for an interview is NOT an excused absence. It is your responsibility to work with recruiters and career services to minimize these kinds of disruptions. However, we recognize the importance of your job search and understand that in some cases such conflicts are unavoidable. If you must miss a class session for an interview it is your responsibility to: (a) notify the professor by e-mail in advance of class indicating the name of the firm and the reason for the absence, and (b) submit in advance your answers to the discussion questions that are assigned for the class you will miss. Failure to do either of these will result in a failing grade for that day’s class.
You should come to each class prepared to discuss the assigned discussion questions, which are based on each day’s readings. These questions should be the basis for study group discussion in preparation for each class. There will be cold calling on a daily basis. If you are unprepared, it is better to "take a pass" than to sidetrack class discussion.
Grading
Dates of your graded assignments and their contribution to your overall grade are shown below.
Activity; Due Date; Weight
Quiz (Due at the start of class); Monday, Jan. 26; 20%
(This quiz will be put in your mailbox Thursday Jan. 22 in the morning)
Group Case Write-Up #1; Monday, Feb. 2; 10%
Group Case Write-Up #2; Monday, Feb. 16; 10%
Final Exam (Due 8:30 a.m.); Monday, Feb. 23; 50%
(This final will be put in your mailbox Tuesday Feb. 17 by 5:00 p.m.)
Class Participation; 10%
Schedule
Tuesday 01/06
Key Topics: economic integration; economic paradigm; production possibilities: community indifference curve; opportunity cost; equilibrium; labor productivity; relative price
Daily Briefing: U.S. Employment Situation (Released Jan. 9)
Readings:
1. BKS - Chapter 2: Resource Allocation in a Closed Economy.
2. Paul Krugman, "The Accidental Theorist," Slate (on-line magazine), January 23, 1997.
Wednesday 01/07
Key Topics: absolute advantage; comparative advantage; gains from trade
Readings:
1. BKS - Chapter 3: International Trade in Goods and Services.
2. "Not So Absolutely Fabulous," The Economist, November 4, 1995.
3. "How Offshore Work Affects Your Industry," Harvard Business Review, November 2004, Vol. 82, No. 11, p.24.
Monday 01/12
Key Topics: protectionism; fair trade; antidumping; GNP, GDP, and their components; current-account balance; national saving; capital-account balance; balance of payments; real interest rate
Daily Briefing: U.S. International Trade in Goods and Services (Released Jan. 13)
Readings:
1. The Choice: A Fable of Free Trade and Protectionism.
Tuesday 01/13
Key Topics: Trade over time; current account; capital account
Daily Briefing: U.S. Producer Price Index (Released Jan. 15)
Readings:
1. BKS - Chapter 4: International Trade in Capital.
2. "Sustaining the Unsustainable," The Economist, March 15, 2007.
Tuesday 01/20
Key Topics: inflation; nominal interest rate; real interest rate; money supply; money demand; purchasing power parity
Daily Briefing: Case-Shiller Home-Price Index (Released Jan. 27)
Readings:
1. BKS - Chapter 5: The Role of Money in the Long Run.
2. "Sandwiched: The Big Mac Index", The Economist, July 24, 2008.
3. "Zimbabwe Can’t Paper Over Its Million-Percent Inflation Anymore," The Wall Street Journal, July 2, 2008.
Wednesday 01/21
Key Topics: productivity, capital accumulation, labor markets, fluctuations and trends
Daily Briefing: U.S. Conference Board Consumer Confidence (Released Jan. 27)
U.S. GDP (Released Jan. 30)
Readings:
1. BKS - Chapter 6: Economic Growth in the Long Run, Sections 6.1, 6.2, 6.5.
2. BKS - Chapter 7: The Short Run Behavior of Output, Sections 7.1, 7.2.
3. "A Productivity Primer," The Economist, November 4, 2004.
4. Paul Krugman, "How Fast Can the Economy Grow?" Harvard Business Review,July/August, 1997.
Monday 01/26
Key Topics: unemployment/inflation tradeoffs, central-bank independence, interest rates, money
supply
Daily Briefing: U.S. Federal Reserve Open Market Committee Meeting (Jan. 27-28)
Readings:
1. BKS - Chapter 8: Monetary Policy.
2. "The Race to Zero," The Economist, November 6, 2008.
3. Monetary Policy and the Crisis of 2007-2008, Stephen C. Cecchetti, April 2008.
Tuesday 01/27
Key Topics: taxes, spending, government budget constraint, seignorage, crowding out, real rate of return
Daily Briefing: European Central Bank Governing Council Meeting (Feb. 5)
U.S. Productivity and Costs (Released Feb.5)
Readings:
1. BKS - Chapter 9: Fiscal Policy
2. "No Time to Waste," The Economist, November 20, 2008.
Monday 02/02
Key Topics: constraints on domestic policy, economic integration, fiscal and monetary interaction, international policy coordination
Readings:
1. Harvard Business School Case 793-033, "Germany in the 1990s: Managing Reunification."
2. "How Mr. Soros Made a Billion by Betting Against the Pound," The Times, October 26, 1992.
Tuesday 02/03
Key topics: arbitrage; purchasing power parity; covered and uncovered interest-rate parity; foreign exchange market equilibrium; exchange-rate expectation; overshooting
Daily Briefing: U.K. Monetary Policy Committee (Released Feb. 5)
Readings:
1. BKS - Chapter 10: The Economics of Currency Markets
2. "Bad Bets," The Economist, October 16, 2008.
3. "Currency Comeback," The Economist, November 19, 2008.
Optional: ***The problem solving session for Tuesday, February 3rd will begin at 4:45 pm and will be in the Danziger classroom.*** Please note the different start time and room location.
Monday 02/09
Key Topics: floating exchange rates; fixed exchange rates; foreign-exchange intervention; capital flight; moral hazard; capital controls; monetary union
Daily Briefing: U.S. Industrial Production (Released Feb. 18)
Readings:
1. BKS - Chapter 11: Fixed Exchange Rates and Their Implications.
2. "What If Britain Had Joined in 1999?" The Economist, June 12, 2003.
3. "Fear of Floating," The Economist, July 10, 2003.
4. "Shrinking Cushion," The Economist, November 24, 2008.
Tuesday 02/10
Key Topics: monopoly pricing; market segmentation and price discrimination; pricing to market; net present value; exposure to currency risk
Daily Briefing: German Employment and Unemployment (Released Feb. 27)
U.S. Jobless Claims (Released Feb. 12)
Readings:
1. BKS - Chapter 14: Competing in International Markets
2. "Yen’s Surge Brings Bad News for Japan's Exporters," The Wall Street Journal, October 25, 2008.
Monday 02/16
Key Topics: international pricing; exposure to currency risk; foreign-currency hedging
Readings:
1. Harvard Business School Case 9-290-005, "Jaguar plc, 1984."
2. Froot, Scharfstein, and Stein, "A Framework for Risk Management," Harvard Business Review,
November-December, 1994, reprint 94604.
Tuesday 02/17
Key Topics: entering foreign markets; joint ventures; foreign direct investment; trade policy; price and investment response to exchange rates
Readings:
1. Harvard Business School Case 9-796-030, "Japan's Automakers Face Endaka."
