Faculty
Professors Andrew B. Bernard, Matthew J. Slaughter
Objectives
In Fall Term B, Global Economics for Managers I (GEM I) covered the basic ideas underlying the economic behavior of individual markets (theory of exchange and supply and demand), firms (cost and pricing), and industries (i.e., strategic interaction). GEM II (Winter Term) 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. The second direction is 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
Materials
Weekly Memos and Course Outline
In advance of each week (typically by Thursday afternoon), you will receive via email a copy of the weekly memo for the course. The weekly memo will provide a brief guide to readings and discussion questions to be prepared for lecture. The weekly memos should be considered the "official record" of what is covered in the class.
The course outline below provides a guide to the topics covered in the 14 course meetings. In the list of readings below, the numbered "chapters" refer to the draft chapters of the textbook, Global Macroeconomics for Managers (by Bernard, Knetter, and Slaughter) that are in the course packet.
Weekly Question-and-Answer and Problem-Solving Sessions
Each Thursday afternoon, the head TA Katherine Greig will conduct a question-and-answer session covering the material from that week. Each Monday afternoon, a pair of TA's will be available to help students with problem-solving techniques for the class. The exact times of these sessions will be determined later in coordination with the TA's.
Required Text
The Choice: A Fable of Free Trade and Protectionism, Russell D. Roberts, Prentice-Hall, revised and updated, 2001.
Attendance and Class Participation
You are expected to attend every class. The only excused absences will be for illness or family emergency. If at all possible, any absence must be cleared with the professor before the start of class. Class participation is 10% of your grade, and unexcused absences will result in a zero grade for that day's participation. 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.
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.
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.
Cases: You should work in your assigned study groups and when required, hand in a single set of answers as a group. Only those who contribute approximately equally to the preparation of a group homework assignment may take full credit for it. This does not mean that everyone's ideas must be included. It means that everyone should contribute about equally to the overall process. You may not use outside materials in preparing a case write-up.
Class Discussion: You should prepare with your group, but must answer independently in class.
Laptops: Laptops may be used in class only when required for the class session. During class you should never check email or surf the Internet.
Grading
Dates of your graded assignments and their contribution to your overall grade are shown below.
Quiz: Monday, Feb. 2, 20%
Group Case Write-Up #1: Monday, Feb.9, 10%
Group Case Write-Up #2: Monday, Feb. 23, 10%
Final Exam: Friday, Feb. 27, 50%
(This final will take place on the 27th, 9:00 a.m. to 12:00 p.m.)
Class Participation: 10%
Schedule
Monday 01/12
Key Topics: economic integration; economic paradigm; production possibilities: community indifference curve; opportunity cost; equilibrium; labor productivity; relative price
Daily Briefing: U.S. Producer Price Index (Jan. 14) [Professor Bernard, Professor Slaughter]
1. BKS - Chapter 2: Resource Allocation in a Closed Economy.
2. Paul Krugman, "The Accidental Theorist," Slate (on-line magazine), January 23, 1997.
Tuesday 01/13
Key Topics: absolute advantage; comparative advantage; gains from trade
Daily Briefing: U.S. International Trade (Jan. 14) [Groups: 1, 13, 25, 37]
1. BKS - Chapter 3: International Trade in Goods and Services.
2. "Not So Absolutely Fabulous," The Economist, November 4, 1995.
3. "Surviving the Onslaught," The Wall Street Journal, October 6, 2003.
Tuesday 01/20
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: EU Consumer Price Index (Jan. 21) [Groups: 2, 14, 26, 38]
1. The Choice: A Fable of Free Trade and Protectionism.
Wednesday 01/21
Key Topics: Trade over time; current account; capital account
Daily Briefing: U.S. Jobless Claims (Jan. 22) [Groups: 3, 15, 27, 39]
1. BKS - Chapter 4: International Trade in Capital.
2. "The Price of Profligacy," The Economist, September 20, 2003.
3. "Trade Gap Widens to Record; Menacing Economic Recovery," Wall Street Journal,
September 13, 2002.
4. "The Dollar and the Deficit," The Economist, September 14, 2002.
Monday 01/26
Key Topics: inflation; nominal interest rate; real interest rate; money supply; money demand; purchasing power parity
Daily Briefing: U.S. Federal Reserve Open Market Committee Meeting (Jan. 27-28) [Groups: 4, 16, 28, 40]
1. BKS - Chapter 5: The Role of Money in the Long Run.
2. "McCurrencies," The Economist, April 26, 2003.
3. "For Wary Argentines, the Crops Are Cash," The New York Times, December 1, 2002.
Tuesday 01/27
Key Topics: productivity, capital accumulation, labor markets, fluctuations and trends
Daily Briefing: U.S. Durable Goods (Jan. 28) [Groups: 5, 17, 29, 41]
U.S. Gross Domestic Product (Jan. 30) [Groups: 6, 18, 30, 42]
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. "Behind Surging Productivity: The Service Sector Delivers," The Wall Street Journal,
November 7, 2003.
4. "Productivity Gains: Never Bad, Even for American Workers," The Wall Street Journal,
August 21, 2003.
5. "Steaming," The Economist, November 15, 2003.
6. Paul Krugman, "How Fast Can the Economy Grow?" Harvard Business Review,
July/August, 1997.
Monday 02/02
Key Topics: unemployment/inflation tradeoffs, central-bank independence, interest rates, money
supply
Daily Briefing: EU Monetary Policy (Feb. 5) [Groups: 7, 19, 31, 43]
1. BKS - Chapter 8: Monetary Policy.
2. "Fed to Keep Rates at Historic Low Despite Growth," The Wall Street Journal, Nov. 14, 2003.
3. "The Excessively Cautious Central Bank," The Economist, October 4, 2003.
Tuesday 02/03
Key Topics: taxes, spending, government budget constraint, seignorage, crowding out, real rate of return
Daily Briefing: U.S. Productivity and Costs (Feb. 5) [Groups: 8, 20, 32, 44]
U.S. Employment Situation (Feb. 6) [Groups: 9, 21, 33, 45]
1. BKS - Chapter 9: Fiscal Policy
2. "Is War a Generator of Expenses or an Economic Stimulus?," The New York Times,
March 27, 2003.
3. "Dartmouth's Andrew Bernard on War's Effect on Inflation" The Boston Globe,
February 16, 2003.
4. "A Flood of Red Ink," The Economist, November 6, 2003.
Monday 02/09
Key Topics: constraints on domestic policy, economic integration, fiscal and monetary interaction, international policy coordination
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 02/10
Key topics: arbitrage; purchasing power parity; covered and uncovered interest-rate parity; foreign exchange market equilibrium; exchange-rate expectation; overshooting
Daily Briefing: German Gross Domestic Product (Feb. 12) [Groups: 10, 22, 34, 46]
1. BKS - Chapter 10: The Economics of Currency Markets
2. "Dollar Plunges on Euro, Yen," The Wall Street Journal, November 19, 2003.
3. "ECB Draws Criticism Over Advance of Euro," The Wall Street Journal, May 22, 2003.
Monday 02/16
Key Topics: floating exchange rates; fixed exchange rates; foreign-exchange intervention; capital flight; moral hazard; capital controls; monetary union
Daily Briefing: U.S. Consumer Price Index (Feb. 20) [Groups: 11, 23, 35, 47]
1. BKS - Chapter 11: Fixed Exchange Rates and Their Implications.
2. "What If Britain Had Joined in 1999?," June 12, 2003.
3. "Fear of Floating," The Economist, July 10, 2003.
4. "Currency Peg Takes Rap for Hong Kong's Malaise" The Wall Street Journal,
October 2, 2002.
Tuesday 02/17
Key Topics: monopoly pricing; market segmentation and price discrimination; pricing to market; net present value; exposure to currency risk
Daily Briefing: U.S. Conference Board Consumer Confidence (Feb. 24) [Groups: 12, 24, 36, 48]
1. BKS - Chapter 14: Competing in International Markets
2. "Dollar's Retreat Puts Pressure on Japanese, Korean Exporters," The Wall Street Journal,
September 24, 2003.
3. "Grappling with the Strong Euro," The Economist, June 5, 2003.
Monday 02/23
Key Topics: international pricing; exposure to currency risk; foreign-currency hedging
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 02/24
Key Topics: entering foreign markets; joint ventures; foreign direct investment; trade policy; price and investment response to exchange rates
1. Harvard Business School Case 9-796-030, "Japan's Automakers Face Endaka."
