Course Outline

This course explores the process of economic reform in a comparative and international setting with a focus on emerging market countries. The course will therefore provide a comprehensive overview of the emerging markets followed by the crises of the 1990-2003. We will identify similarities and differences in these crises and assess the politics of reform resulting from these crises and its implications for the recent financial crisis that engulfed the world economy. Finally, we will examine the resilience of the dynamic emerging market countries as they become key participants in the global financial community and irresistible destinations for global finance.
Recommended prerequisite: PS 454/554.

Reading Material

The textbook for this course is as follows:

  • David Beim and Charles Calomiris, Emerging Financial Markets, McGraw-Hill Irwin, 2001

In addition, the following texts are required for this course

  • Paul Krugman, The Return of Depression Economics and the Crisis of 2008, W. W. Norton and Company, 2009 (Critical Review 1: 5-7 pages double spaced)
  • Louis W. Pauly, Who elected the bankers?: Surveillance and control in the world economy, Cornell University Press, 1997 (Critical Review 2: 5-7 pages double spaced)
  • Smaghi, Lorenzo Bini (2009), “Conflicts of Interest and the Financial Crisis,” International Finance, Vol. 12, No. 1, Spring, pp. 93-106. In addition to the above readings, required reading material will be handed out in class or made available via website/email.

Recommended Readings

  • Joseph Stiglitz, Free Fall, W. W. Norton and Company, 2010
  • Hellman, Joel. 1998. Winners Take All: The Politics of Partial Reform in Postcommunist Transitions. World Politics 50 (2 (January)):203-34.
  • Shirk, Susan. 1993. The Political Logic of Economic Reform in China. Berkeley: University of California Press.
  • Manzetti, Luigi. 2003. Political Manipulations and Market Reform Failures. World Politics 55 (3):315-360.

Weekly Topics

Week 1. The Emerging Markets Phenomenon

  1. Historical Overview
  2. Debt Crisis of 1980s
  3. Role of Capital Flows in Emerging Markets

    4. Readings: Beim and Calomiris, Ch1

Week 2. The Politics of Financial Development

  1. Role of Governments in the Financial System in Emerging Markets
  2. Financial Repression
  3. Transparency and openness

    4. Readings: Beim and Calomiris, Ch.3; Pauly, Ch.3

Week 3. Economic opening and Political democratization

  1. Central and Eastern Europe after demise of Soviet-led authoritarianism
  2. Latin America’s wave of democratization
  3. Role of Capital Flows in Emerging Markets

    4. Readings: Beim and Calomiris, Ch1

Week 4. The politics of Privatization and Financial Liberalization

  1. The wave of Privatization
    1. Latin America
    2. Eastern Europe
    3. East Asia
    4. Private Sector growth in China

    2. Readings: Beim and Calomiris, Ch.4; Pauly, Ch.4

Week 5. Issues of Governance and Rule of Law

  1. Corruption
  2. Legal Protection
  3. Property Rights

    4. Readings: Pauly, Ch.5, Ch.6 and Ch.7

    Assignment: Pauly, Who elected the bankers? (First Critical review due)

Week 6. Information and Control

  1. Impact of Market Asymmetries on Financial Markets
  2. Corporate Governance
  3. Accounting Standards
  4. Exchange rate regimes
  5. Role of the Banking System

    6. Readings: Beim and Calomiris, Ch5, Ch6 and Ch7

Week 7. Financial Crisis

  1. Mexican Peso Crisis
  2. Asian Financial Crisis
  3. Japan’s Liquidity Trap
  4. Role of IMF and World Bank

    5. Readings: Beim and Calomiris, Ch8 and Ch9, Krugman, Ch.1, Ch.2 and Ch.3

Week 8. Global Credit Crunch

  1. Credit Crunch: Lessons never learnt
  2. The case for Reform
  3. Politics of Reform Process
  4. Impact of Credit Crunch on Emerging Markets

    5. Readings: Krugman, Ch.4, Ch.5, Ch.6, Ch.7, and Ch.8

    Assignment: Pauly, Who elected the bankers? (First Critical review due)

Week 9. Global Markets and National Politics Todayn

  1. National Politics and Global Financiers
  2. Financial Reform in the US
  3. Reform for PIGS (Portugal, Italy, Greece and Spain)
  4. Differences in policy response to the recent crisis
  5. Are we all Keynesians now?

    6. Readings: Smaghi, Conflicts of Interest and the Financial Crisis; Krugman, Ch.9

Week 10. The future of Emerging Markets

  1. The role of the State
  2. Reliance on Foreign Capital
  3. Reliance on Foreign Consumers: Exports vs. Domestic Demand

    4. Readings: Beim and Calomiris, Ch10; Krugman, Ch.10

Grading

Attendance is mandatory and students should come prepared to discuss readings in class. Final grade will be based on the following criteria:

Grading

Please refer to the University Student Conduct Code for policies on Academic Honesty and integrity.