UAB banner

and Erasmus Mundus Master: Models and Methods of Quantitative Economics (QEM)

 

Timothy J. Kehoe

International Trade and Finance

Universitat Autònoma de Barcelona

March 2012

 

Syllabus

Class Notes

Problem Set #1

Notes on Monopolistic Competition

Notes on Ricardian Models with a Continuum of Goods

Least traded goods excercise: Mexico to Canada, China to United States

To use Comtrade data to least traded goods exercise, you should these instructions.  If you are using SITC rev. 2 data, you can use this list of codes.  If you are using SITC rev. 3 data, you can use this list of codes. 

To label the graph in the least traded goods exercise, you should download DataTools.xls and follow the instructions.

Problem Set #2

Notes on Monopolistic Competition and Trade with Heterogeneous Firms

Notes on Dynamic Heckscher-Ohlin Models

Notes on Real Exchange Rates

Turkey-Germany Real Exchange Rate Data              

Spain-United States Real Exchange Rate Data

Notes on Sudden Stops

Notes on what happened in Mexico in 1994–95

Notes on Self-fulfilling Crises

Examination

1.  The New Trade Theory and its Applications

Questions:

1.         Why has merchandise trade grown so much faster than manufacturing output? 

2.         Why did the applied general equilibrium models used to analyze the impact of NAFTA fail to predict which sectors would have the largest increases in trade? 

Readings:

R. Bergoeing and T. J. Kehoe, “Trade Theory and Trade Facts,” Federal Reserve Bank of Minneapolis, 2003. 

T. J. Kehoe,  “An Evaluation of the Performance of Applied General Equilibrium Models of the Impact of NAFTA,” in T. J. Kehoe, T. N. Srinivasan, and J. Whalley, editors, Frontiers in Applied General Equilibrium Modeling:  Essays in Honor of Herbert Scarf, Cambridge University Press, 2005, 341-77. 

P. J. Kehoe and T. J. Kehoe, “A Primer on Static Applied General Equilibrium Models,” Federal Reserve Bank of Minneapolis Quarterly Review, 18:2 (1994), 2-16. 

T. J. Kehoe, C. Polo, and F. Sancho, “An Evaluation of the Performance of an Applied General Equilibrium Model of the Spanish Economy,” Economic Theory, 6 (1995), 115-141.  

J. Markusen, “Explaining the Volume of Trade: An Eclectic Approach,” American Economic Review, 76 (1986), 1002-1011. 

K.-M. Yi, “Can Vertical Specialization Explain the Growth of World Trade? Journal of Political Economy, 111 (2003), 52-111.

 

2.  Trade Models with Heterogeneous Firms

Questions:

3.         From which products does the growth in exports come after trade liberalization, from products with large exports volumes before the liberalization or from those with small export volumes?

4.         Why is the distribution of exporters in an industry so different from the overall distribution of firms?

Readings:

T. Chaney, “Distorted Gravity: Heterogeneous Firms, Market Structure, and the Geography of International Trade,” University of Chicago, 2005. 

J. Eaton, S. Kortum, and F. Kramarz, “An Anatomy of International Trade:  Evidence from French Firms,” University of Minnesota, 2005. 

T. J. Kehoe and K. J. Ruhl, “How Important is the New Goods Margin in International Trade?” Federal Reserve Bank of Minneapolis, 2009.

M. J. Melitz, “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,” Econometrica, 71 (2003), 1695-1725. 

K. J. Ruhl, “Solving the Elasticity Puzzle in International Economics,”University of Texas at Austin, 2008. 

 

3.  Trade and Growth

Questions:

5.         Do standard models of trade predict that trade liberalization will increase growth rates? 

6.         How do the concepts of productivity used by researchers in the theoretical literature on international trade compare with the concepts used by researchers in the empirical literature?

Readings:

C. Bajona and T. J. Kehoe, Trade, Growth, and Convergence in a Dynamic Heckscher-Ohlin Model,” Review of Economic Dynamics, 13 (2010), 487–513.

M. J. Gibson, Trade Liberalization, Reallocation, and Productivity,” University of Minnesota, 2006. 

T. J. Kehoe and K. J. Ruhl, “Are Shocks to the Terms of Trade Shocks to Productivity?” Federal Reserve Bank of Minneapolis, 2007. 

M. Roberts and R. Tybout, “The Decision to Export in Colombia :  An Empirical Model of Entry with Sunk Costs.” American Economic Review, 87 (1997), 545-564. 

F. Rodriguez and D. Rodrik, “Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence,” in B. Bernanke and K. Rogoff, editors, Macroeconomics Annual 2000, MIT Press, 2001, 261-325.

J. Ventura, “Growth and Interdependence,” Quarterly Journal of Economics, 112 (1997), 57-84. 

 

4.  Real Exchange Rates and Crises

Questions:

7.         Is the distinction between traded and nontraded goods accounting for real exchange rate fluctuations?

8.         How far can a standard model with traded and nontraded goods go in accounting for the changes in relative prices and quantities observed in developing countries after a sudden stop in capital flows as, for example, in the Mexican Crisis of 1994-95?

Readings:

C. M. Betts and T. J. Kehoe, Real Exchange Rate Movements and the Relative Price of Nontraded Goods, Federal Reserve Bank of Minneapolis Staff Report 415.  

C. M. Betts and T. J. Kehoe, “U.S. Real Exchange Rate Fluctuations and Relative Price Fluctuations,” Journal of Monetary Economics, 53 (2006), 1297-1326.

G. Fernandez de Cordoba and T. J. Kehoe, Capital Flows and Real Exchange Rate Fluctuations Following Spain's Entry into the European Community, Journal of International Economics, 51 (2000), 49-78.

T. J. Kehoe and K. J. Ruhl, Sudden Stops, Sectoral Reallocations, and the Real Exchange Rate,” Journal of Development Economics, 89 (2009), 235–249.

 

5.  Self-Fulfilling Crises

Questions:

9.         Can we construct a dynamic stochastic general equilibrium model in which financial crises are driven by self-fulfilling expectations on the part of investors?

10.    What role did the maturity of Mexican government debt play in the 1994–95 financial crisis?

11.    Can we model the current financial crises in Europe as self-fulfilling crises?

Readings:

C. Chamley and B. Pinto (2011), “Why Official Bailouts Tend Not to Work:  An Example Motivated by Greece 2010,”  The Economists’ Voice, 8.

H. L. Cole and T. J. Kehoe (1996), “A Self-Fulfilling Model of Mexico's 1994-95 Debt Crisis,” Journal of International Economics, 41, 309-330.

H. L. Cole and T. J. Kehoe (2000), “Self-Fulfilling Debt Crises,” Review of Economic Studies, 67, 91-116. 

J. C. Conesa and T. J. Kehoe (2011), “Gambling for Redemption and Self-Fulfilling Debt Crises,” Federal Reserve Bank of Minneapolis.

T. J. Kehoe, “What Happened in Mexico in 1994–95?” in P. J. Kehoe and T. J. Kehoe, editors, Modeling North American Economic Integration, Kluwer Academic Publishers, 1995, 131–47.

 


Home Page | Research | Publications | C.V. | Teaching | Computation | Personal | Data  

URL: http://www.econ.umn.edu/~tkehoe/classes/uab-12.html/ 

© 2012 by the Regents of the University of Minnesota.
All rights reserved. 
Comments to: tkehoe@econ.umn.edu 
Last
modified: Sunday 22 April 2012 12:04