EMBA Profs. Cavallo, Johnson, Orphanides, Rigobon & Steinwender
Fall 2017
15.702: Leading in a Global Context
Macroeconomics and Global Markets
October 21 – 28, 2017
Faculty
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EMBA Profs. Cavallo, Johnson, Orphanides, Rigobon & Steinwender
Fall 2017
Professor Alberto Cavallo
Office: E62-512
Tel: 617-715-4837
Email:
Professor Simon Johnson
Office: E62-420
Tel: 617-290-9618 (cell)
Email:
Professor Athanasios Orphanides
Office: E62-481
Tel: 617- 324-4051
Email:
Professor Roberto Rigobon
Office: E62-515
Tel: 617-258-8374
Email:
Professor Claudia Steinwender
Office: E62-521
Tel: 617-253-7974
Email:
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EMBA Profs. Cavallo, Johnson, Orphanides, Rigobon & Steinwender
Fall 2017
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EMBA Profs. Cavallo, Johnson, Orphanides, Rigobon & Steinwender
Fall 2017
Teaching Assistants
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EMBA Profs. Cavallo, Johnson, Orphanides, Rigobon & Steinwender
Fall 2017
Diego Aparicio
Blagoja Todorov
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EMBA Profs. Cavallo, Johnson, Orphanides, Rigobon & Steinwender
Fall 2017
Course Website
http://stellar.mit.edu/S/course/15/fa17/15.702/
Course Assistant
Michelle Fiorenza
Email:
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Our world is changing in fundamental ways. The institutions and regulations governing the global economy are clearly in flux. Standard macroeconomic policies have failed to deliver stable growth over the past decade. Established national regulations are no longer adequate, while international accords over aid, trade, labor standards, and a host of other issues are fiercely contested by competing interests. The rethinking of macroeconomic policy and the outcomes of current trade debates will determine who wins and who loses in the new global economy. Understanding the interaction between this shifting political-economic-regulatory environment and individual firms, even entire industries, is key to determining both the possibilities for and constraints on global business in today's fast changing economy.
This course will provide the conceptual tools necessary to understand and work effectively in today's global world, with a particular emphasis on how the macroeconomy works. We will analyze how the environment for business varies around the world, and we will develop frameworks that help connect larger trends with individual and firm-specific decision-making.
Readings
Readings include a combination of analytic articles and cases drawn from a variety of different industries, contexts and economies in Europe, the US, Asia and Africa. Copyright course material is provided by Study.net. Access instructions and a link to Study.net can be found on the Stellar materials page. You may also order a printed TEXTPAK from Copy Tech and they will notify you once your order has been fulfilled.
Additional material:
Additional readings and useful information will be posted on Stellar under Materials.
Requirements
The requirements for this course (which are described in detail below) and the contribution of each of these towards the final grade are as follows:
1. Two individual write-ups (described below) [20% and 15%] 35%
2. Class participation (including the simulation) 20%
3. Group Project 45%
Write-ups
Of the two write-ups, one is a case write-up and one is a reflection piece.
Case write-up: This accounts for 20% of your grade. It should be brief, not more than 3 double spaced pages (750 words). This write-up is due before the start of class, in particular by Wednesday night, Oct. 18, 2017, at 11:59 pm, and should be emailed to the TAs. Case write-ups are intended to be analytic discussions of some issues central to the case. Please do not write a summary of the case or repeat case facts except to bolster your argument. Based on the information provided in the case materials, please be analytically judgmental and evaluative. In short, you should write what you think of the situation in the case and not merely what the author of the case says. These case write-ups are individual assignments. Choose just ONE case to complete the write-up assignment: an HBS case from the readings for classes 4, 5, 6, 7, 10, 11; or the Iceland (A) case from class 14; or the Harvard Business Review article for class 3. Please note: students should read and be prepared to discuss all assigned HBS cases and other readings for each class, but you only need to write up one item.
Reflection piece: This accounts for 15% of your grade. The second write-up is a post simulation reflection. In this note, you should assess what happened in the simulation and why. What was your position and, given what happened, would you now change your views in any way? Also, what implications can you draw for firm-level decision-making in the situation that we covered? Further details of what can work in this piece will be discussed in class during the week. It is due by Tuesday, Nov. 7, 2017 at 11:59 pm. Please upload this to Stellar.
Group Project
The group project is due on Sunday, November 12, by 11:59 pm to Stellar, and will count for 45 percent of the grade.
Pick a country. For this country, choose ONE economic policy you think the country should implement to either stabilize the economy in the short run or to achieve medium term growth (over the next two to five years), and explain why this policy is of primary importance to this country. You should be clear on the constraints and risks is the country currently faces and use this analysis to build a case for why it is essential to implement this policy immediately. Use economic analysis as discussed in this class.
This written report should be a maximum length of 5 pages of text (1250 words) plus as many exhibits as you deem necessary. You should ground your assessment in data of some kind and link it to the themes covered in the course. This is a GROUP assignment. You can work in teams of 3-4 people, across cohorts, on this project. Groups will not be assigned by faculty and students are encouraged to form groups amongst themselves. (No groups larger than four, please.)
Class participation
Your active participation in the discussion in class is integral to the design of this course. Class participation counts for 20% of your final grade. Prior preparation of the cases and assigned readings are essential as this background is presumed in the lectures and case discussions. If your native language is not English, or if you have difficulty speaking up in class for other reasons, please contact the faculty to discuss how your participation in class can be ensured.
Class absence
You can miss up to two (2) 90 minute sessions. For every session over that number, you have to prepare a write-up of 250 words on any one of the missed sessions. For example, if you miss 3 sessions, you need to hand in ONE write-up of 250 words on any of the sessions you missed; if you miss 5 sessions, you need to hand in 3 write-ups of 250 words each. In the write-up, explain what you would have said in class if you had been able to attend.
You should also review the video from all sessions that you miss – you need all the building blocks in order to understand the big picture.
Additional Sessions
On Wednesday, October 25, 4:30-6:30pm, we will have an informal “dinner table” discussion (food will be provided). Participation in this session is optional and will not be graded. This is intended as an opportunity for question-and-answer about topics not covered directly in the course. Details on this session will be announced separately.
Please note that the late afternoon session on Friday, Oct. 27, 4:15-5:15pm, is required for everyone. This is an essential part of the set-up for the simulation that we run all morning and through lunchtime on Saturday. You are free to leave campus at 2 pm on Saturday, October 28, but please do not make any arrangements to leave earlier than that.
15.702: Leading in a Global Context
Schedule of Classes and Readings
Class 1: Introduction
Sat., Oct. 21
RR
Class 2: Babysitters
Sat., Oct. 21
RR Readings
Required Reading: Mankiw, “Macroeconomics” Chapter 1, The Science of Macroeconomics, eighth edition
Class 3: Where Does Growth Come From: Growth Theory?
Sat., Oct. 21
CS Readings
Required Cases: HBR Article #07406: How Fast Can the US Economy Grow?
Article (Economist): The Growth of Growth Theory
Class 4: Growth Theory: Total Factor Productivity and Innovation
Sun., Oct. 22
CS Readings
Required Case: HBS Case #9-703-040: Singapore Inc.
Article (WSJ): Singapore Swing: Krugman was Right…
Recommended: Article (Economist): Reading the Tea Leaves
Paul Romer, “Economic Growth”, The Concise Encyclopedia of Economics, edited by David R Henderson.
Optional: Article (Economist): The Singapore Exception
Class 5: Money and Inflation
Sun., Oct. 22
RR Readings
Required Case: HBS Case #9-798-048: The German Hyperinflation of 1923.
Required Reading: Chapter 4, Money and Inflation, “Macroeconomics and the Financial System”, Greg Mankiw and Larry Ball, Worth Publishers 2011.
Class 6: Policy in the Short Run: the AS-AD model
Mon., Oct. 23
AC Readings
Required Readings: HBS Case #9-713-056: Perspectives on the Great Depression
Chapter 9, Introduction to Economic Fluctuations, “Macroeconomics and the Financial System”, Greg Mankiw and Larry Ball, Worth Publishers 2011.
Class 7: Economic Unions: Brexit
Mon., Oct. 23
CS Readings
Required Case: HBS Case #9-717-028: Brexit
Class 8: Modern Central Banking; Credit Allocation; Relative Prices
Tues., Oct.24
AO Readings
Required Reading: Federal Open Market Committee. Statement on Longer-Run Goals and Monetary Policy Strategy, January 31, 2017.
Janet Yellen. The Economic Outlook and the Conduct of Monetary Policy. Stanford, January 19, 2017.
Class 9: Institutions, Rules, and Regulations
Tues., Oct. 24
SJ Readings
Required Readings: Daron Acemoglu and James Robinson, Why Nations Fail: The
Origins of Power, Prosperity and Poverty, Crown Business, New York, 2012, chapters 3, The Making of Prosperity and Poverty pp. 70-95.
Jared Diamond, “What Makes Countries Rich or Poor?” The New York Review of Books, June 7, 2012.
Class 10: Introduction to Exchange Rates
Wed., Oct. 25
AC Readings
Required Reading: HBS Case #9-709-026: Who Broke the Bank of England?
Chapter 5-3, Exchange Rates, “Macroeconomics and the Financial System,” Greg Mankiw and Larry Ball, Worth Publishers 2011.
Class 11: Exchange Rate Regimes and Financial Crises in Developing Countries
Wed., Oct. 25
AC Readings
Required Case: HBS Case #9-714-036: “Breaking Bad (the Rules): Argentina Defaults, Inflates (and Grows), 1997-2015.”
Class 12: Banking and Regulation in a Digital Global Economy
Thur., Oct. 26
SJ Readings
Required Reading: Johnson, Simon “The Financial System of the Future,” Democracy, 2016.
R. Ali, J. Barrdear, R. Clews, & J. Southgate, The economics of digital currencies, Bank of England Quarterly Bulletin, 2014.
Class 13: Origins of the Euro Area Crisis
Thur., Oct. 26
AO Readings
Required Readings: Baldwin, Richard et al. Rebooting the Eurozone: Step 1 – agreeing a crisis narrative. CEPR Policy Insight 85, November 2015.
Orphanides, Athanasios, “The Euro Area Crisis Five Years After the Original Sin,” MIT Sloan Working Paper 5147-15, October 2015.
Class 14: Small European islands with large banks: Iceland, Ireland, Cyprus
Fri., Oct. 27
AO Readings
Required Cases: HBS Case #9-709-011: Iceland (A)
HBS Case #9-709-102: Iceland (B): Redefining Aaa-Rated Sovereigns.
Class 15: Fiscal-monetary interactions: Japan and Italy
Fri., Oct. 27
AO Readings
Required Readings: Kuroda, Haruhiko, “Quantitative and Qualitative Monetary Easing with Yield Curve Control”: After Half a Year since Its Introduction. Tokyo, March 24, 2017.
Orphanides, Athanasios, Japanese Frugality versus Italian Profligacy? VOX, June 6, 2017.
Classes 16 & 17: You Live the Euro Crisis
Sat., Oct. 28
SJ & AO Readings
Required Reading: None, as the purpose of these sessions is to integrate material from the entire week. However, the material covered in classes 13 and 15 is particularly relevant.
Class 18
Sat. Oct 28 Plenary Review
SJ & AO
Classroom Values@MITSloan
The MIT Sloan Mission
The mission of the MIT Sloan School of Management is to develop principled, innovative leaders who improve the world and to generate ideas that advance management practice.
Values@MIT Sloan
The MIT Sloan Mission statement (above) provides the context for core values that express who we are at our best. These core values include integrity, respect, collaboration, innovation, and positive impact. We invite all members of our community – students, staff, faculty, alumni – to practice these values in all the ways we work together, both inside and outside the classroom.
MIT Sloan Policy on Classroom BehaviorIn order to create a productive learning environment and to ensure mutual respect it is essential that the norms and rules of classroom etiquette and behavior reflect the highest standards. It is also important that these norms be consistently enforced by the faculty across all classes. Although in the final analysis each faculty member is responsible for his or her own classroom, there are significant negative consequences for other faculty and for the School if rules are not consistent and are not enforced. Therefore it is the policy of the MIT Sloan School that
· Students are expected to arrive promptly on time and to stay for the entire class.
· Faculty are expected to begin and end class on time.
· Laptops and e-readers not be open in the classroom except with explicit permission of the faculty (e.g., when used to deliver an e-course pack or otherwise used as part of the instructional program, or when required by students because of physical or other challenges)
· Cellphones and PDAs are not to be used or permitted to ring in the classroom.
· Students are expected to attend all classes.
It is expected that faculty will articulate how these rules apply in their class as well as how the rules will be enforced.
ACADEMIC HONESTY – INTEGRITY IN PRACTICE
As a member of the MIT Sloan academic community, you are expected to uphold the highest standards of academic integrity. Violations of academic integrity include, but are not limited to, cheating, plagiarism, unauthorized collaboration, and facilitating academic dishonesty. Please see the document Academic Integrity at the Massachusetts Institute of Technology: A Handbook for Students for further discussion of this topic. These standards are also discussed below, specifically regarding plagiarism, individual work, and team work.
It is your responsibility to make yourself aware of MIT’s rules of academic integrity and to adhere to them. When students are found to have violated academic standards, disciplinary action will result. Possible consequences include grade reduction, an F grade, a transcript notation, delay of graduation, or expulsion from MIT.