Mankiw 6e. Experience it.
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Chapter 32: A Macroeconomic Theory of the Open Economy

Recent Posts
(Note: Page numbers referenced in posts prior to June 1, 2011 refer to 5th edition)

 

March 2

Is the Obama administration right in pushing for a trade deal?

The U. S. is negotiating a free-trade deal with Asia known as the Trans-Pacific Partnership. Paul Krugman, who claims to be a free trader, thinks the deal is not valuable enough for president Obama to spend political capital on it. The Economist magazine thinks it is.

Textbook References:

Pages 706-709 “Trade Policy”

December 30

The Burden of the Debt

Paul Krugman argues that the Federal debt is not much of a problem. Laurence Ball and Greg Mankiw argue that the debt has distributional effects and that too much debt might trigger a collapse in demand for government bonds.

Textbook References:

Pages 238-240 “The Fiscal Challenge Ahead”
Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”
Pages 704-706 “Government Budget Deficits”
Pages 823-827 “Should the Government Balance Its Budget?”

December 5

Eichengreen on U.S. Fiscal Policy

Barry Eichengreen argues that if the U.S. fails to bring its deficits under control, then investors will no longer want to buy or hold U.S. debt. When that happens, the consequences could be severe.

Textbook References:

Pages 238-240 “The Fiscal Challenge Ahead”
Pages 704-706 “Government Budget Deficits”
Pages 709-711 “Political Instability and Capital Flight”

September 29

Fred Bergsten on Net Exports

Fred Bergsten may have forgotten the connection between trade flows and capital flows.

Textbook References:

Pages 698-701 “The Market for Foreign-Currency Exchange”

May 27

Feldstein on Greece

Greece needs to devalue its currency to regain competitiveness, but as long as it is part of the Eurozone, it cannot devalue.

Textbook References:

Page 704 “The Euros”
Pages 718-721 “The Market for Foreign-Currency Exchange”

May 23

Strong Dollar = Strong Economy?

Christina Romer explains why the country's obsession with a strong dollar is misplaced.

Textbook References:

Page 706 “How a Weak Dollar Boosts Exports”


July 9

Prices Adjust When the Exchange Rate Can't

The crisis in Greece is affecting prices because Greece is part of the Euro area and can't devalue its currency.

Textbook References:

Pages 703-705 “The Prices for International Transactions: Real and Nominal Exchange Rates”

Page 704 “The Euro”

Pages 724-728 “Government Budget Deficits”


May 18

Is A VAT Good for Exports?

Alan Viard explains the fallacy in former President Clinton's assertion that a VAT would be good for exports.

Textbook References:

Page 251 “Income or Consumption Be Taxed? ”
Pages 728-730 “Trade Policy”

October 20

More Shots in the Trade War

China imposes a new tariff on nylon in a tit for tat trade war with the U.S.

Textbook References:

Page 8 “Principal 5: Trade Can Make Everyone Better Off”
Chapter 3 “Interdependence and the Gains from Trade”
Pages 183-185 “The Effects of a Tariff”
Pages 728-730 “Trade Policy”


October 18

China's Dollar Problem

Kenneth Rogoff explains why the Chinese are worried about the value of the dollar.

Textbook References:

Pages 692-702 “The International Flows of Goods and Capital”
Pages 718-721 “The Market for Foreign-Currency Exchange”
Pages 732-733 “Capital Flows from China”


October 5

A Victory for Mundell-Fleming

The size of the fiscal multiplier depends heavily on whether exchange rates are fixed or flexible.

Textbook References:

Chapter 32 “A Macroeconomic Theory of the Open Economy”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?”


June 15

Samuelson’s Words of Warning

Paul Samuelson worries that China may lose its appetite for dollars.

Textbook References:

Chapter 31 “Open-Economy Macroeconomics: Basic Concepts”
Chapter 32 “A Macroeconomic Theory of the Open Economy”

Chapter 32: A Macroeconomic Theory of the Open Economy
Archived Posts

 

Feb. 24

Mixed Messages

The U.S. wants China to keep buying our treasury bonds, which has the effect of keeping the value of the dollar high against the Yuan. But the U.S. also wants China to raise the value of the Yuan against the dollar.

Textbook References:

Pages 692-702 “The International Flows of Goods and Capital”
Pages 724-733 “How Policies and Events Affect an Open Economy”


Feb. 16

China Favors Free Trade, Even if U.S. Doesn’t

China promises to avoid protectionism, even though the U.S. stimulus bill includes protectionist policies.

Textbook References:

Chapter 3 “Interdependence and the Gains from Trade”
Chapter 9 “Application: International Trade”
Pages 728-730 “Trade Policy”


Feb. 11

Ray Fair on Stimulus

Ray Fair reports that his macroeconomic model predicts that the stimulus bill will create short-run gains and long-run pain.

Textbook References:

Pages 246-248 “The Fiscal Challenge Ahead”
Pages 589-591 “Policy 3: Government Budget Deficits and Surpluses”
Pages 591-593 “The History of U.S. Government Debt”
Pages 724-728 “Government Budget Deficits”
Pages 787-793 “How Fiscal Policy Influences Aggregate Demand”
Pages 793-796 “Using Policy to Stabilize the Economy”
Pages 830-832 “Should Monetary and Fiscal Policymakers Try To Stabilize the Economy?


Feb. 5

Malkiel on “Buy American”

Burton Malkiel argues that the stimulus package should not include protectionist provisions.

Textbook References:

Page 8 “Principle 5: Trade Can Make Everyone Better Off”
Chapter 3 “Interdependence and the Gains from Trade”
Chapter 9 “Application: International Trade”
Pages 728-730 “Trade Policy”


Feb. 2

Irwin on “Buy American”

Douglas Irwin advises against requiring infrastructure projects to use domestic steel and other inputs.

Textbook References:

Chapter 3 “Interdependence and the Gains from Trade”
Chapter 9 “Application: International Trade”
Pages 728-730 “Trade Policy”


Jan. 31

Smoot, Hawley and Pelosi

The proposed stimulus package contains a provision that would prevent infrastructure projects from using foreign steel.

Textbook References:

Chapter 3 “Interdependence and the Gains from Trade”
Chapter 9 “Application: International Trade”
Pages 728-730 “Trade Policy”


Jan. 4

The Protectionist Threat

Mankiw warns against the possibility of protectionism in the stimulus package.

Textbook References:

Chapter 3 “Interdependence and the Gains from Trade”
Chapter 9 “Application: International Trade”
Pages 728-730 “Trade Policy”


Feb. 10

Tit for Tat

Canadian unions join the chorus for economic nationalism.

Textbook References:

Page 8 “Principle 5: Trade Can Make Everyone Better Off”
Chapter 3 “Interdependence and the Gains from Trade”
Chapter 9 “Application: International Trade”
Pages 728-730 “Trade Policy”