FINAN 6420 - Emerging Markets (EM) in Today's Global Context

Motivation: Master students entering the job market in the next few years will do so at an exceptionally unusual time. Global growth is slowing and the world is more financially connected than ever. Volatility and credit spreads have been artificially suppressed by unprecedented easing by Developed Market central banks (earlier, US Fed, now Bank of Japan and European Central Bank). But eventually, such stimulus will either need to be withdrawn, as exemplified by the Fed taper followed by anticipations of rate hikes this year, or risk new bubbles, generating considerable uncertainty. Goal: To equip students with analytics for understanding EM growth and macroeconomic fundamentals as well as vulnerability and country risk. Students will be exposed to issues such as: assessing whether the government's debt is on a sustainable course; assessing a country's external vulnerability as defined by its own fundamentals in interaction with DM monetary policy; and broader sources of risk. Both economic tools (for example, Solow growth model, public debt dynamics) and financial tools (for example, assessing foreign exchange reserve adequacy, using market signals to gauge default risk) will be presented. The context will be defined by EM experience over the last 25 years, incorporating the transition to a market economy in Central and Eastern Europe, the EM crises from 1997-2001 (starting with East Asia in 1997 and then going on to envelope Russia, Brazil, Argentina and Turkey), the EM response in the run up to the global financial crisis of 2008-09 (GFC), and the impact on EMs of "unconventional" DM monetary policy after the GFC. Prominent country examples will be used to illustrate the analytical tools. Course material: The instructor will draw upon various contemporary readings, including IMF country reports and articles on cutting edge topics such as the 2014 VoxEU volume on secular stagnation and the 2014 Geneva Report on deleveraging. He will also use the material on EMs in a recent book, "How Does My Country Grow? Economic Advice Through Story-telling", which presents a compendium of analytical tools aimed at acquiring a solid practical understanding of EM country growth and macroeconomic fundamentals.* This will be supplemented by lectures focused on understanding the implications for EMs of compelling topics in vogue after the global financial crisis of 2008-09, such as: Taper Tantrum; secular stagnation; on-going deleveraging or lack thereof in DMs and EMs; the Chinese growth slowdown and its global implications; and sovereign debt restructuring and the Greek and Eurozone periphery crises.