15.218: Global Economic Challenges and Opportunities
Offered Spring Semester
This course provides in-depth analyses of the major risks and opportunities in the global economy. It discusses the key economic forces and policy responses that will shape the business environment in the next decade and for which every organization should prepare. The course not only analyzes global economic issues currently in the headlines, but also develops the tools to understand and interpret these events. The objective is to provide students with the context and frameworks to be able to perform their own critical analyses, so that they can plan for and respond to the inevitable surprises in the global economy that will affect them in their future careers.
The course focuses on economic forces and events that affect and link multiple countries around the world. The first section develops the basic models, tools and frameworks in the context of recent financial crises. This initial material provides the background to interpret and understand key macroeconomic and international financial statistics. These frameworks and models will then provide the core for analyzing the impact of global economic events and policy responses. The second section of the course shifts to the policy options employed by different countries to address these challenges and risks, including more nuanced discussions of how governments, central banks, and other international institutions make decisions. These discussions will draw on Professor Forbes’ experiences working in the White House, US Treasury and Bank of England. The final section of the course shifts to major long-term global economic challenges and opportunities facing countries around the world today, building on the frameworks developed earlier for analyzing countries’ strengths, vulnerabilities, and policy options. These discussions provide insights on how macroeconomic policy decisions are made, and the role of various economic, political, historic and social forces. Most of these current challenges have no straightforward solutions, so this section will involve more debate and discussion. This section ends by discussing what comes next in the global economy, including what companies should be monitoring and doing to prepare.
E2.728: Monetary Policy, Currency Wars and the Repercussions for Emerging Markets
Offered Fall 2019, SIP
Overview: Central banks used to be “boring” institutions that quietly operated in the background. Today, announcements about monetary policy can cause sharp movements in financial markets and central bankers are accused of fighting “currency wars”. The US President even tweets responses to discussions at technical conferences on monetary policy. Bond yields in much of the world have also fallen below zero—i.e., negative yielding debt—such that banks and investors are being charged for their money and gold prices have spiked. At the same time, several countries that tried to raise interest rates to more normal levels have recently had to reverse course—including the US—with ramifications for economies around the world. This series of events is changing the landscape for companies, governments, investors, and consumers—especially when combined with higher tariffs and concerns about trade wars. This class will explore the drivers of recent changes in monetary policy, how this is raising concerns about “currency wars”, and what the repercussions are for emerging markets. More specifically, it covers five topics: (1) how central banks conduct monetary policy (including how it has changed since the crisis); (2) how changes in interest rates in the US will affect countries around the world, especially emerging markets; (3) what is meant by “currency wars” and why they can raise concerns (both legitimate and unfounded); (4) why different countries may choose to engage in “currency wars” instead of other responses; (5) how these risks interact with other recent events in the global economy (such as trade wars) and what this implies for the future.E2.728: Monetary Policy, Currency Wars and the Repercussions for Emerging Markets.
E2.728: Can the World Withstand a More “Normal” US Monetary Policy?
Offered Fall 2018, SIP
After years of very low interest rates and “unconventional” monetary policy, the US is leading the world in raising interest rates and returning to a more “normal” monetary policy. This is increasing risks for emerging markets and companies around the world—especially when combined with increased tariffs and concerns about trade wars, as well as higher oil prices. Is this just the beginning of more widespread stress in markets around the world? Should we expect more widespread financial contagion? More specifically, the class will cover five topics: (1) a quick review of how central banks conduct monetary policy (including how it has changed since the crisis); (2) how higher interest rates in the US will affect countries around the world, including how to evaluate which emerging markets are most vulnerable; (3) how to predict how different emerging markets will respond—with implications for companies and investing around the world; (4) the risks of financial contagion from different countries and country responses; (5) how these risks interact with other recent events in the global economy (such as protectionism and oil prices).