ECONOMICS OF EUROPEAN INTEGRATION AND ECONOMIC INTEGRATION AND STRUCTURAL REFORMS

Program

Updated A.Y. 2018-2019

 

 

Master of Science in European Economy & Business Law

Economics of European Integration & Economic Integration and Structural Reforms

 

Academic Year 2018-2019

 

Lecturers: Prof. Barbara Annicchiarico (Parts 1 and 2) and Prof. Alessandra Pelloni (Part 3).

E-mail addresses: barbara.annicchiarico@uniroma2.it and alessandra.pelloni@uniroma2.it

E-mail policy: See here

Office Hour: We haven't an open-door policy. Please respect our office hours. Check here or here.

Credits - CFU: 12

Syllabus Updates and Material: Students are advised to regularly check for syllabus updates. Handouts and presentations will be available in due course.

Description of the Course

The course introduces students to the economics analysis of European integration and structural reforms. The course will cover economic concepts, models and tools developed in the field of international economics and macroeconomics that are particularly suited to provide students with a better understanding the of the process of European integration and the structural reforms.

Prerequisites

Students are expected to be familiar with basic microeconomic and macroeconomic concepts and models. A quantitative background is not strictly required, but students will benefit from knowledge of mathematics and statistics. The course is held in English

Learning Objectives

  • Knowledge and Understanding: In-depth understanding of the monetary integration process, the fiscal rules, the economic implications of the rules and treaties governing the economic functioning of the European Union and of the related implications for the conduct of monetary and fiscal policies (euro crisis, fiscal compact, austerity). Deep understanding of the economic integration process on growth, spatial allocation of economic activity, cohesion and convergence. Knowledge of the role played by reforms on product and labor markets, of the importance of R&D activity and of human capital accumulation as engines of growth; understanding of the common agricultural policy; understanding and critical evaluation of the objectives of Europe 2020 economic strategy.

  • Applying Knowledge and Understanding: To give students familiarity with a broad range of European policy issues; to ensure a good knowledge of the economic grounding of European economic integration; to show students the usefulness of simple analytical models in understanding the relevant aspects of European integration and to give them the ability to apply these analytical tools intelligently. What is learned can be applied to other situations and to actual work in the context of European Institutions and/or National and local public administrations subject to European directives and regulations.

  • Making Judgements: What is learned can be used to assess critically and without prejudices the activity and the decisions of national and European policy makers.

  • Communication Skills: Be able to rigorously present facts and complex mechanisms; learn how to present complex facts in a comprehensive manner and communicate the relative conclusions, knowledge and rationale to specialists and non-specialized audiences.

  • Learning Skills: The course aims at providing students with the tools necessary for future learning. At the end of the course students are expected to be able to read and understand official documents, scientific articles and databases. Students are also expected to be develop autonomous learning abilities.

  • Soft Skills: Special attention will be given to help students develop their soft skills, such as flexibility, integrity and work ethic, positive attitude, responsibility, teamwork and interpersonal skills. It is expected that students work on their own to develop a sound understanding of the material through lecture notes, readings, and assignments. Yet, interaction among students is strongly recommended when revising the course material and when sharing information. A cooperative atmosphere improves achievement.

Exams

Written examination on all program. See Exam Rules for details. A specimen exam paper will be available soon.

Pre-exam: All EEBL and Erasmus students are eligible to take the pre-exam. This pre-exam is scheduled for December 18th at 9:00. . See Exam Rules for details.

 

Grading Policy

Please note that a grade of 30/30 represents achievement that is outstanding relative to the level necessary to meet course requirements (students must show an excellent knowledge of the subject, all written work must be well written, competent and accurate; sloppiness of any kind will prevent a student from getting 30/30 as final grade, no matter if the student feels she/he is well prepared). Bargaining on grading is not allowed. Notice that grading is based on performance rather than effort. If you are not happy with the grade, just improve the performance. It is not possible to submit extra work in the attempt to improve a grade. 

Zero tolerance policy regarding academic dishonesty

Academic dishonesty includes cheating on exams, plagiarism, improper citation, recycled work, unauthorized assistance, or similar actions. Assignments and projects are specific to individual courses; presenting the same work in two different courses (including previous courses) is considered recycling and is unacceptable.

Students who commit an act of academic dishonesty will receive a failing grade. See also the Exam Rules.

Attedance and Behavior

  • Attendance is not mandatory, but highly recommended. Attending students are typically able to reap more benefits from the course and more easily meet the learning objectives.

  • Punctuality is mandatory.

  • Students must arrive in class on time and must not leave before the end of the class without a specific reason. It is the responsibility of the student to catch up on any missed work. Correct, active and responsible participation is insisted on. Proper behavior and dress code must be observed in class.

  • Classrooms are to be left in order and clean. Drinking/eating during class is allowed. Electronic devices (cell phones, tablets, laptop computers, etc.) must be switched off during class, unless otherwise instructed.

 


 

Syllabus

Last update:  23rd November 2018



 

IMPORTANT: This syllabus will be subject to changes and updates during the semester. The final reading list for each topic will be available step by step. In this way we'll be able to tailor the contents of this course to students' needs, interests and background. Please check this syllabus on a regular basis for any updates.



 

Please notice that

  • Starred (*) readings are required

  • Other readings are optional and are provided for your interest and benefit.



 

PART 1: The Microeconomic Aspects of European Integration and EU Micro Policies

1. Basic Tools

  • Logarithms

  • Derivative w.r.t. time

  • Some derivative rules

  • Growth Rates

  • First-order differential equations

  • First-order difference equations

  • Adaptive expectations

  • Rational expectation hypothesis

Final Readings

  • Any text on basic maths for economists is fine or Appendix A in JV-2013

  • *Handout #0

  • For expectations: see *Handout#1* (Only Sections 1*, 2*, 4* (introduction + 4.3* )

2. Hystory, Facts and Institutions

Please review this material - it will not be covered in class.

Final Readings

3. The Microeconomics of Economic Integration & The Economics of Preferential Trade Agreement

Final Readings

  • Basic microeconomic tools

  • Economics of preferential liberalization

Final Readings

4. The Single Market: The Essential Economics

  • Market size and scale effects

  • Growth effects and factor market integration - An analysis using the neoclassical growth model

  • Labour markets and migration

  • The EU Single Market

Final Readings

  • *BW-2015: chapter 6-8

  • *JV-2013: chapter 2

  • *Handout 2

  • Handout 3

  • *20 Years of the European Single Market, available here

  • *Presentation #2 (2A, 2B, 2C)

  • *What benefits from completing the Single Market?, available here

  • *The EU single market: How it works and the benefits it offers, available here

  • Allen, C., Gasiorek, M. and Smith, A. (1998), European Single Market: How the programme has fostered competition, Economic Policy, 441-486.

  • Badinger, H., (2005). Growth Effects of Economic Integration: Evidence from the EU Member States, Review of World Economics (Weltwirtschaftliches Archiv), 41(1),50-78.

  • Badinger, H., (2007). Has the EU's Single Market Programme Fostered Competition? Testing for a Decrease in Mark-up Ratios in EU Industries, Oxford Bulletin of Economics and Statistics, 69(4), 497-519.

  • Baldwin, R. E. & Forslid, R., (2000),. Trade liberalisation and endogenous growth: A q-theory approach, Journal of International Economics, 50(2), 497-517, .

  • Clemente, J., Pueyo, F., Sanz, F., (2009), Market potential, European Union and growth, Journal of Policy Modeling, 31(5), 719-730.

  • Vanhoudt, P. (1999), Did the European unification induce economic growth? In search of scale effect and persistent changes Weltwirtschaftliches Archiv, 135 , 193--220

  • Videos

  • Links

5. The Single Market

  • Location Theories

    • A workhorse tool for NEG and competition analysis in macro: the Dixit-Stiglitz Model

    • Agglomeration and dispersion forces

    • A simple footloose capital (FC) model

    • Labour market pooling

    • History v. Expectations

  • Cohesion Policies

Final Readings

  • *BW-2015: chapter 10

  • *K-1991, pp. 29-33 (section: History versus Expectations, chapter 1), pp. 38-49 (section: Labor Market Pooling, chapter 2), *Appendixes B & C.

  • *Handouts 4-5  

  • Handouts 6-8

  • *Presentations #3A, 3B and 4

  • *Indermit Gill (2010) * Regional development policies: Place-based or people-centred? VoxEU.org, 9 October

  • *Brülhart, Marius (2009) I s the new economic geography passé? VoxEU.org, 7 January.

  • *World Bank (2008), World Development Report 2009: Reshaping Economic Geography, Washington, DC, chapter 4, "A guide to scale economies" (pp. 129- 140)

  • Neary, J. Peter, (2001), "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.

  • Krugman, Paul, (1991), "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.

  • Krugman, Paul, (1991), "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.

  • GT-2013, chapter 16.

  • Baldwin, Richard E. & Venables, Anthony J., (1995). "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644.

  • Baldwin, Richard E. & Krugman, Paul, (2004),. "Agglomeration, integration and tax harmonisation," European Economic Review, Elsevier, vol. 48(1), pages 1-23, February.

  • Dixit, A.K., Stiglitz, J.E., (1977) Monopolistic competition and optimum product diversity. American Economic Review 67 (3), 297--308.

  • Trionfetti, Federico (2001), "Public Procurement, Market Integration, and Income Inequalities," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 29-41, February.

  • Annicchiarico, Barbara, Orioli, Federica & Trionfetti, Federico (2012), "National Oligopolies and Economic Geography", The Annals of Regional Science , 48(1), 2012.

6. The Common Agricultural Policy and the EU Budget

  • The functioning of the CAP

  • CAP reform

  • Today's CAP

  • The EU budget

Final Readings

  • *BW-2015: chapter 9 + *The effects of an export subsidy here

  • *Presentations 5-6

  • European Commission (2013), Overview of the CAP Reform 2014-2020

  • *Have a look at the website: *CAP at a glance (with keywords!) here and *Recent trends here

  • *Myths and Facts of the EU Budget here

  • *The EU budget here

PART 2: The Macroeconomic Aspects of Monetary Integration and Structural Reforms

7. Basic Macroeconomic Tools

  • Rational bubbles

  • Money demand and money supply

    • A Very Short-Intro on Monetary Policy

    • Goals, targets and instruments of monetary policy

    • Interest rate rules, monetary targeting, inflation targeting

    • Monetary policy transmission mechanism

  • Open Economy Aspects

    • Interest rate parity

    • PPP

    • The impossible trinity

    • Marshall-Lerner Condition

Final Readings

  • Rational bubbles

    • *Presentation #7

    • Handout #9

    • Olivier J. Blanchard, Mark W. Watson (1983). Bubbles, Rational Expectations and Financial Markets NBER Working Paper No. 945

  • Money demand and money supply

  • Open Economy Aspects

    • *BW-2015: chapter 13

    • *Presentation #9

    • *Handout #10

    • Kenneth Rogoff (1996) The Purchasing Power Parity Puzzle, Journal of Economic Literature, Vol. 34, No. 2. pp. 647-668.

    • Maurice Obstfeld, Jay C. Shambaugh & Alan M. Taylor (2005). "The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility" in The Review of Economics and Statistics, Vol. 87, No. 3, pp. 423--438.

8. Exchange Rates Determinants and the Euro/Dollar Exchange Rate

  • Flexible-price monetary model

  • The Euro/Dollar exchange rate

Final Readings

9. Macroeconomics of Monetary Integration

 

Final Readings

  • *BW-2015: chapter 14 

  • *BW-2015: chapter 15

  • *Maurice Obstfeld (1996) Models of Currency Crises with Self-Fulfilling Features, European Economic Review, vol. 40, pp. 1037-1047, ONLY sections 1*, 2*

  • *Paul Krugman (2012) "The revenge of optimum currency area", Chapter in NBER book NBER Macroeconomics Annual 2012, Volume 27 (2013).

  • Kenen, P. (1969) "The Theory of Optimum Currency Areas: An Eclectic View" in R.Mundell and A. Swoboda eds, Monetary Problems of the International Economy, The University of Chicago Press.

  • Mundell, R. (1961) A theory of Optimum Currency Areas, American Economic Review, 51 (4).

  • Presentation 12

10. European Monetary Union

Final Readings

  • *Presentation #13

  • *BW-2015: chapter 16

  • *ECB website contents (see the links in The functioning of the Eurosystem). 

  • *DG-2014: chapter 7 (from section 7.1 to section 7.4 +BOX 7.1) 

 

11. Fiscal Policy

  • The Government Budget Constraint

  • Fiscal and monetary policy interactions

  • Fiscal policy in a monetary union

  • Fiscal policy externalities

  • Stability and Growth Pact

  • Fiscal Compact

Final Readings

  • *BW-2015: chapter 17

  • *DG-2014: chapter 10

  • Handout #13

  • *Handout #14 (only the first equation and the discussion on the stability condition)

  • *Presentation #14

  • *Presentation #15

  • ECB on the Fiscal Compact see here

  • *Barry Eichengreen & Charles Wyplosz, 1998. "The Stability Pact: more than a minor nuisance?," Economic Policy, CEPR & CES & MSH, vol. 13(26), pages 65-113, 04.

  • Thomas J. Sargent & Neil Wallace (1981) Some Unpleasant Monetarist Arithmetic, Federal Reserve Bank of Minneapolis Quarterly Review vol. 5, no 3.

  • Buiter, W.H. & Corsetti, G. & Roubini, N., 1992. Excessive Deficits: Sense and Nonsence in the Treaty of Maastricht, available here.

  • Eric Leeper (1993) The Policy Tango: Toward a Holistic View of Monetary and Fiscal Effects, Atlanta Fed Economic Review.

  • M. Wickens (2008), Macroeconomic Theory, Princenton University Press, chapter 5.

12. Eurozone Crisis

  • The subprimes follies and the great recession

  • Sovreign Debt Crisis 

  • Managing the Crisis and the EMS

  • Conditions for the survival of the Euro

  • Lessons from the crisis: Towards a new governance

  • Black swan scenarios

Final Readings 

  • *Presentation #16

  • *Presentations #17A and Presentation #17B

  • *BW-2015: chapter 19

  • *Barry Eichengreen (2010), The Breakup of the Euro Area, in Europe and the Euro (A. Alesina and F. Giavazzi, editors), The University of Chicago Press.

  • Barry Eichengreen (2008), Sui generis EMU, European Economy, Economic Papers 303, February 2008.

  • Charles Wyplosz, (2006). "European Monetary Union: the dark sides of a major success," Economic Policy, CEPR & CES & MSH, vol. 21(46), pages 207-261, 04

  • Paul De Grauwe, Yuemei Ji, Fiscal implications of the ECB's bond-buying programme, 14 June 2013, VoxEU.

13. Structural Reforms

  • Product market

  • Labour market and human capital

  • Structural reforms and austerity

Final Readings

  • *Handout 15* 

  • *Handout 16*

  • *Presentation 18*

  • Presentation 19 

  • *De Mello, L., & Padoan, P. C. (2010). Promoting Potential Growth. OECD WP no. 793.

  • *Padoan P.C, & van der Noord P. (2012) Is Austerity Going Too Far? Structural Reforms and The Debt Trap, chapter 8 of this book

  • AN-2005: chapters 8 and 9 

  • BW-2015: chapter 11

  • BCFG-2006: chapters 2, 6

14. Europe 2020 Reform Strategy

Final Readings

PART 3: GROWTH

 

15. The engine of growth   

 

 

 

 

  • The Facts of Economic Growth

  • The Solow Model and its Empirical Appications

  • The Economics of Ideas

  • The Romer Model

Preliminary Readings

- Charles Jones and Dietrich Vollrath, Introduction to Economic Growth, Norton 3rd Edition, Chapters 1*, 2*, 3*, and 4*.

Books

  • AH-2009: Aghion, P., and P. Howitt (2009), The Economics of Growth, MIT Press.

  • AN-2005: Altomonte, Carlo and Nava, Mario (2006), Economics and Policies of an Enlarged Europe, Edward Elgar.

  • BAG-2013: Blanchard, O., Amighini A., Giavazzi F., (2015), Macroeconomics, A European Perspective,2nd edition, Pearson.

  • BW-2015: Baldwin, Richard and Wyplosz, Charles (2015), The Economics of European Integration, 5th edition, McGraw Hill. This book represents an ESSENTIAL READING for this course.

  • BSiM-2004: Barro, R.J., and Sala-i-Martin, X. (2004), Economic Growth, MIT Press.

  • BCFG-2006: Boeri, Tito,Castanheira, Micael, Faini, Riccardo and Galasso,Vincenzo, (2006), Structural Reforms without Prejudices, Oxford University Press.

  • DG-2014: De Grauwe Paul (2012), The Economics of Monetary Union, 10th edition, Oxford University Press.

  • JV-2013 Jones, C.I and Vollrath, D.. (2013), Introduction to Economic Growth, W. W. Norton & Company.

  • K-1991 Krugman Paul (1991), Geography and Trade, MIT Press. 

  • Romer2011: Romer David (2011) Advanced Macroeconomics, The Mcgraw-Hill Series in Economics.