SEMESTER AT SEA COURSE SYLLABUS

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1 SEMESTER AT SEA COURSE SYLLABUS Voyage: Summer 2014 Discipline: Economics SEMS : Economics of the European Union Division: Upper Faculty Name: John A. James Pre-requisites: Principles of Economics, ECON 2010 and 2020 COURSE DESCRIPTION This course studies the history and evolution of European economic integration and the European Union. The first part of the course examines the real side, the institutions of the EU, their structure and what they do, with particular reference to the integration and regulation of product and factor markets. The second focuses on the monetary and financial side, the theory behind monetary unions or common currency areas, with application to the euro. The third considers the nature of the relationship between individual member states or closely-affiliated nonmembers and the EU as a whole. COURSE OBJECTIVES The objective of the course is to study how the European Union affects economic activity, stability, and growth among its member states. To this end, there is a element of political economy, examining the structure of EU institutions and what they do. Particular attention will be given to money/macro issues, the implementation and implications of a common currency. Finally, in addition to an examination of the EU as a whole, relationships between specific countries and the EU will be examined. REQUIRED TEXTBOOKS AUTHOR: Larry Neal TITLE: The Economics of Europe and the European Union PUBLISHER: Cambridge University Press ISBN #: DATE/EDITION: 2007 TOPICAL OUTLINE OF COURSE June 16: Depart Southampton June 17: Orientation C1-June 18: Evolution of Legal and Institutional Framework I History of European economic integration 1

2 C2- June 19: Evolution of Legal and Institutional Framework II History of European economic integration (continued) Institutions of the EU C3- June 20: Evolution of Legal and Institutional Framework III Institutions and budget of the EU (continued) June 21-24: Lisbon C4- June 25: Market Integration I Customs unions C5- June 26: Market Integration II Product and factor markets June 27-30: Bilbao C6- July 1: Market Integration III Product and factor markets (continued) C7- July 2: Market Integration IV Common agricultural and regional policy C8- July 3: Review of Open Economy Macro July 4-7: Glasgow C9- July 8: Monetary Integration in Theory and History I Costs of a common currency C10-July 9: Monetary Integration in Theory and History II Benefits of a common currency July 10-13: Dublin C11- July 14: Monetary Integration in Theory and History III Comparing costs and benefits C12- July 15: Monetary Integration in Theory and History IV Is the EU an optimum currency area and does it matter? C13- July 16: EXAM July 17-20: Bergen and Oslo 2

3 C14- July 21: Monetary Integration in Theory and History V Historical experience with common currencies C15- July 23: Monetary Integration in Theory and History IV Historical experience with common currencies (continued) The Euro, Monetary Integration in Practice I The Maastricht Treaty July 24-28: St. Petersburg C16- July 29: The Euro, Monetary Integration in Practice II European Monetary System C17- July 30: The Euro, Monetary Integration in Practice III Transition to monetary union and the euro July 31- August 3: Stockholm C18- August 4: The Euro, Monetary Integration in Practice IV The European Central Bank The Current Financial Crisis and Prospects for the Euro I C19- August 5: The Current Financial Crisis and Prospects for the Euro II August 6-9: Helsinki C20- August 10: The Current Financial Crisis and Prospects for the Euro III C21- August 11: The Economies of Europe- Country presentations I August 12-15: Gdansk C22- August 16: The Economies of Europe- Country presentations II C23- August 17: The Economies of Europe- Country presentations III C24- August 19: Final Exams Syllabus Starred (*) readings are optional but could be useful. I. Evolution of the legal and institutional framework and expansion A. History of European economic integration Neal, Ch. 2. 3

4 Elizabeth Pond, The Rebirth of Europe, 2 nd ed., 2002, Chs 1,2. B. EU institutions Neal, Ch. 1. Institutions of the European Union, John McCormack, Understanding the European Union, Ch. 4. Martin Dedman, The Origins and Development of the European Union, Ch. 9. *Alberto Alesina, Ignazio Angeloni, and Ludger Schuknecht, What Does the European Union Do?, NBER Working Paper No. 8647, December II. Market integration A. Customs unions Neal, Ch 3. B. Product and factor markets Neal, Chs. 7, 8, 9. *Barry Eichengreen and Andrea Boltho, The Economic Impact of European Integration, pp C. Policy Agriculture Neal, Ch. 4. Common Agricultural Policy Explained, Regional Neal, Ch. 10. Regional Policy, Other *Dick Leonard, Guide to the European Union, Chs III. Review of open economy macro *Blanchard, Macroeconomics, Ch. 20. IV. Monetary integration in theory and history A. Costs and benefits of common currencies Robert Mundell, A Theory of Optimum Currency Areas, American Economic Review, 1961, pp *Ron McKinnon, Optimum Currency Areas, American Economic Review, 1963, pp B. Is the EU an optimum currency area? Barry Eichengreen, One Money for Europe? Lessons from the U.S. Currency 4

5 Union, Economic Policy, 1990, pp Barry Eichengreen, Is Europe an Optimum Currency Area?, in Silvio Borner and Herbert Grubel, eds., The European Community after 1992, 1992, pp *Paul Krugman, Lessons of Massachusetts for EMU, in Francisco Torres and Francesco Giavazzi, eds.,adjustment and Growth in the European Monetary Union, Pp C. Does it matter? Andrew Rose, One Money, One Market: The Effect of Common Currencies on Trade, Economic Policy, April 2000, pp *Marc Flandreau and Mathilde Maurel, Monetary Union, Trade Integration, and Business Cycles in 19 th Century Europe: Just Do It, CEPR Discussion Paper No. 3087, November D. Historical experience with common currencies and the gold standard Michael Bordo and Harold James, A Long Term Perspective on the Euro, NBER Working Paper *Michael Bordo and Lars Jonung, The Future of EMU: What Does the History of Monetary Unions Tell Us?, in Forrest Capie and Geoffrey Wood, eds, Monetary Unions, Pp *Art Rolnick, Bruce Smith, and Warren Weber, The Origins of the Monetary Union in the United States, in P. Siklos, ed., Varieties of Monetary Reforms: Lessons and Experiences on the Road to Monetary Union, Pp *Marc Flandreau, On the Inflationary Bias of Common Currencies: The Latin Union Puzzle, European Economic Review, 1993, pp *Barry Eichengreen, Deja Vu All Over Again: Lessons from the Gold Standard for European Monetary Unification, in Bayoumi, Eichengreen, and Taylor, eds., Modern Perspectives on the Gold Standard, 1996, pp *Marc Flandreau, Jacques Le Cacheux, and Frederic Zumer, Stability Without a Pact? Lessons from the European Gold Standard, , Economic Policy, 1998, pp V. The euro, monetary integration in practice A. The EMS Neal, Ch. 5. Elizabeth Pond, The Rebirth of Europe, 2 nd ed., 2002, Ch. 5. B. The euro Emmanuel Dhyne, et al, Price Changes in the Euro Area and the United States, Journal of Economic Perspectives, 2006, pp Philip Lane, The Real Effects of European Monetary Union, Journal of Economic Perspectives, 2006, pp Charles Wyplosz, European Monetary Union: the dark sides of a major success, Economic Policy, 2006, pp

6 Brian Ardy, et al, Adjusting to EMU, Ch. 12. *Barry Eichengreen and Andrea Boltho, The Economic Impact of European Integration, pp C. The European Central Bank Neal, Ch. 6 Kathryn Dominguez, The European Central Bank, the Euro, and Global Financial Markets, Journal of Economic Perspectives, 2006, pp David Marsh, The Euro, Ch. 7 VI. The current financial crisis and prospects for the euro Articles on Euro at ten, financial crisis Articles on Sovereign debt crisis- Greece, etc. Articles on Latvia Jean Pisani-Ferry and André Sapir, Banking Crisis Management in the EU: an early assessment, Economic Policy, 2010, pp Barry Eichengreen, The Crisis and the Euro. David Marsh, The Euro, Ch. 8. Martin Feldstein, The Political Economy of the European Economic and Monetary Union: Political Sources of an Economic Liability, Journal of Economic Perspectives, Fall 1997, pp Barry Eichengreen, The Breakup of the Euro Area, NBER Working Paper 13393, September Articles on Future of the Euro *Alberto Alesina, Enrico Spolare, and Romain Wacziarg, Economic Integration and Political Disintegration, American Economic Review, December 2000, pp VII. The economies of Europe Neal, Ch. 11. *Barry Eichengreen and Pablo Vazquez, Institutions and Economic Growth in Postwar Europe. *Germany Neal, Ch. 12. *France Neal, Ch. 13. *UK Neal, Ch. 14. *Italy Neal, Ch. 15. *Benelux Neal, Ch. 16. *Spain Neal, Ch. 18. *Ireland Neal, Ch. 18. *Denmark Neal, Ch. 17. *Sweden & Finland Neal, Ch. 17. *Other latecomers Greece, Portugal Neal, Ch. 18. *Austria Neal, Ch. 16. *Czech Republic, Hungary, Slovakia Neal, Ch

7 *Other newcomers Neal, Ch. 19. *Bulgaria & Romania Neal, Ch.20. *Turkey Neal, Ch. 20. Assignments The course grade will be determined as follows: Field lab 20% Mid-term exam 15% Presentation 30% Final exam 30% Class participation 5% 100% Field lab (see below) involves a paper on the opportunities for autonomy and independence which the EU might offer to smaller regions and how such relationships with the EU might work, based on the Scottish case. Presentation focuses on a specific country oral presentation in class of about 15 minutes on country to be determined at the beginning of the voyage its economic condition; costs and benefits of EU membership to it; recent experience in the financial crisis, particularly with regard to its place in the EU. If there are more than 12 to 15 in the class, they will have to be group efforts. FIELD WORK Field lab attendance is mandatory for all students enrolled in this course. Please do not book individual travel plans or a Semester at Sea sponsored trip on the day of our field lab. FIELD LAB The field lab would focus on the degree to which EU activities in economic, foreign, and military policy might encourage/allow the development of greater intra-nation autonomy or complete independence for smaller states/regions. Scotland is the case study here, and we shall examine the relationship between the Scottish independence movement (vote coming up in September 2014) and the EU. The day would involve a trip to Edinburgh where we would take a guided tour of the Scottish parliament and meet with two people (to be named later) active in the Scottish independence movement. They would talk on the role the EU might play in promoting independence (implicitly) and how the relationship between the EU and an independent Scotland might evolve. After that there would be a question period. Each meeting would last about an hour or so. 7

8 I don t really have a good second alternative. If need be, I might be able to do something sort of similar in Stockholm since Sweden has had a rather arm s length relationship with the EU (and the euro). I know an economic history professor there who has had some ties to the government and might be able to point me toward some relevant people. FIELD ASSIGNMENTS Based on the talks/discussions in Edinburgh I would have the students write a short paper on the role the EU might play in promoting or discouraging an independent Scotland-- does the EU make smaller European states more viable? 5% of the 20% field lab grade will be assessed on participation in the field lab paying attention, asking questions, in particular asking intelligent questions. METHODS OF EVALUATION / GRADING RUBRIC The distribution of total points is given under Assignments (above). Class participation appears in two spots. One is part of the Field Lab grade (5% out of 20%) do the students pay attention to the speakers, do they ask questions, are they thoughtful and intelligent questions? The same criteria apply to the degree to which they are engaged during the student oral presentations. If the presentations turn out to be group projects because of the size of the class, one element in the grade would be a self-assessment by each member of the group of the contributions of the other members (to differentiate). RESERVE LIBRARY LIST (1) AUTHOR: Mike Artis and Norman Lee TITLE: The Economics of the European Union: Policy and Analysis PUBLISHER: Oxford University Press ISBN #: DATE/EDITION: 2007, 4 th ed. (2) AUTHOR: Simon Bulmer and Christian Lequesne TITLE: The Member States of the European Union PUBLISHER: Oxford University Press ISBN #: DATE/EDITION: 2013, 2nd ed. (3) AUTHOR: David Marsh TITLE: The Euro PUBLISHER: Yale University Press ISBN #: DATE/EDITION: 2009 (4) 8

9 AUTHOR: Elizabeth Pond TITLE: The Rebirth of Europe PUBLISHER: Brookings Institution Press ISBN #: DATE/EDITION: 2002, 2 nd ed. (5) AUTHOR: John Peterson and Michael Shackleton TITLE: The Institutions of the European Union PUBLISHER: Oxford University Press ISBN #: DATE/EDITION: 2012, 3rd ed. (6) AUTHOR: Dick Leonard TITLE: The Economist Guide to the European Union PUBLISHER: Wiley ISBN #: DATE/EDITION: 2010 [A new edition of this may be coming out soon since it s half price right now on The Economist website] (7) AUTHOR: Elizabeth Bomberg, John Peterson, and Richard Corbett TITLE: The European Union: How Does It Work? PUBLISHER: Oxford University Press ISBN #: DATE/EDITION: 2012, 3rd ed. (8) AUTHOR: Erik Jones, Anand Menon, Stephen Weatherill, eds. TITLE: The Oxford Handbook of the European Union PUBLISHER: Oxford University Press ISBN #: DATE/EDITION: 2012 (9) AUTHOR: Olivier Blanchard TITLE: Macroeconomics PUBLISHER: Prentice Hall ISBN #: DATE/EDITION: 2011 is the most recent, but this doesn t have to be the newest (or new either) ELECTRONIC COURSE MATERIALS AUTHOR: Robert Mundell ARTICLE/CHAPTER TITLE: A Theory of Optimum Currency Areas JOURNAL/BOOK TITLE: American Economic Review DATE:

10 PAGES: AUTHOR: Barry Eichengreen ARTICLE/CHAPTER TITLE: One Money for Europe? Lessons from the U.S. Currency Union JOURNAL/BOOK TITLE: Economic Policy DATE: 1990 PAGES: AUTHOR: Barry Eichengreen ARTICLE/CHAPTER TITLE: Is Europe an Optimum Currency Area? JOURNAL/BOOK TITLE: Silvio Borner and Herbert Grubel, eds., The European Community after 1992 DATE: 1992 PAGES: AUTHOR: Andrew Rose ARTICLE/CHAPTER TITLE: One Money, One Market: The Effect of Common Currencies on Trade JOURNAL/BOOK TITLE: Economic Policy DATE: 2000 PAGES: 9-45 AUTHOR: Michael Bordo and Harold James ARTICLE/CHAPTER TITLE: A Long Term Perspective on the Euro JOURNAL/BOOK TITLE: NBER Working Paper DATE: PAGES: AUTHOR: Emmanuel Dhyne, et al ARTICLE/CHAPTER TITLE: Price Changes in the Euro Area and the United States JOURNAL/BOOK TITLE: Journal of Economic Perspectives DATE: 2006 PAGES: \ AUTHOR: Philip Lane ARTICLE/CHAPTER TITLE: The Real Effects of European Monetary Union JOURNAL/BOOK TITLE: Journal of Economic Perspectives DATE: 2006 PAGES:

11 AUTHOR: Charles Wyplosz ARTICLE/CHAPTER TITLE: European Monetary Union: the dark sides of a major success JOURNAL/BOOK TITLE: Economic Policy DATE: 2006 PAGES: AUTHOR: Michael Mussa ARTICLE/CHAPTER TITLE: The Euro versus the Dollar: Not a Zero Sum Game JOURNAL/BOOK TITLE: Journal of Policy Modeling DATE: 2002 PAGES: AUTHOR: Kathryn Dominguez ARTICLE/CHAPTER TITLE: The European Central Bank, the Euro, and Global Financial Markets JOURNAL/BOOK TITLE: Journal of Economic Perspectives DATE: 2006 PAGES: AUTHOR: Jean Pisani-Ferry and André Sapir ARTICLE/CHAPTER TITLE: Banking Crisis Management in the EU: an early assessment JOURNAL/BOOK TITLE: Economic Policy DATE: 2010 PAGES: AUTHOR: Martin Feldstein ARTICLE/CHAPTER TITLE: The Political Economy of the European Economic and Monetary Union: Political Sources of an Economic Liability JOURNAL/BOOK TITLE: Journal of Economic Perspectives DATE: 1997 PAGES: AUTHOR: Barry Eichengreen ARTICLE/CHAPTER TITLE: The Breakup of the Euro Area JOURNAL/BOOK TITLE: NBER Working Paper DATE: PAGES: AUTHOR: John McCormack 11

12 ARTICLE/CHAPTER TITLE: The European Institutions JOURNAL/BOOK TITLE: Understanding the European Union DATE: PAGES: Ch. 4 AUTHOR: Martin Dedman ARTICLE/CHAPTER TITLE: EU Treaty Change and EU External Relations JOURNAL/BOOK TITLE: The Origins and Development of the European Union DATE: 2006 PAGES: Ch. 9 AUTHOR: Brian Ardy ARTICLE/CHAPTER TITLE: The New Members or Slow Transition to Stage 3? JOURNAL/BOOK TITLE: Adjusting to EMU DATE: 2006 PAGES: Ch. 12. ADDITIONAL RESOURCES Institutions of the European Union, Common Agricultural Policy Explained, Regional Policy, Or else I could simply print out these pages and bring them with me. I ll provide the following pdf files: Articles on Euro at ten, financial crisis Articles on Sovereign debt crisis- Greece, etc Articles on Latvia Articles on Future of the Euro It would be great if the students could have reasonable access to several websites: European Central Bank statistics: European Central Bank homepage: EU homepage: europa.eu Other links to central banks, government statistics: 12

13 HONOR CODE Semester at Sea students enroll in an academic program administered by the University of Virginia, and thus bind themselves to the University s honor code. The code prohibits all acts of lying, cheating, and stealing. Please consult the Voyager s Handbook for further explanation of what constitutes an honor offense. Each written assignment for this course must be pledged by the student as follows: On my honor as a student, I pledge that I have neither given nor received aid on this assignment. The pledge must be signed, or, in the case of an electronic file, signed [signed]. 13