(1) Discuss generally the origin and causes of the 1997-98 Asian (i.e, Thai, Indonesian, Malaysian, and Korean) crisis.

(2) Discuss the origin and causes of the 1998 Russian crises. (You can substitute a specific discussion of one of the following crises: the Thai, Indonesian, Malaysian, or Korean crisis.

Indicate and assess the roles that the International Monetary Fund and World Bank have had in the process of adjustment and reform? What policies can the country groups you chose and the international community adopt to resolve the debt crisis? Discuss.

When you discuss 1, be sure to discuss the following statement by the IMF, World Economic Outlook, May 1998:

"The economies of east [and southeast] Asia at the center of the recent crisis have been some of the most successful emerging market countries in terms of growth and gains in living standards. With generally prudent fiscal policies and high private saving rates, these countries had become a model for many others. That this region might become embroiled in one of the worst financial crises in the postwar period was hardly ever considered - within or outside the region - a realistic possibility. What went wrong? Part of the answer seems to be that these countries became victims of their own success. This success had led domestic and foreign investors to underestimate the countries' economic weaknesses. It had also, partly because of the large-scale financial inflows that it encouraged, increased the demands on policies and institutions, especially but not only in the financial sector; and policies and institutions had not kept pace. The fundamental policy shortcomings and their ramifications were fully revealed only as the crisis deepened. Past success may also have contributed to a tendency by policymakers to deny the need for action when problems first became apparent."

The question should be answered in no more than roughly 12 typewritten single-spaced pages (not counting graphs and tables, which are to be limited to no more than 3-4 extra pages). Be sure to cite sources (see next page).

Here is how you should cite sources, e.g. (Dornbusch, p. 27), (Conversation with Elizabeth Jones, September 30, 1998), (Lecture, September 16, 1998). For sources outside the readings, list as (Smith 1990: 36-38) for author, year, and pages in text; in the references (not to be included in the five single-spaced limit), include author, title, publishing information if book (city, publishing company, year, and pages, if relevant) or journal (name of journal, volume number, date, page numbers). See the American Economic Review for an example as to how to cite.

Write on 2 of the following questions:

1/ Indicate and discuss how changes in assumptions about international trade and migration affect the ratio of skilled to unskilled wages (the "skilled premium") during the past two decades.

2/ How has globalization increased social tensions? What policy measures can governments undertake to cope with these social tensions? Use economic analysis to discuss the subject.

3/ Milton Friedman wrote in 1950 that the leading economic powers "seem committed to a system of international payments based on exchange rates between their national currencies fixed by governments and maintained rigid except for occasional changes to new levels. . . . Whatever may have been the merits of this system for another day, it is ill suited to current economic and political conditions. These conditions make a system of flexible or floating exchange rates--exchange rates freely determined in an open market primarily by private dealings and, like other market prices, varying from day to day--absolutely essential for the fulfillment of our basic economic objective: the achievement and maintenance of a free and prosperous world community engaging in unrestricted multilateral trade. There is scarcely a facet of international economic policy for which the implicit acceptance of a system of rigid exchange rates does not create serious and unnecessary difficulties. . . . Liberalization of trade, avoidance of allocations and other direct controls both internal and external, harmonization of internal monetary and fiscal policies--all these problems take on a different cast and become far easier to solve in a world of flexible exchange rates and its corollary, free convertibility of currencies. The sooner a system of flexible exchange rates is established, the sooner unrestricted multilateral trade will become a real possibility. And it will become one without in any way interfering with the pursuit by each nation of domestic economic stability according to its own lights." Assess, evaluate, and discuss the relevance of Friedman's contention for international trade and finance today.

Questions for final take-home examination (a 200-point exam):

1/ Discuss the factors that have influenced or will be influencing the exchange rate of the US dollar vis-à-vis other major currencies in the year 2000. Indicate how (if at all) you can define what an equilibrium exchange rate is, and whether the exchange rate for the US dollar can be considered an equilibrium exchange rate.

In addition, discuss the factors that have influenced or will be influencing the exchange rate of a developing country vis-à-vis the U.S. dollar in the year 2000. Indicate how (if at all) you can define what an equilibrium exchange rate is for this developing country, and whether the exchange rate for this developing country's currency can be considered an equilibrium exchange rate. ["Developing country" refers to any country in Asia, Africa, or Latin America except Japan.]

Note: you may substitute the present for the year 2000 for both parts of the question.

2/ Should WTO/GATT encourage regional trading blocs (under Article XXIV of GATT, which now allows free trade areas under certain conditions)? Are trading blocs a stumbling or building bloc to the increasingly liberal international trade? Discuss.

What impact will the euro have on the US, especially the use of US dollar reserves by other countries? What impact will the euro have on the reserves of LDCs? Discuss.

3/ Formulate a question dealing with one of the following issues: the Asian financial crisis; the international monetary system; trade and income distribution; adjustment, stabilization, and reform in a transitional economy; adjustment, stabilization, and reform in a developing economy; the international economics of the environment; agriculture and international trade; or the international implications of restoring Japanese economic growth. Then answer the question you have asked.

Since you are to be judged not only on your answer but the importance of the question, spend a paragraph or so defending why you chose the question. Please avoid a question the answer of which would substantially duplicate a question from one of the first two examinations. To avoid giving a student an advantage from writing on a topic he or she presented in class and to give each student the same number of choices, I will bar (1) from writing on the environment; (2), (3), and (4) from writing on transitional economies; (5) from writing on developing economies; (6) from writing on agriculture; and (7) from writing on Japan.

Each question should be answered in no more than roughly 6 typewritten double-spaced page equivalent (not counting graphs and tables, which are to be limited to no more than 3-4 extra single-spaced pages).

Be sure to cite sources. Here is how you should cite sources, e.g. (Dornbusch, p. 27), (Conversation with Elizabeth Jones, December 9, 1998), (Lecture, December 4, 1998). For sources outside the readings, list as (Smith 1990: 36-38) for author, year, and pages in text; in the reference (not to be counted in the 6 double-spaced limit), include author, title, and publishing information. Publishing information means for a book - city, publishing company, year, and pages, if relevant, and for a journal - name of journal, volume number, date, and page numbers. See the American Economic Review for an example as to how to cite.

The answers are to be handed in at the scheduled time of the final examination, Friday, December 18, 11:50 a.m.-1:40 p.m., in Waters 329.

My office hours will be Friday, December 11, 9:30-10:20, and 1:30-2:30; Monday, December 14, 9-11 a.m.; Wednesday, December 16, 2:30-3:30; Thursday, December 17, 2:30-3:30; and by appointment.