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MODULE 1 - BEYOND TRADITIONAL COMPARATIVE ADVANTAGE: DEVELOPMENT POLICY IMPLICATIONS OF TRADE THEORY
The module reviews the standard trade models (the Ricardian and the Heckscher-Ohlin models) - their assumptions, predictions and policy conclusions - and critically examines how they have performed empirically. It then presents the advances in trade theory that help explain some of the empirical puzzles not addressed by the basic models. Finally, it looks into the implications of the use of these models for policy advice to be drawn from trade theory. In this context, it focuses particularly on those advances in modern trade theory that are of special importance for policy conclusions for developing countries, namely the productivity-enhancing competition effects of trade, learning-by-doing, technology spillovers and monopolistic competition.
MODULE 2 - DUTCH DISEASE, RESOURCE CURSE AND DEVELOPMENT
The module starts with an explanation of the basic theories that are used to analyze Dutch disease and the resource curse, including their limitations and weaknesses, in light of the current debates on this issue. It then looks at empirical evidence - an analysis of oil-exporting countries and country case studies of Angola, Botswana, Nigeria, Norway, Indonesia and Venezuela. Finally, it discusses different policy options that could help countries cope with Dutch disease and the resource curse. These policies cover the periods of commodity booms (saving or spending resource rents, or using them for diversification) and commodity slumps (cutting consumption and investment, resorting to external borrowing or use of stabilization funds, depreciating currency), and also touch upon more general issues, such as the management of natural resources (speed of extraction, property rights, transparency) and macro-economic policies.
MODULE 3 - CAPITAL ACCOUNT MANAGEMENT IN DEVELOPING COUNTRIES
This module analyses the feasibility, efficiency and effectiveness of capital controls (CC) and, in a broader sense, capital account management (CAM). After introducing the key terms and definitions, it reviews the arguments in favour and against capital control and liberalization, as they were applied in the course of history of international capital mobility and in the respective policies of relevant international organizations. It explains the economic logic of CC/CAM, its theoretical foundations, objectives and instruments, and discusses the relationship between prudential regulation of the financial sector, macroeconomic policies and capital controls. In this context, it also introduces the recent change in the IMF approach towards capital controls. The module concludes by analyzing and comparing national experiences with capital controls using case studies of Chile (country with selective and only temporary price-based controls) and China (country with permanent broad-based administrative controls) while stressing that most other countries have been operating somewhere in between these two approaches.
MODULE 4 - CAPITAL FLOWS TO DEVELOPING COUNTRIES: WHEN ARE THEY GOOD FOR DEVELOPMENT?
The module starts with a review of the neoclassical model of capital inflows and development. It then looks at the empirical evidence about capital liberalization and capital inflows around the world in the past decades to check whether their proclaimed benefits have materialized or not. It demonstrates that the real world is more complex than the neoclassical model and that a number of its predictions do not materialize. It concludes with tentative explanations of why the empirical evidence is at odds with the theoretical predictions and sketches out a Keynesian alternative to the neoclassical model.