The first objective in this course is to apply economic principles to the experiences of transition economies. Ten years of transition from centrally planned to market economies offer us many opportunities to apply economic theory to real world situations. Transition countries pursued different economic policies with differing results. We will learn how to join economic data with analytical tools to improve our understanding of why some countries have been more successful than others. The second objective is to study the lesson which the transition provided for the field of economics. Many of the initial policy prescriptions in transition were based on the view that a free market is enough to achieve rapid growth and stable economy. These prescriptions grossly failed and economists realized the importance of institutions which support a market economy. We will explore which institutions are necessary for an effective capitalist society, and how to build them. The course combines topics from international macroeconomics and institutional microeconomics. We will analyze macroeconomic aggregates such as output, inflation, money, interest rates, government deficit, investment, employment, exchange rates, trade balance, capital flows and stock market returns. At the macroeconomic level we will examine the rationale and mechanisms of privatization, corporate governance and securities regulation. Format: discussion. Requirements include problem sets, midterm and final exam. Prerequisites: Economics 120. Enrollment limit: 40.

Hour: DVORAK