Order Description
The writing assignment involves a brief essay. The essay should have a clear thesis that is backed
up by a combination of facts and economic analysis. The main part of the grade will depend on the
quality of the economic analysis, but the quality of the writing will inevitably factor into the grade.
In fact, it is difficult to judge an analysis as conceptually sound if it is poorly written, and so the two
criteria are always linked. So make sure your points are presented clearly and avoid long, tangential
discussions.
Essay topics
Choose one of the topics below.
1. Consider Greek inflation before and after joining the euro zone. Describe the role of joining the
eurozone in the evolution of inflation. Describe the dynamics of government deficits and government
debt in the same time period. Discuss whether fiscal policy is relevant for understanding the
success or failure of an inflation-stabilization program in general, and how it relates to Greece’s
experience in particular.
2. Many open economies experience real appreciations during an output boom, usually associated
with large current account deficits. At some point, the economy begins to weaken. A common
response is to devalue the nominal exchange rate, which, in the short run, is associated with
a real devaluation because of price stickiness. Choose a eurozone country on the periphery
(Ireland, Greece, Portugal, or Spain). Compute the real exchange rate relative to Germany using
the domestic CPI for the time period after your country join the eurozone. Does your country
follow the pattern of current account deficits and real exchange rate appreciation during an output
boom? Discuss why being a member of the eurozone complicates the adjustment to a more
competitive real exchange rate.
