ECON 161a: INTERNATIONAL FINANCE

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Oct 28, 2013 (3 years and 9 months ago)

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Brandeis University









Spring 2009


PRELIMINARY SYLLABUS















ECON 161a: INTERNATIONAL FINANCE


Tuesday/Friday 9
-
10:30



Prof. Catherine L. Mann

Office Hours:
A
fter class and by appointment

Office Location: Sachar 124

e
-
mail:
clmann@brandeis.edu



OVERVIEW


Topics in international finance are central to political debate, policy decision, economic
development, and business strategy.

Exchange rates, international capital flows, balance of
paymen
t crises are in
the news every single day. This course applies
and
expands
macro
economic
theories of money and the real economy to incorporate global trade,
international capital flows, and exchange rates to investigate how global forces affect firms,
wor
kers, and overall macroeconomic performance in the short
-
run and the long
-
run. Questions
of what policies to employ and their impact on home and foreign economies are considered. The
course emphasizes application of theory to real
-
world situations.



Ec
onomics 80a or an equivalent course in microeconomic theory and Economics 82b or an
equivalent course in macroeconomics should be completed before enrolling in Economic 161a.


COURSEWORK, EXAMS, AND GRADES


Class Method
: Course material will be covered
through assigned readings
,
lectures,
and problem sets. Substantive discussion is

organized around

2
-
page memos


and
presentations on specific topics.


Memos and Discussion
:

T
here will be
three
2
-
page memos

in which the student
applies the theoretical

topic to a business or policy issue. These memos will be used as
the
foundation for the class discussion

that day. The memo must be turned in at the
end of class for credit.
Late memos will receive no credit
. Depending on the size of the
class, several

of these memos may be done in groups of 2 or 3 people, rather than
individually by each student.


Class Presentation
s
:

T
here will be
two presentations

during the semester in which
t
eams of 2
-
3 students will research and give a presentation

on a country

or business
topic.



Two Midterm Exam

(OR problem sets)
: One mid
-
term exam will be given in early
February and one will be given in mid
-
March
.
If we are running behind, these exams
will be in the form of take
-
home problem sets.


Final Exam
: A fin
al exam covering all the material will be given during the exam block
for the class.


Evaluation and Course Grade
: The course grade will be determined by



Three 2
-
page memos and associated class discussion
--

35%



Two team presentations


20%



Two midte
rm exams/problem sets 20 %



Final exam 25%


TEXTBOOK AND
REFERENCE MATERIALS


The main textbook for this class is Feenstra and Taylor
International Macroeconomics.

This textbook is the macro half of the textbook Feenstra and Taylor
International
Economic
s.
. The other half is Feenstra and Taylor
International Trade

which is used in
some of the trade classes. This
textbook ha
s
on
-
line student support material, which I
encourage you to use.


Other textbooks to which I may on occasion refer include:



Puge
l,
International Economics

(13 edition)



Caves, Frankel, Jones,
World Trade and Payments: A Introduction

(10 edition).



Krugman and Obstfeld,
International Economics: Theory and Policy

(7 edition)


Additional readings will be put on LATTE.



ACCOMODAT
ION AND ACADEMIC INTEGRITY


If you are a student with a documented disability on record at Brandeis University and wish to
have a reasonable accommodation made for you in this class, please see Professor Mann
immediately.


You are expected to be familiar w
ith and to follow the University’s policies on academic
integrity (
www.brandeis.edu/studentlife/sdc/ai
). Instances of alleged dishonesty will be forwarded to
the Office of Campus Life for possible

referral to the Student Judiciary System. Potential
sanctions include failure in the course and suspension from the University.If you have any
questions about expectations, please ask.




COURSE OUTLINE

topics, references, deliverables


I: Exchange r
ates, markets, and institutions

A: Definitions of exchange rates

B:

Theoretical relationships: financial, real, behavioral

C: Empirical evidence: financial, real, behavioral


Reference materials



Feenstra/Taylor (Taylor chapter numbers) 2, 3, 4, 11



Evans

and Lyons, “Meese Rogoff Redux: … “ available on LATTE


Memo 1: Choose between the following, prepare a two
-
page memo to hand in, and plan
to discuss in class:



Exchange rates and arbitrage: Choose a country and discuss how that country’s exchange
rate
has (or has not) moved as expected with respect to inflation and interest rate
differentials



Exchange rates and capital flows: Choose a country and discuss how that country’s
exchange rate has (or has not) moved as expected with international capital flow
s



Exchange rates and trade flows: Choose a country and discuss how that country’s
exchange rate has (or has not) moved as expected with international trade flows


II. Trade, exchange rates, and the balance of payments

A: Balance of payments accounting

B
: Determinants of trade flows (‘income’ and ‘relative price’)

C: Exchange rate and trade dynamics


Memo 2: Choose between the following, prepared a two
-
page memo to hand in, and
plan to discuss in class



Exchange rates and inflation: Has pass
-
through ch
anged? Why do we care?



Trade in commodities and elasticities: Are commodity exporters ‘doomed’ to elasticity
pessimism?


Reference Materials



Feenstra/Taylor (Taylor chapter numbers) Chapter 7 pp 287
-
289, Appendix 1,



Or CFJ, Chapter 15, 16 and suppleme
nt to chapter 16.



Or Pugel, Chapter 16, chapter 23 pp 571
-
577 and Appendix E and H



Mann and Pluck,

Understanding t
he US Trade Deficit: A Disaggregated Perspective,”
(with Katharina
Plück
) in
G
-
7 Current Account Sustainability and Adjustment
, Richard
Clar
ida ed.. MIT Press: Cambridge, 2007
.
Find link on LATTE

EXAM (either in class or take
-
home depending on schedule)


III. Policy and challenges in the open economy

A: Keynsian model in the open economy

B.

IS
-
LM in the open economy

C.

International reserves an
d central banking in the open economy

D.

Fiscal policy in the open economy




Presentation 1 in teams: Choose between, prepare a powerpoint and let’s discuss in
class



US recession: Implications for the US balance of payments and foreign equilibrium



Euro o
ptimism: Implications for Euro/dollar capital flows, European growth, and US
equilibrium



Asia ‘delinking’: Implications for Asia if they ‘delink’ their GDP growth from exports to
the US, or don’t delink


Reference Materials



CFJ Chapter 22, 23



Or,
Pugel chapter 22, 23



Or, Feenstra/Taylor (Taylor Chapter number) Chapter 7



Or, K/O Chapter 12


EXAM (either in class or take
-
home depending on schedule)


IV: The open economy in the long run


A: Long run aggregate demand, aggregate supply


B:
Long
-
run dynamics of the open economy over time



Reference Materials



CFJ p 436
-
439, supplement to chapter 24



Or, Taylor Chapter 6



Or, Pugel Appendix G



V: Current Topics in International Macroeconomics and Finance


A: The Euro and Pegged Exchange Ra
te Regimes


Reference materials



Taylor chapter 10



TBD



B: Finance and Development / Banking and Currency Crises


Reference Materials:



Taylor Chapter 6



Or, Pugel chapter 21



Or, CFJ, chapter 24



Or, Taylor Chapter 9



Kose, Prassad, Rogoff, and Wei, “Finan
cial Globalization: A ReAppraisal”, IMF working
paper no. 06/189. Available on LATTE



Memo 3: Choose between, prepare a two
-
page memo and let’s discuss in class



China financial crash: Likelihood and implications?



Country of your choice: Financial li
beralization and growth: How are they related?



Asian financial crises: Outside speculators or incomplete reforms?


C: Global imbalances


sustainability and adjustment

D: International portfolio diversification:


Reference materials



TBD


E: Interna
tional Institutions


Presentation 2 in Teams:

International Economics Institutions: Origin, Objectives (then and now), Challenges for
their Future

One team will present on: IMF, World Bank Group, G
-
7, G
-
30, BIS, OECD, (possibly others)


.


FINAL EXAM