Open Economy Macroeconomics Full year 3 - 44


Oct 28, 2013 (4 years and 8 months ago)


Course Title





Open Economy Macroeconomics


Full year



Course Topic:

Open Macroeconomics

Course Objecti ve/Theme:

This course is intended to help students acquire the basics, or the minimu
m essence of
international economics that introduces international transactions, as the developed version of
macroeconomics, by focusing primarily on closed economy and following the curriculum below.

Course Outline:

The recent trend in the global econom
y presented the problems that international economists
have been debating over the past two centuries. As seen in many sciences, new methods of
analysis have been created through the mutual interaction between facts and principles

theories. In addition,
the speed of change of actual economic society is further increasing. Amid
such circumstance, it is not eas
to study economics as a pragmatic study. In this course, lectures
will be given on basic areas by separating them into the “theory” part and “prac
tical” part. In the
“theory” part, I plan to explain recent theories in an easy
understand and precise manner
while focusing on realistic issues as much as possible, without getting too technical. In the
“practical” part, I will explain various systems
regarding international trade after the end of
World War II and new economic phenomena, etc. from the economics standpoint in a
comprehensible manner.

Course Schedule:

1. Introduction

Closed macroeconomics and open macroeconomics

2. Review of basic macr
oeconomics (1)

Overall picture of macroeconomics

3. Review of basic macroeconomics (2)

Macroeconomic variables, short
term and long
term, economic growth

4. National income account and international balance of payments

Current account and capital acc

5. Currency exchange

Fixed exchange rate system and floating exchange rate system

6. Determining exchange rate (1)

Exchange rate and foreign
market and balance

7. Determining exchange rate (2)

Asset approach theory, domestic currency de
posit and foreign currency deposit

8. Determining exchange rates (3)

Profitability and risks of deposits, interest rate and estimated exchange rate fluctuation

9. Money, interest rate, exchange rate (1)

Definition of money and monetary market

10. Money
, interest rate, exchange rate (2)

Supply and demand also pertain to money

11. Money, interest rate, exchange rate (3)

Money, level of prices, and exchange rate

12. Short
term money supply and exchange rate

Monetary market and exchange market (1)

. Long
term price levels and exchange rate

Monetary market and exchange market (2), inflation and exchange rate

14. Long
term price levels and exchange rate (1)

Law of one price and Purchasing Power Parity Theory (PPP)

15. Long
term price levels and ex
change rate (2)

Absolute PPP and relative PPP, issues of PPP

16. Long
term exchange rate model based on PPP

Basic equation of the monetary approach and Fischer effect

17. Beyond PPP (1)

Real exchange rate, interest rate differentials and real excha
nge rate

18. Beyond PPP (2)

Real interest rate parity

19. Short
term production volume and exchange rates (1)

Balance of output market, DD curve

20. Short
term production volume and exchange rates (1)

Balance of capital market, AA curve

21. Short
erm balance of the economy

AA analysis

22. Supplementary notes: IS
LM model, Mundell
Fleming model, DD
AA model

23. Exchange rate system and impact of policy (1)

Fleming model (1)

24. Exchange rate system and impact of policy (2)

Fleming model (2)

25. Exchange rate system and impact of policy (3)

AA model (1)

26. Exchange rate system and impact of policy (4)

AA model (2)

27. Long
term impact of policy (1)

Change in forecast and inflation

28. Macroeconomic policy and cu
account balance

Lerner condition and J
curve effect

29. International macroeconomic policy and problematic points (1)

International monetary system and macroeconomic policy and coordination

30. International macroeconomic policy and prob
lematic points (2)

Grading Method:

Grades will be based on the weighted average of three items: performance on the exam in the
first semester (2/6), performance on exam in the second semester (3/6) and attendance, etc. (1/6).


(Written by) P.
R. Krugman and M. Obstfeld (translated by Ishii, Urata, Takenaka, Senda and
Matsui), “
Kokusai Keizairon

Riron to Seisaku

II Kokusai Macro Keizaigaku

Theory and Policy

International Macroeconomics II
), Shinsei
sha Co., Ltd.


Reference literature and others will be introduced in class.