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International Financial Economics R. McIntyre firstname.lastname@example.org
This course covers the history, theory, and politics of the international financial system. Topics include the foreign exchange market, international capital movements, and global economic crises. Students must have had at least one course in macroeconomics, such as ECN 202 at URI. A course in international relations such as PSC 116 is also helpful background. Grades are based on: Four homework assignments: 15% (Best three count, no late acceptances.) Four quiz grades: 15%. (Best three count, no make-ups.) Mid Term and Final Exams: 30% each, include term identifications, short answer questions and an essay Attendance and Participation: 10% A makeup exam will be given only with proof of a true medical or family emergency. May 23 Introduction Review of basic macroeconomics and international relations May 24 Historical Institutionalism and the Case of Iceland Barry Eichengreen, Globalizing Capital: A History of the International Monetary System, chap. 1, pp.1-5 Robert H. Wade and Silla Sigurgeirsdottir, Iceland s meltdown: The rise and fall of international banking in the North Atlantic , real-world economics review, issue no. 56, 11 March 2011, pp. 58-71, http://www.paecon.net/PAEReview/issue56/WadeSigurgeirsdottir56.pdf / May 25 The Classical Gold Standard Barry Eichengreen, Globalizing Capital, Chap. 2, pp.6-42 May 26 The Interwar Gold Standard Eichengreen, Globalizing Capital, Chapter 3, pp.43- 69 Quiz 1
Globalizing Capital. April 2. Chaps. Chaps. Globalizing Capital.html .May 31 The Great Depression Eichengreen. pp.149-178 Third Homework Due June 14 The International Lender of Last Resort Eric Helleiner. Ch. 5. 5. The Bank Run We Knew So Little About. http://www. 4-5 Second Homework due June 7 Mid Term Exam June 8 The Liberalization of Global Finance Eric Helleiner. States and the Reemergence of Global Finance. New York Times. Globalizing Capital. Chaps. Ch. 8 Gretchen Mortgensen. 2-3. pp. Ch.70-90 First Homework due June 1 The Bretton Woods Compromise Eric Helleiner.com/2011/04/03/business/03gret. Chapter 3.134-149 Quiz 3 June 13 The Formation of the Euro Area Barry Eichengreen. States and the Reemergence of Global Finance. States and the Reemergence of Global Finance. 2011. 6-7 June 9 Floating Exchange Rates Barry Eichengreen. June 3 No class Quiz 2 available on SAKAI June 6 The Re emergence of Global Finance Eric Helleiner. 4. Chap. Globalizing Capital. June 2 The Bretton Woods System Barry Eichengreen. States and the Reemergence of Global Finance. pp.nytimes.
S. Sub-Prime Financial Crisis So Different? An International Historical Comparison. Globalizing Capital. Globalizing Capital.edu/faculty/rogoff/files/Is_The_US_Subprime_Crisis_So_Different. The Aftermath of Financial Crises.economics.pdf June 21 Documenting the Crisis Film: Inside Job June 22 After the Crisis Carmen Reinhart and Kenneth Rogoff. 5-6.economics.210-232 Quiz 4 June 20 The Crisis of 2007-? Carmen Reinhart and Kenneth Rogoff.´ http://www. Ch.harvard. Ch.178-210 Film: The Crash June 16 Global Imbalances in the 2000s Barry Eichengreen.6-7. Is the 2007 U. pp.edu/files/faculty/51_Aftermath.pdf June 23 Final exam .June 15 The Experience of the Developing Countries in the 1980s and 90s Barry Eichengreen.harvard. http://www. pp.
The most recent data for the US is available at http://www. Much of the history of the period between the two world wars can be explained by the attempt to put the gold standard back in place and the ultimate failure of that attempt. It includes the balance of trade on goods and services. governments allow the currency to float but intervene periodically to move the currency s value. another currency. Under a floating rate a government allows the currency s value to be determined by supply and demand in the foreign exchange market. or an average of other currencies. Under a dirty float. Thus trade deficits are potentially selfcorrecting. the balance on income flows from the ownership of assets. In general currency values are determined by y y y y Expectations of foreign exchange traders ( the news ) Relative interest rates The Trade balance Relative inflation rates With a fixed exchange a government agrees to buy or sell a currency at a particular rate.Macro review for International Finance The balance of payments is a statement of a country s international transactions for a given year. But the trade balance has its effect on the value of the currency only over time. The Bretton Woods system was established in 1944 with other currencies . All else constant a trade deficit will lead to a depreciation of a nation s currency. meaning that the price of imports will go up. and the balance of financial transactions.bea.gov/international/index. Between the 1870s and World War I the classical gold standard dominated international finance. usually measured against gold.htm#bop A basic condition from national income accounting is that leakages from the flow of income and expenditure must be equal to injections meaning S+T+M = I +G +X Which when rearranged gives us X-M = (S-I) + (T-G) Thus the macroeconomic interpretation of a trade deficit is that a country is trying to spend (I+G) more than it saves (S+T) leading to a financial inflow. Countries do this to create confidence in the value of their currency. A fixed exchange rate system is in place when a group of countries agree to fix their currencies against each other or against another asset.
fixed against the dollar and the dollar fixed against gold. This system ended in the early 1970s due to persistent US balance of payment deficits. .
Why was there growing support for capital controls in the period between the two wars? How did the original Bretton Woods proposals of Keynes and White interpret the international monetary and financial experience of the interwar period? How were the Keynes and White proposals modified by interested parties? 2. How did international coordination work under the gold standard and how did coordination differ between the center and the periphery? May 26 The Interwar Gold Standard Period 1. What do Wade and Sigurgeirsdottir think is the basic message of the Iceland story? What surprised you about this case? May 25 The Classical Gold Standard 1. Why was there an attempt to re-establish the gold standard after World War I? 2.2-3 1. What forces led to the formation of the classical gold standard? How did the gold standard work? 2. States and the Reemergence of Global Finance ch.Study Questions May 24 1. What role did the reestablished gold standard play in the Great Depression? What did the re-established gold standard have such effects June 1 The Bretton Woods Settlement Helleiner. Why did the US not support a liberalization of international money and finance in the 1940s and 50s? . What is foreign exchange? What is an exchange rate? Explain what is meant by the value of the dollar. What is the central theme of Eichengreen s Globalizing Capital? What roles do network externalities and path dependence play in his argument? 3. 2. What problems did this effort face? May 31 The Great Depression 1.
How did changes in economic ideology contribute to the reemergence of global finance? Why did international monetary cooperation fail in the early 1970s? June 8 The Liberalization of Global Finance 1. and French cases for understanding the evolution of international finance in the late 70s/early 80s. How did global finance begin to reemerge in the 1960s? Why did the US abandon its support for the restrictive order of Bretton Woods? 2. Describe the pattern of exchanges rate fluctuations in the late 1970s and 1980s. Japan. US. How and why did financial liberalization proceed outside the major centers? 2. How did the Bretton Woods system differ from the gold exchange system? What role did it play in postwar reconstruction and growth? 2. How did ideology and interest contribute to the pursuit of financial liberalism in the US.June 2 The Bretton Woods System 1. What was the contradiction at the heart of the Bretton Woods system and how did this contradiction lead to the system s collapse? What are the lessons of Bretton Woods? June 6 The Reemergence of Global Finance 1. why was there so little discussion of this at Bretton Woods? In what sense does free market finance depend on a strong role for international governmental institutions? . Why did Europe try to re-create fixed exchange rates in the post Bretton Woods period? How did the EMS work and what led to its crisis? June 14 The International Lender of Last Resort 1. Summarize the significance of the British. Summarize Eichengreen s explanation of this pattern. If the crisis of 1931 convinced observers of the necessity of an international lender of last resort. June 13 The Formation of the Euro Area 1. and England in the 1980s? What is competitive deregulation and what role did it play in the liberalization of international finance in this period? June 9 Floating Exchange Rates and Global Capital Mobility 1.
What role did marketization of loans play? 3. What caused the Asian crisis and what were its results? What were the causes and consequences of the Argentinian crisis? June 16 Global Imbalances in the 2000s 1. 2. How were international financial crises handled between 1974 and 1989 and why were they handled this way? Why was the Asian crisis surprising and what lessons does Eichengreen draw from the crisis? 3. How do the 2000s compare to the 1920s? June 22 The Aftermath 1. What happens in the aftermath of a typical financial crisis? 2. How were the global imbalances of the 2000s related to the financial crises of the 1990s? Why were these imbalances referred to as Bretto Woods II ? 2. How relevant is the history to our contemporary situation? . Is the Euro emerging as a rival to the dollar? June 20 The Sub-Prime Crisis 1. What do we now know about lender of last resort operations in 2008-09 that was not known at the time? Dod the Fed act appropriately? Why or why not? June 15 The Experience of the Developing Countries in the 1980s and 90s 1.2. How did the developing countries respond to the end of Bretton Woods? Evaluate the effectiveness of currency boards and collective pegs in insulating countries from international economic instability. Is the US crisis of 2007 -08 unique? Explain fully June 21 Inside Job 1. Who is responsible for the crisis? 2.
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