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Economics 244
Spring 2011
Course Objectives
This course has two complementary objectives. First, to study some basics of exchange rates and the
balance of payments. Second, to equip the students with the tools and facts to understand the international
financial system. The course will emphasize both theoretical and practical considerations. International
Finance topics are everyday in the newspapers and we will study key policy questions as the “global
imbalances” or currency wars. Moreover, we will study some Central Banks and their interaction with the
financial markets and the economy. The course will be demanding. Students are expected to attend the
lectures.
Grading
Course grades will be determined according to this system:
- There will be a midterm and a final. If the grade in the final is higher than in the midterm, the final
will count for 90% of the grade. If the grade in the midterm is higher than in the final, the final will
count 60% of the grade and the midterm will count 30%. Hence the midterm will provide insurance
against having a bad day in the final. Warning: If you miss the midterm, for any reason, the final will
count for 90% of the grade. Dates for the final exam and the conflict exam can be found on the
Registrar’s web page (for the Final is: Friday, May 13th, 12:30 - 2:30pm). The midterm will be on
Tuesday, March 22nd. You must take the exam for the section in which you are enrolled. Conflict
exams must be approved by your Dean's office. Exams will not be administered on any other day; so,
plan your travel accordingly.
- There will be two types of homeworks:
i) “Mandatory homeworks”: They will be assigned every 3 or 4 weeks. They will count 10% of
the grade. You are encouraged to work in groups but each student should hand in a separate set of
answers. The purpose of doing the homeworks is to help you learn the material, and to inform you
and me about your progress. Even if your answers are wrong you will get the 10% if you submit all
your homeworks on time and your answers show that you put effort to do them.
ii) “Voluntary homeworks”: They are just for you to practice. They will be assigned every 2 weeks.
I will adhere to the new grading guidelines of the Economics Department: at most 45% of the students
will get A/A-. 50% will get B-, B or B+. And 5% will receive C and below. Any student caught cheating on
any exam or engaging in any other form of academic dishonesty will receive a grade of F (fail) and be
reported to the Dean.
If you have a complaint about the grade that you received then send me an email describing your
complaint, the grade received and the grade you feel you deserve. Do not e-mail me explaining the
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circumstances under which you took the final exam or the midterm. I will strictly apply the previous grading
system.
Outline
The following reading list gives a guide to the topics that we will cover. It is tentative; we will feel free
to modify it if it suits us. At the end of each lecture I will announce the readings for the following lecture. I
will also send out regular email messages to the class mentioning specific articles to review before class.
II. Exchange Rates and Interest Rates: Uncovered and Covered Interest Rate Parities (UIP, CIP)
III. Exchange Rates and Prices: Real Exchange Rates and Purchasing Power Parities (APPP, RPPP)
IV. A model of Exchange Rate determination for the long run: PPP and money demand
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IX. Introduction to the economics and structure of the International Financial Markets
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