Yale University
International Finance
Econ 724b
Spring 2005
Galina Hale
The class will cover International Finance and International Monetary Economics. Exchange rate determination, recent development in open economy macroeconomics, currency and financial crises, models of current account, international capital markets and contagion. We will cover theory, empirical evidence and policy issues.
The following combinations of exams and paper are allowed to pass the class:
Midterm + Final
Paper proposal (accepted) + Final (insurance policy
if you decide half-way not to work on the paper anymore - not encouraged)
Paper proposal (accepted) + Paper
You are not allowed to submit a paper unless your paper proposal has been
accepted.
Paper and proposal
requirement and deadlines are described on course web site.
There will be problem sets for you to better master the course material. You are required to submit them on time, however they will not be graded. Use the answer key provided to check your answers. If you do not turn it the problem sets, it might negatively affect your course grade, but only marginally.
Midterm will be in-class on March 3, final exam date will be announced later.
A required textbook for the class is
M. Obstfeld and K. Rogoff "Foundations of International Macroeconomics", MIT
Press, 1996 (OR) .
Other required and recommended readings are listed
in the reading list
.
Lecture Plan.
| Current account | |
| January 11. Lecture 1. | Introduction Balance of payments Intertemporal approach to CA: 2-period small open economy |
| January 13. Lecture 2. | 2-country world A model with investment |
| January 18. Lecture 3. | Dynamic CA models: deterministic and
stochastic Empirics on CA model |
| January 20. Lecture 4. | CA and policy
issues: open-economy OGM. Feldstein-Horioka puzzle and capital mobility |
| Exchange rates | |
| January 25. Lecture 5. | PPP puzzle Bachus-Smith puzzle Mussa puzzle Exchange rate "disconnect" puzzle |
| January 27. Lecture 6. | Monetary model of exchange rate determination |
| February 1. Lecture 7. | Exchange rate
stabilization and target zones Liquidity models |
| February 3. Lecture 8. | Mundell-Fleming
model Exchange rate "overshooting" |
| New Open Economy Macroeconomics | (NOEM) |
| February 8. Lecture 9. | Basics |
| February 10. Lecture 10. | Closed vs. Open economy |
| February 15. Lecture 11. | International transmission International policy coordination |
| February 17. Lecture 12. | LOP vs. LCP Nominal rigidities Sectoral shocks and non-traded goods |
| February 22. Lecture 13. | International price discrimination - modelling Financial frictions versus goods markets imperfections International spillovers |
| February 24. Lecture 14. | Empirical performance of NOEMs |
| Asset trade | |
| March 1. Lecture 15. | International asset trade: theories. |
| March 3. Midterm | |
| March 22. Lecture 16. | International asset trade: empirical
analysis. Risk-sharing Consumption correlation puzzle Portfolio home bias puzzle |
| Financial crises | |
| March 24. Lecture 17. | The logic of currency crises: first vs.
second generation models The coordination problem in the theory of currency crises |
| March 29. Lecture 18. | Financial crises: debt, banking, currency: theory |
| March 31. Lecture 19. | Financial crises: debt, banking, currency: evidence |
| April 5. Lecture 20. | International financial contagion: theory International financial contagion: empirical challenges ...and evidence |
| International financial architecture | |
| April 7. Lecture 21. | Financial
stability and the choice of
exchange rate regime Credibility and fear of floating |
| April 12. Lecture 22. | Sovereign debt problems: theory and
policy Debt repurchase debate Reputation for repayment debate |
| April 14. Lecture 23. | Preventing financial crises Minimizing costs of financial crises Capital controls: theory and evidence Dollarization and "original sin" |
| Student presentations | April 19, 21 |