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Economics 443

ECON 443: International Monetary Theory and Policy

Prerequisite: Economics 105 and ECON 106

Credit Hours: (3)

An examination of the determinants of a nation's balance of payments, exchange rate determination, implications of various exchange rate regimes for domestic stabilization policies and the international coordination of monetary and stabilization policies.

 

Detailed Description of Content of the Course

Students will be introduced to the tools necessary to analyze the monetary consequence of international trade. In addition, the course will teach students to analyze for themselves the international monetary issues that they frequently face in the political arena, the news media, and the business world.

Topic Outline

1. Introduction to International Monetary Theory and Policy
2. The Foreign Exchange Market
3. The Balance of Payments
4. The Balance-of-Payments Problem: A Basic Model
5. The Price-Adjustment Mechanism
6. The Income-Adjustment Mechanism
7. The World Debt Crisis
8. Fiscal and Monetary Policy for Internal and External Balance
9. Flexible versus Fixed Exchange Rates
10. The Monetary Approach to Balance of Payments
11. International Capital and Investment Flows
12. Devaluation and the Balance of Trade
13. Eurocurrencies: The International Money Market

 

Detailed Description of Conduct of the Course

The following teaching strategies will be employed:

Lectures and discussion. Research paper may be written.

  1. Goals and Objectives of the Course

1. Discuss the nature, organization, and functions of the foreign exchange market; the forward market and its relationship to the spot market; and the Eurodollar.
2. Discuss the balance of payments of a country's economic transactions with the rest of the world.
3. Explain the basic balance-of-payments and conventions.
4. Explore the concepts of balance-of-payments equilibrium.
5. Discuss merchandise balance, balance on goods and services, current account balance, and official settlement balance.
6. Discuss the behavior of U.S. trade balance, the international investment position, and the U.S. foreign dept.
7. Describe the balance of payments model and use it to illustrate various aspects of the balance-of- payments problem.
8. Discuss the effects of exchange-rate changes on the balance-of-payment and trade.
9. Explain how to extend the analysis of exchange-rate changes to price level changes under fixed exchange rates.
10. Examine the policy issue of how to achieve internal and external balance simultaneously.
11. Discuss the dimensions, directions, and consequences of the world debt crisis.
12. Discuss the alternative policy options in dealing with the crisis.
13. Examine fiscal and monetary policy for internal and external balance.
14. Discuss the characteristics and differences between flexible and fixed exchange rates.
15. Review the monetary approach dealing with flexible and fixed exchange rates.
16. Discuss the differences between monetary and traditional theories.
17. Discuss types, general principles, and problems of the International Monetary System.

 

Assessment Measures

Option I:

  • Examinations: Exam I 100 Points*
  • Exam II 100 Points*
  • Exam III 100 Points*
  • Final Exam 100 Points

*Drop the lowest grade of the three exams. (Total 300 points)

Option II:

Students are allowed to choose any two exams from exam I, II, and III plus a research paper** on International Monetary Theory plus the Final Exam.

**Drop the lowest grade plus the research paper. (Total 300 points)

 

Other Course Information

 

Review and Approval

Date Action Reviewed by
December 2004 Made alterations to syllabus N. Hashemzadeh, Chair
April 16, 2012 Revised