This course will provide students with models that can be used to analyse issues in international monetary economics. The course introduces students to so-called global imbalances and the basic stylized facts about current accounts with cross-section and the time-series of selected countries such as the US and China. Issues of current account sustainability will also be addressed. The underlying intertemporal modelling framework will be applied to the current account and be used to understand the macroeconomic effects of external shocks, such as changes in terms of trade and the world interest rate. Students will also learn about the effects that endowment and productivity shocks have on consumption, saving, investment, the trade balance, and the current account. These effects will be analysed for small and for large open economies. Students will learn about the real exchange rate and use the intertemporal modelling framework to analyse its determinants. Towards the end of the course, students will learn about capital market integration and the effects of capital controls. The last lecture concludes the course with a discussion of the most recent World Economic Outlook that is produced semi-annually by the International Monetary Fund. In the tutorials: students will learn about stabilisation policies in open economies. Using basic open-economy Keynesian models, where prices are assumed to be sticky, students will analyse the short-run effects of monetary and fiscal policies.
Upon successful completion, students will have the knowledge and skills to:
- demonstrate an understanding of the core theoretical models used by economists in the field of international monetary economics;
- apply these models to contemporary issues in international monetary economics;
- explain and demonstrate an understanding of some of the associated empirical implications and policy issues in international monetary economics;
- critically evaluate and analyse newspaper and magazine articles covering events about international monetary economics in the world.
- analyse contemporary developments in the world economy about capital flows across countries and formulate policy recommendations;
- Understand the implications that capital flows have on the private sector. Based on this understanding, formulate investment strategies for large firms.
- Assessment will consist of a Final Exam, mid-semester exam(s), quizzes, assignment or some combination thereof. See the Class Summary for details. (100) [LO 1,2,3,4,5,6]
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130 hours in total over the semester consisting of lectures, tutorials and private study time.
Requisite and Incompatibility
See Class Summary
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Commonwealth Support (CSP) Students
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- 6 units
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