Programme Outlines and Overviews

The objective of the course is to develop a deeper understanding of how a macro economy behaves when it is open to trade and capital flows with other countries. The course is also concerned with exchange rate determination and monetary behavior under fixed exchange rates and policies involving exchange rates. Important elements of the course are the following: - National income accounting and the balance of payments - Market mechanisms of the foreign currency market - Interest parity conditions - Purchasing power parity - Exchange rate determination - How a macro economy adjusts to various exogenous shocks under floating exchange rate and fixed exchange rate regimes - International monetary systems, 1870 to present - Macroeconomic policy and coordination under floating exchange rates - Optimum currency areas and European monetary agreements, including the EMU - Financial crises involving the exchange rate. **Connection to Research and Practice** This course deals with the frequently-researched areas of exchange rate determination (what variables affect the exchange rate), a country’s choice on exchange rate regime (fixed or floating) and a country’s choice on whether to participate in a monetary union with other countries. The connections between the exchange rate and other macroeconomic variables are relevant to decision makers determining central bank policy or government fiscal policy. Furthermore, it is important for decision makers in firms to consider how exchange-rate changes affect their businesses. It is also important for decision makers in firms to consider how central banks and governments react to macroeconomic activity in which the exchange rate plays a major role.