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Economics 165: International Finance
Stanford University
Summer Quarter 2014-2015
Time and place:
Instructor:
Office:
Phone:
Email:
Office hours:
Tuesday/Thursday 11:00-12:50
Russell Boyer
???
650-206-5414 (cell phone)
russellboyer@gmail.com
Tuesday/Thursday 2-3pm
This course is designed to give students the tools to think about a wide variety of issues in international
finance. At the heart of the presentation is a simple macromodel which captures the mechanisms which
are important to re-equilibration of the economy in the short, intermediate and long runs. A key
element of the model is distinguishing between policy initiatives and policy regimes. Classical results
will be considered in depth: the equivalence between a monetary policy initiative and devaluation;
exchange rate overshooting; and question of superiority of fixed versus flexible exchange rate regimes.
Developments in the Eurozone will be analyzed within the framework of the model, with a key
contention being that the failure of the euro was widely anticipated, even by those who promoted its
adoption.
Textbook
Classic readings, by Hume, Friedman and Mundell, will place the development of this subject into an
historical context. But the heart of the course will be the coverage of the material in the standard
textbok on this subject: Paul Krugman, Maurice Obstfeld, and Marc Melitz, International Finance, 10th
edition. Their textbook on international economics now comes in three formats: the complete book
covers topics in both real theory, and in financial economics. We will be using the stand-alone half of
the book that deals with financial topics only.
Assessment
To be provided.
Important Dates
Tuesday, June 22
Saturday, August 15
First day of class
Final exam, 8:30-11:30
Course outline
I
Introduction to Analytical Tools of International Macro
1. Current Topics in International Finance
a. Is the Euro System Working?
b. Is Europe an Optimum Currency Area?
c. Desirability of Fixed Vs. Flexible Exchange Rates
2. Tools for Open Economy Macro Analysis
Chapter 10
Chapter 10
II
3.
4.
5.
6.
7.
8.
9.
10.
11.
III
12.
13.
14.
15.
a. National Income Accounting
b. Balance of Payments Accounting
c. The Foreign Exchange Market
d. Purchasing Power Parity
The Theoretical Model
Output in the Short Run under Fixed Exchange Rates
Fiscal and Trade Policy in the Short Run
Devaluation in the Short Run
Policies in the Intermediate Run
The Asset Markets
Fiscal and Trade Policy under Flexible Exchange Rates
Monetary Policy in the Short and Intermediate Runs
The Equivalence of Monetary and Exchange Rate Policies
How the Exchange Rate is Managed
History, International Monetary Systems, and Current Topics
International Monetary Systems: An Historical Overview
Financial Globalization: Opportunity and Crisis
Optimum Currency Areas and the Euro
Developing Countries: Growth, Crisis and Reform
Chapter 2
Chapter 2
Chapter 3
Chapter 5
Chapter 6
Chapter 6
Chapter 6
Chapter 6
Chapters 3, 4 & 6
Chapter 6
Chapters 5 & 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11