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L13609 International Money and Macroeconomy

Pre-requisite: L13509 Monetary Economics I is strongly recommended

Credits: 15

Lecturer: Dr Yoshi Morozumi 

Module description & content

This module covers the theory of international money and macroeconomics. The course

content is given as follows.

1: Introduction 

1-1: Uncovered interest rate parity

Blanchard, O (2008, 5th

ed.) Macroeconomics, Prentice Hall/Pearson, Chapter 18

Copeland, L (2008, 5th

ed.) Exchange Rates and International Finance, FT Prentice Hall,Chapter 3

Hallwood, C.P. and MacDonald, R. (2000, 3rd

ed.) International Money and Finance,

Blackwell Publishers, Chapter 3

1-2: Purchasing power parity

Copeland, Chapter 2

Haskel J. and Wolf H. (2001) “The Law of One Price - A Case Study”, Scandinavian

 Journal of Economics 103(4) 545-58Hallwood and MacDonald, Chapter 7

Krugman P.R. and Obstfeld M. (2003, 6th

ed.) International Economics: Theory and Policy,

Addison-Wesley, Chapter 15

2: Exchange rate determination and effectiveness of macroeconomic policies 

2-1: The monetary model

Copeland, Chapters 5 and 13

Hallwood and MacDonald, Chapter 9

Obstfeld, M. and Rogoff, K. (1996) Foundations of International Macroeconomics, MIT

Press, Cambridge MA, Chapter 8

2-2: The Mundell-Fleming model

Blanchard, Chapter 20

Copeland, Chapter 6Hallwood and MacDonald, Chapter 5

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2-3: The Dornbusch Model

Copeland, Chapter 7

Dornbusch R. (1976) “Expectations and Exchange Rate Dynamics”, Journal of Political

 Economy 84(6), 1161-1176

Hallwood and MacDonald, Chapter 9Obstfeld and Rogoff, Chapter 9

3: Macroeconomic interdependence 

3-1: Mundell’s Two-Country Model

Hallwood and MacDonald, Chapter 6

Krugman and Obstfeld, Chapter 19

3-2: International Policy Coordination

Hallwood and MacDonald, Chapter 6

Krugman and Obstfeld, Chapter 19Walsh, C (2003, 2nd ed.) Monetary theory and policy MIT press, Chapter 6

4: Choice of exchange rate regime: fix or float? 

Poole, W (1970) “Optimal Choice of Monetary Policy Instruments in a Simple Stochastic

Macro Model”, Quarterly Journal of Economics 85

Artis, M.J. and Currie, D.A. (1981) “Monetary Targets and the Exchange Rate: A Case for Conditional Targets” In W.Eltis and P.Sinclair, The Money Suppply and the Exchange Rate,

Oxford University Press

5: Currency crises and speculative attacks 

5-1: The first generation model

Copeland, Chapter 18

Hallwood and MacDonald, Chapter 14

Obstfeld and Rogoff, Chapter 8

5-2: The second generation model

Copeland, Chapter 18

Obstfeld, M (1996) “Models of currency crises with self -fulfilling features”, European

 Economic Review 40 (April): 1037-48Obstfeld and Rogoff, Chapter 9

6: Introduction to `micro-founded’ macroeconomics: intertemporal trade and the

current account balance 

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Obstfeld and Rogoff, Chapter 1

Obstfeld and Rogoff (1995) “Exchange rate dynamics redux”, Journal of Political

 Economy 103 (June): 624-660

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Aims and objectives

The aim of this module is to introduce the theory of international money and

macroeconomics.

On completing this module, the learning outcomes are such that students will be able to:

Knowledge and Understanding:

  A1 Demonstrate a broad knowledge of core areas of economics.

  A2 Apply core economic theory and economic reasoning to applied topics.  A3 Show understanding of analytical methods, both theory- and model-based.

  A4 Demonstrate understanding of verbal, graphical, mathematical and econometric

representation of economic ideas and analysis, including the relationship betweenthem.

  A6 Discuss and analyse government policy.

Intellectual Skills:

  B2 Work with abstract concepts and in a context of generality.

  B3 Reason logically and work analytically.

  B5 Understand the context in which a problem is to be addressed.

Professional / Practical Skills:

  C2 Select and apply appropriate techniques to solve problems.

  C3 Justify conclusions using economic arguments with appropriate rigour.

Transferable Skills:

  D1 Apply mathematical, statistical and graphical techniques in an appropriatemanner.

  D2 Communicate effectively and clearly in written and oral formats.  D3 Analyse and solve complex problems accurately.

  D5 Undertake independent study of a problem or subject.

Emphasised learning outcomes from the study of this module are: A1, A4, C3, D1 and D5.

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Lectures and tutorials

Each tutorial group will meet three times a term and the timing of these will be announced

in lectures. Please sign up on Nexus for the tutorial sessions.

Module Assessment

Exam (100% - 2.5 hours)

Previous Examination Papers and Feedback for all modules can be viewed online in the

Portal but are restricted to registered students only. A password may be required to access

this material.

Module Texts

Main textbooks 

Copeland, L (2008, 5th

ed.) Exchange Rates and International Finance, FT Prentice Hall

Hallwood, C.P. and MacDonald, R. (2000, 3rd

ed.) International Money and Finance,Blackwell Publishers

Obstfeld, M. and Rogoff, K. (1996) Foundations of International Macroeconomics, MITPress, Cambridge MA

Further information

If you have any questions regarding this module please feel free to contact the lecturer. At

the end of this semester, we would welcome your views on the organisation and content of 

this module.