International finance

This module covers the functioning and organisation of the international financial market. We study the different assets exchanged in the international market and the effect of international capital flows on the economy.

We emphasise policy relevance, for example the effect of government intervention in the foreign exchange market. The unit begins by looking at the organisation of the international capital market, followed by the study of standard models of exchange rate determination, and an evaluation of attempts to test them empirically.

We apply these models to understand the interaction between financial markets and the whole economy.

Likely topics:  

• introduction: the organization of the international capital market.

• the determination of the exchange rate in the international financial markets. Monetary policy and the exchange rates. An independent Central Bank in an open economy.

• efficient market hypothesis and the exchange rate

• exchange rate regimes: fixed vs. floating exchange rates

• speculative attacks and international financial crises.

• the evolution of the international monetary system from Bretton Woods to the Euro. Proposals to reform the international monetary system.