Syllabus of 《International Finance》.doc

Syllabus ofInternational FinanceCourse code: 18156Course name: International FinanceTeaching hour: 48 and 64Credit: 3 and 4Available to: students majored in Economics, Finance and Economic managementType of the course: compulsoryTeaching method: bilingualPreceding courses: Economics, Accounting, Statistics, International Trade, Money and Banking.Aims of the course:International finance is a basic course for students majored in economics. It is concerned with the monetary and macroeconomic relations between countries, and is constantly evolving subject that deals very much with real world issues such as balance of payments problems and policy, the causes of exchange-rate movements and the implications of macroeconomic linkages between economies. Through teaching, the aim is to let students grasp the basic theories and knowledge, by which they can explain various international phenomenon and understand various international finance policies, and build up a solid basis for their future job in economic or finance. Basing that, inducting students into the further studying of the latest development in the theory in International Finance, and trying hard to grasp the latest trends in international finance, that they can establish a foundation for future further steep study of problems in international finance.Teaching contents and basic requirements:The course is divided into three parts. The first part is the balance of payments theory and policy. The second part is exchange rate theory and policy. The third part is international monetary system and policy. The main teaching contents include: the basic knowledge of foreign exchange market, balance of payments theory and policy, macroeconomic policy in an open economy, exchange rate theory and policy, international monetary system and international financial market.Part The balance of payments theory and policyChapter 1 The foreign exchange marketTeaching contents: 1. The definition of exchange rate;2. Various participants in the foreign exchange market and the basic forces that operate in the market;3. Various exchange-rate definitions and their economic significance, the simple models of the determination of the spot and forward exchange rates, and the basic operational differences between fixed and floating exchange-arte regimes;4. The relationship between spot and forward exchange rates.Teaching requirements: Through studying, students are required to realize the fundamentals of the foreign exchange market, grasp various exchange-rate definitions and their economic significance, the essential differences between fixed and floating exchange rates, the determination of spot and forward exchange rates and the relationship between them.Teaching emphases: The various definitions of exchange-rates and their economic significances, the basic forces operating in the foreign exchange market, a simple model for the determination of the spot exchange rate, analysis of the fixed and floating exchange rates by the model, the determination of the forward exchange rate and the relationship with the spot exchange rate.Teaching difficulty: The estimates of the bid rate and the offer rate, the calculation of the real exchange rate and the effective exchange rate and their economic significance, the determination of the forward exchange rate and the relationship with the spot exchange rate. Chapter 2 Balance of paymentsTeaching contents: 1. What is balance of payments?2. How to understand the balance of payments surplus and deficit?3. The relationship between the current account and the national income account;4. The effects of changes in government expenditure and export on national income and the current account.Teaching requirements: Through studying, students are required to grasp the basic notions of balance of payments and the relationship with the national income account, that they can do preliminary analysis on the situation of the balance of payments and the relationship with the national income account, and can understand the multiplier effects in an open economy.Teaching emphases: The notion of balance of payments, the accounting and the basic components of the balance of payments, the significance of balance of payments surplus and deficit, open economy identities and the multipliers.Teaching difficulty: The differing between residents and non-residents, the accounting of international economic transactions, the significance of balance of payments surplus and deficit, the essentiality of the official settlements balance, how to look on balance of payments surplus and deficit.Chapter 3 Elasticity and absorption approaches to the balance of paymentsTeaching contents: 1. The elasticity approach to the balance of payments;2. The absorption approach to the balance of payments;3. The similarities and differences between the two models.Teaching requirements: Through studying, students are required to grasp the effects of the changes in exchange rate on the current account, national income, and absorption, that they can preliminarily analyse the economic phenomenon in the real world.Teaching emphases: The Marshall-Lerner condition, the price effect and volume effect of devaluation, the J-curve effect and its possible causes, the basic principle of the absorption approach, the effects of devaluation on national income and absorption, the relationship between the two approaches.Teaching difficulty: The assumption of the Marshall-Lerner condition, the possible causes of the J-curve effect, the terms of trade effect of devaluation on national income, the effects of devaluation on direct absorption.Chapter 4 Macroeconomic policy in an open economyTeaching contents: 1. The policy objectives and policy instruments in an open economy, the swan diagram and the Tinbergens rule;2. Mundell-Fleming model;3. Analyse the effectiveness of the fiscal and monetary policies under different exchange rate regimes;4. The effective market classification principle;Teaching requirements: Through studying, students are required to grasp the policy objectives and policy instruments in an open economy, the basic analysis of Mundell-Fleming model, and the effective market classification principle, that they can preliminarily analyse the macroeconomic policy in an open economy.Teaching emphases: Policy objectives and policy instruments in an open economy, Tinbergens rule, the Mundell-Fleming model, the effectiveness of fiscal policy and monetary policy under different exchange rate regimes, the effective market classification principle.Teaching difficulty: Tinbergens rule, the derivation and the shift of the IS, LM, and BP schedules, the effectiveness of fiscal and monetary policies under different exchange rate regimes, the effective market classification principle.Chapter 5 The monetary approach to the balance of paymentsTeaching contents: 1. The monetary approach to the balance of payments;2. The effect of devaluation on the balance of payments in the framework of monetarists;3. Compare the effects of the money supply shock, national shock, and foreign price shock on balance of payments under fixed and floating exchange rates;4. Empirical evidence on the approach and the implications of the monetary approach;Teaching requirements: Through studying, students are required to grasp the basic tenets of the monetary approach to the balance of payments, that they can preliminarily analyse the economic phenomenon in the real world.Teaching emphases: The simple model of the monetary approach, the monetarists concept of the balance of payments disequilibrium, the effect of devaluation on the balance of payments in the framework of the monetary approach, the effects of the money supply shock, national shock, and foreign price shock on balance of payments under fixed and floating exchange rates, the implications of the monetary approach.Teaching difficulty: The effect of devaluation on the balance of payments in the framework of the monetary approach, the effects of the money supply shock, national shock, and foreign price shock on balance of payments under fixed and floating exchange rates.Part The exchange rate theory and policyChapter 6 Purchasing power parity and floating exchange-rate experienceTeaching contents: 1. The purchasing power parity;2. The empirical evidence on the PPP;3. Explaining the poor performance of the PPP theory;4. The Balassa-Samuelson model.Teaching requirements: Through studying, students are required to grasp the basic principle of the PPP theory, that they can preliminarily analyse the relationship between price and exchange rate in the real world.Teaching emphases: The PPP theory, the explanations on the poor performance of the PPP, the Balassa-Samuelson model.Teaching difficulty: The explanations on the poor performance of the PPP, the Balassa-Samuelson model.Chapter 7 The monetary models of exchange-rate determinationTeaching contents: 1. The basis background to the monetary models of exchange-rate determination;2. The common characteristic and significant differences between the models;3. The flexible-price monetary model;4. The sticky-price monetary model;5. The real interest-rate differential model;6. Implications of the monetary views of exchange rate determination.Teaching requirements: Through studying, students are required to grasp the basic principle of the monetary models of exchange-rate determination, that they can preliminarily analyse the relationship between relative money supply and exchange rate in the real world.Teaching emphases: Uncovered interest rate parity, the flexible-price monetary model, the sticky-price monetary model and the Frankel real interest-rate differential model.Teaching difficulty: The sticky-price monetary model and the Frankel real interest-rate differential model.Chapter 8 The Portfolio Balance ModelTeaching contents: 1. The concept of risk premium and different types of risk;2. A simple version of the model and use this to examine the differing effects of OMOs, FXOs and SFXOs;3. Consider some of the dynamic features of the portfolio balance model.Teaching requirements: Through studying, students are required to know the concept of risk premium and different types of risk, grasp the simple version of the model and use this to examine the differing effects of OMOs, FXOs and SFXOs, consider some of the dynamic features of the portfolio balance model.Teaching emphases: how to use the model to examine the differing effects of OMOs, FXOs and SFXOs, the dynamic features of the portfolio balance model.Teaching difficulty: how to use the model to examine the differing effects of OMOs, FXOs and SFXOs, the dynamic features of the portfolio balance model.Chapter 9 Empirical Evidence on Exchange RatesTeaching contents: 1. the efficiency of the foreign exchange market.2. The model best predicts exchange-rate movements.3. How can we model exchange market participants expectations?Teaching requirements: Through studying, students are required to know what is meant by foreign exchange market efficiency, grasp the models best predict exchange-rate movements, six plausible theoretical methods for modelling the expected future exchange rate.Teaching emphases: the efficiency of the foreign exchange market, the rational expectation hypothesis (REH), how to test the Efficient Market Hypothesis, six plausible theoretical methods for modelling the expected future exchange rate.Teaching difficulty: how to test the Efficient Market Hypothesis, the understanding of the efficiency of the foreign exchange market and the rational expectation hypothesis.Chapter 10 Fixed, floating and managed exchange ratesTeaching contents: 1. The case for the fixed and floating exchange rates;2. The rationale behind discretionary intervention in the foreign exchange market.Teaching requirements: Through studying, students are required to grasp the advantages and disadvantages of the fixed and floating exchange rates, that they can preliminarily analyse the selection problem for the exchange rate regimes in the real world.Teaching emphases: The case for the fixed and floating exchange rates, the rationale for the managed floating.Teaching difficulty: The rationale for the managed floating.Part The international monetary systemChapter 13 Currency Derivatives: Futures, Options and SwapsTeaching contents: 1. The growth of the currency derivatives.2. Currency futures.3. Currency options.4. Currency swaps.Teaching requirements: Through studying, students are required to grasp the reasons of the rapid growth of currency derivatives, what is meant by currency futures, options and swaps, the similarities and differences between futures, forwards, options and swaps, how to use the derivatives to hedge and speculate, the factors determining the price of options.Teaching emphases: The similarities and differences between futures, forwards, options and swaps, how to use the derivatives to hedge and speculate, the different profiles of profit/loss of futures and options, the determinants of the price of the options.Teaching difficulty: The pricing models of futures and options contracts.Chapter 14 International macroeconomic policy coordinationTeaching contents: 1. What is meant by coordination of economic policies?2. Why does the need for international policy coordination arises?3. Is coordination always superior to non-coordination?4. What are the obstacles that prevent greater international coordination?Teaching requirements: Through studying, students are required to grasp the international economic coordination theory and policy, that they can preliminarily analyse the international economic coordination problem in the real world.Teaching emphases: The significance of international coordination, the rationale for the need for international coordination, the