This is a one semester module that is suitable for students doing a Master’s programme in Finance/Economics or related disciplines. Students taking this module will be required to have already taken International Finance 1 (FNCE 9005). This module builds on the knowledge, understanding and analytical techniques that the participant will have acquired in International Finance 1. A selection of models of exchange rate determination are developed and analysed. The empirical evidence in relation to these models is also examined.
Private and Sovereign Debt:
Mathematical analysis on how to stabilise government debt, government debt/GDP ratio.
Mathematical analysis in relation to how a change in the government discretionary deficit affects both the equilibrium deficit and the equilibrium deficit/GDP ratio.
Mathematical analysis on adjustments that must be made by a sovereign in order to restore the deficit/ GDP ratio to target in a given year if growth in GDP falls below target.
The doom loop between private and public debt.
Co-ordination of Internal and External Balance in an economy
Developing the IB and EB curves associated with the Swan model.
Tinbergen’s instruments/targets rule.
Using the Swan model to show the inter-dependence between fiscal and monetary policies with the Tinbergen rule.
Developing the IS/LM/BP model
Four diagram structures to develop the IS, the LM and the BP.
Analysis of slopes and positioning of IS/LM/BP.
Equilibrium in the model with fixed and flexible exchange rates.
Application of IS/LM/BP Analysis:
Application of IS/LM/BP analysis to both the large open economy and the small open economy. Case studies on exogenous changes in fiscal policy and monetary policy and their application to both the large open economy and the small open economy.
Comparison between the Classical Model and the IS/LM/BP Model:
Use of case studies to assess the effectiveness of fiscal/monetary policy changes in both models with fixed/flexible exchange rates.
There is an emphasis on “learning by doing” i.e. the Socratic method in this module. Students are asked questions during lectures and are “encouraged” to participate. Each topic involves significant “block building” and students are required in lectures to show both an understanding of the material developed in previous lectures and a capacity to apply this material in the further development of the topic. Students are also given problems to solve between lectures and then the students and lecturer jointly develop solutions in subsequent lectures. Part of the practical application of the theory will take the form of self-directed learning. There are a number of prescribed research papers which students are required to read and critically evaluate. There is a one hour exam based on these prescribed research papers.
| Module Content & Assessment | |
|---|---|
| Assessment Breakdown | % |
| Formal Examination | 80 |
| Other Assessment(s) | 20 |