Course Guidelines and other Trivia

Balance of Payments

Class Timings

Classes: Monday 9:30 AM to 11:00 AM

            Wednesday 9:30 AM to 11:00 AM

Contact Hours

            Monday 2:00 PM to 4:00 PM and by appointment.

Evaluation

The students would be evaluated on the basis of an midterm examination (40%) and a final examination (50%). The remaining 10% will be based on classroom interaction. No requests for make up examinaions will be entertained unless the request is accompanied with appropriate documents from the University and other prescribed sources.

Course Outline:

The primary objective of the course is to develop analytical skills towards understanding the formal models of open economy macroeconomics. The students would learn to identify institutional factors influencing the macroeconomic performance of open economies, and to examine the scope for effective macroeconomic policies in open economies. Some of the proposed topics covered in the course would include
  1. The Mundell-Fleming Model
  2. Macroeconomic Interdependence in Open Economies
  3. Price Flexibility in the Open Economy
  4. The Monetary Approach to the Balance of Payments
  5. The Asset Market Approach to Exchange Rate Determination
  6. Issues in Exchange Rate Management: Models of Speculative Attack, and Exchange Rate Target Zones

Readings

Readings: Although not containing sufficient detail on all of the topics covered in the module, the most suitable textbook for the course is:
  1. C P Hallwood and R MacDonald, International Money and Finance, Blackwell, 2000 (H & M)
In addition to the textbook references, you are also strongly advised to consult the original journal articles referred to on the reading list.
TOPIC 1. THE MUNDELL-FLEMING MODEL
  1. J M Fleming, “Domestic Financial Policies under Fixed and Floating Exchange Rates”, IMF Staff Papers 1962, pp. 369-379.
  2. R A Mundell, “Capital Mobility and Stabilisation Policy under Fixed and Flexible Exchange Rates”, Canadian Journal of Economics and Political Science , 1963, pp. 475-485.
  3. H & M, Chapter 5
TOPIC 2. MACROECONOMIC INTERDEPENDENCE
  1. R. N. Cooper, “Economic Interdependence and Coordination of Economic Policies”, in R Jones and P. Kenen Handbook of International Economic, Vol II, 1985, pp. 1196-1207.
  2. R. N. Cooper, “Macroeconomic Policy Adjustment in Interdependent Economies”, 1960, Quarterly Journal of Economics, Vol 83
  3. H & M, Chapter 6
TOPIC 3. PRICE FLEXIBILITY IN AN OPEN ECONOMY
  1. K. Rogoff, “The Purchasing Power Parity Puzzle”, 1996, Journal of Economic Literature , Vol 84. pp 647-668
  2. H & M, Chapter 7
TOPIC 4. MONETARY APPROACH TO BALANCE OF PAYMENTS
  1. R. Dornbusch, “Devaluation, Money and Non-Traded Goods", 1973, American Economic Review , Vol 63. pp 871-880
  2. H & M, Chapter 8
TOPIC 5. MONETARY VIEW OF EXCHANGE RATE DETERMINATION
  1. R. Dornbusch, “Expectations and Exchange Rate Dynamics", 1976, Journal of Political Economy , Vol 84. pp 1161-1176
  2. R. Dornbusch, “Exchange Rate Expectations and Monetary Policy", 1976, Journal of International Economics , Vol 6. pp 231-244
  3. H & M, Chapter 9
TOPIC 6. GLOBALIZATION, CAPITAL FLOWS AND CRISIS
  1. Carmen Reinhart and Ken Rogoff, AThe Aftermath of Financial Crisis , 2009, American Economic Review , Vol 11. pp 311-325
  2. Michael Dooley and Michael Hutchison, Transmission of the US Subprime Crisis to Emerging Markets: Evidence on the Decoupling-Recoupling Hypothesis , 2009, NBER Working Papers No. 15120
  3. India and the Financial Crisis: Reading will be announced later