KOÇ UNIVERSITY
ECON 322 - INTERNATIONAL FINANCE
Fall 2007
Course Webpage: http://home.ku.edu.tr/~kyilmaz/econ322
Instructor: Kamil Yılmaz
Office: CASE 242; Tel. 338 1458; email: kyilmaz@ku.edu.tr
Office Hours: Mon-Wed. 3:15-4:30 pm and by appointment
Teaching Assistant: İsmail Baydur; Office: CASE 271; Tel: 338 1636; email: ibaydur@ku.edu.tr
Objective
This course covers the concepts and models that will be necessary to understand the monetary
side of the international economy. Balance of payments will be the first topic to be covered. The
workings of the foreign exchange market will be discussed next. The determination of exchange
rate and the national output in the short- and long-run equilibrium of an open economy will be
analyzed. The implications of increased integration of global financial markets will be
emphasized as a major theme throughout the semester. The behaviour of and the choice among
different exchange rate systems; the effect of macroeconomic policies on the open economy
equilibrium; the causes and consequences of financial crises and contagion; the role of
international financial institutions; and the development of a more stable international economic
system are some of the topics that will be studied throughout the semester.
Required Text
Richard E. Caves, Jeffrey Frankel and Ronald W. Jones, 2007, World Trade and Payments: An
Introduction, Tenth Edition, Pearson Addison Wesley.
Course Requirements
Class attendance is not mandatory, but the course is designed such that students who choose not
to attend the lectures will be at a disadvantage.
There will be two mid-term exams, one final exam, and an unspecified number (ranging from 4 to
6) of quizzes. There will be no homework assignments. You are encouraged to study the problems
and review questions at the end of each chapter. I will occasionally distribute additional review
questions as well. You are not supposed to turn in the answers to these questions. However, they
are still important, because the quizzes will most likely be based on the review questions.
Quizzes may or may not be announced in advance.
The final grade will be determined as follows:
1st Mid-term Exam
20 percent
2nd Mid-term Exam
25 percent
Final Exam
40 percent
Quizzes
10 percent
Class Participation
5 percent
If you miss an exam, you have to make sure that your excuse is documented and approved by the
University. Under no circumstances will a make-up be given for mid-term exams. If you have a
valid reason with required documentation, such as a doctor’s report approved by the University,
your midterm points will be added to the final exam, which will then have a weight of 60 or 65
out of 100 depending on which mid-term exam you missed. Since you can drop the lowest quiz
score, no make-up quiz will be given.
ECON 322
INTERNATIONAL FINANCE
ACADEMIC HONESTY
The following note summarizes the University’s position on Academic Honesty. Read it carefully.
“Honesty and trust are important to all of us as individuals. Students and faculty adhere to the following
principles of academic honesty at Koç University:
1. Individual accountability for all individual work, written or oral. Copying from others or providing answers
or information, written or oral, to others is cheating.
2. Providing proper acknowledgement of original author. Copying from another student’s paper or from
another text without written acknowledgement is plagiarism.
3. Authorized Teamwork. Unauthorized help from another person or having someone else write one’s paper or
assignment is collusion.
Cheating, plagiarism, and collusion are serious offenses resulting in an F grade and disciplinary action.”
COURSE OUTLINE - FALL 2006
Topic
Chapters
Part I. Money, Income ad the Balance of Payments
1
2
The Balance of Payments
Ch. 15
2 lectures
The Foreign Exchange Market and Trade Elasticities
 Supply and demand for foreign exchange
 Elasticities; Devaluation effects
Ch. 16
2 lectures
3
Open Economy Keynesian Model
 National savings Identity
 Fical and export multipliers
Ch. 17
3 lectures
4
Spending and Exchange Rate in the Keynesian Model
 Tranmission of disturbances
 Expenditure switching/Reducing
 Monetary factors
Ch. 18
3 lectures
Ch. 19
2 lectures
Ch. 20
2 lectures
Midterm Exam, October 31, 2007
5
6
Monetary Approach to Balance of Payments


Money supply and the price level
Purchasing power parity
Small Open Economies with Nontraded Goods
 Relative pice of nontraded goods
 The monetary approach with nontraded goods
Part II.
International Financial Markets and Macroeconomic Implications
7
8
The Globalization of Financial Markets
Ch. 21
2 lectures
The Mundell-Fleming Model under Partial Capital Mobility
 Fiscal and monetary policy
 Under fixed exchange rates
Ch. 22
2 lectures
9
The Mundell-Fleming Model in Modern Times
 Under flexible exchange rates
 Under perfect capital mobility
Ch. 23
2 lectures
Crises in Emerging Markets
Ch. 24
3 lectures
Interdependence and Policy Coordination
Ch. 25
2 lectures
Expectations, Money and the Exchange Rate Determination
 Interest parity conditions
 Monetary models of exchange rate and overshooting
Ch. 27
2 lectures
Midterm Exam, December 5, 2007
10
11
12
ECON 322
INTERNATIONAL FINANCE