Prof. M. El-Sakka Dept. of Economics
Kuwait University
Economics of international Finance Econ. 315
Course syllabus-Summer 2014/2015
Prof. M. El-Sakka
This course focuses on topics in macroeconomics of international finance and capital flows, including balance of payments and its adjustment, exchange rate and its determination, capital flows and other related topics.
The course begins with the analysis of the balance of payments with reference to the balance of payments in Kuwait, international liquidity, balance of payments adjustments under different exchange rate regimes. Special attention is to be given to the case of a small open economy. Exchange rate determination is to be covered in details including the specific factors of demand and supply that determine exchange rates under the fixed and flexible exchange rate systems and exchange rate dynamics. Spot and forward markets, purchasing power parity, and interest rate parity are considered. The international monetary system and international financial organizations are also discussed with reference to recent attempts to reform the system and the role of the IMF in macroeconomic stabilization. Finally a variety of topics such as currency crises and contagion, currency boards, dollariszation and currency unions will be covered.
Detailed course schedule:
1.
Balance of Payments (BOP)
 BOP principles
 Accounting balances and disequilibrium in international transactions
 The IMF method of reporting international transactions
 BOP of Kuwait.
(Ref. Salvatore (2011) Ch. 13.)
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Prof. M. El-Sakka Dept. of Economics
Kuwait University
(Hallwood & MacDonald (2000) Ch.2.)
2.
Foreign Exchange Markets and Exchange Rates
 Functions of the foreign exchange markets
 Foreign exchange rates
 Spot and forward rates, swaps, futures and options
 Foreign exchange risks, hedging and speculation
 Interest arbitrage and efficiency of foreign exchange markets
(Ref. Salvatore (2011) Ch. 14.)
(Hallwood & MacDonald (2000) Ch.3.)
(Copeland (2000) Ch.2-3.)
3.
Exchange Rate Determination
 Purchasing power parity theory: theory and evidence
 Monetary approach to the BOP and exchange rates
 Portfolio Balance Model and Exchange Rates
 Exchange rate dynamics
(Ref. Salvatore (2011) Ch. 15.)
(Hallwood & MacDonald (2000) Ch.7 - 9.)
4.
Price Adjustment Mechanism with flexible and fixed exchange rates
 Adjustment with flexible exchange rates
 Effect of exchange rate changes on domestic prices and terms of trade
 Stability of foreign exchange markets
 Adjustment under the gold standard
(Ref. Salvatore (2011) Ch. 16.)
5.
The Income Adjustment Mechanism and Synthesis of Automatic Adjustment
 Income determination in a closed economy
 Income determination in a small open economy
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Prof. M. El-Sakka Dept. of Economics
Kuwait University
 Foreign repercussions
 Absorption approach
 Monetary adjustment and synthesis of the automatic adjustments
(Ref. Salvatore (2011) Ch. 17.)
(Hallwood & MacDonald (2000) Ch.4.)
6.
Open Economy Macroeconomics: Adjustment policies
 Internal and external balance with expenditure-changing and expenditure switching policies.
 Fiscal and monetary policies for internal and external balance with fixed exchange rates
 The IS-LM model with flexible exchange rates
 Policy mix and price changes
 Direct controls
(Ref. Salvatore (2011) Ch. 18.)
(Copeland (2000) Ch.4.)
7.
Prices and Output in an Open Economy: Aggregate Demand and supply
 Aggregate demand and supply in a closed economy
 Aggregate demand and supply in an open economy under fixed and flexible exchange rates
 Fiscal and monetary policies in open economies
(Ref. Salvatore (2011) Ch. 19.)
8.
Flexible Versus Fixed Exchange Rates, Currency Unions and Currency Crises
 The case for flexible exchange rates
 The case for fixed exchange rates
 Currency substitution
 Optimum currency areas
 Currency crises and contagion
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Prof. M. El-Sakka Dept. of Economics
Kuwait University
(Ref. Salvatore (2011) Ch. 20.)
(Hallwood & MacDonald (2000) Ch.14.)
(Copeland (2000) Ch.9-10 & 16.)
9.
The International Monetary System: Past, Present and Future.
 the Bretoon Woods system: Mechanism and evolution
 The international monetary system: present and future
(Ref. Salvatore (2011) Ch. 21.)
(Hallwood & MacDonald (2000) Ch.20.)
EVALUATION SYSTEM
EVALUATION SYSTEM
1st mid term 14/6/2015 20
2nd mid term 5/7/2015 20
Quizzes 10
Attendance 5
Final exam (comprehensive) 45
_____________
Total 100
Distribution of Attendance Marks
Absence
1
2
3
4
5
6
GRADING
A 95+
A- 90-94.5 marks
5
4.5
4
3
1
0
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Prof. M. El-Sakka Dept. of Economics
Kuwait University
B+ 87-89.5
B 83.5-86.5
B- 80-83
C+ 77-79.5
C 73.5-76.5
C- 70-73
D+ 65-69.5
D 60-64.5
F < 60
REFERENCES:
 Hallwood & MacDonnald (2000) “International Money and Finance”, 3 rd edition.
Blackwell.
 Salvatore (2007) “International Economics”, 9 th edition, Wiley.
 Copeland (2000) “Exchange Rates and International Finance”, 3 rd edition. Prentice
Hall.
OFFICE HOURS
Saturday, Monday, and Wednesday 11.00–12.00 pm weekly.
Students are served on a first-come first-serve basis. If more than one student are seeking help, each student will be allocated a maximum of ten minutes. In case a student needs additional time, an appointment at a later time is fixed so as to allow other waiting students to be assisted. Telephone calls are only allowed in emergencies.
WEBSITE
There is a web site for this subject in my home page:
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Prof. M. El-Sakka Dept. of Economics
Kuwait University http://www.cba.edu.kw/elsakka
GENERAL INFORMATION
- Absenteeism: university regulations governing absenteeism are applied to all students. This involves a first warning after 3 hours, a second warning after additional 3 hours absence and a failure notice for any absence beyond the six hours. It should be noted, however, that students may lose marks as a result of absenteeism
- Tardiness: students are expected to be in the lecture hall on time. Students showing signs of tardiness shall be warned for the first time and subsequently barred from the lecture.
- Make up policy: students who are unable to attend an exam due to illness or other extenuating circumstances (appropriate documents are required to verify the indicated circumstances) may request a make-up exam.
- Plagiarism and cheating are strictly prohibited by university policies as well as academic ethics.
- For electronic mail message you can use one of the following E-mail addresses: elsakka@cba.edu.kw
or mohammed.elsakka@gmail.com
Best of my wishes
Dr. Mohammed El-Sakka
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