Economics 365
International Macroeconomics
Fall 2007
Dr. Léonie L. Stone
South 115B1, Office Hours: Tuesday, 2-3 and by appointment. There will be additional office hours each
week as necessary; talk to me or check the website for weekly additional hours.
Office: 245-5428 Home: 245-9383 Email: stone@geneseo.edu
http://www.geneseo.edu/~stone
Catalog Description:
A study of the macroeconomic and monetary aspects of international economics, with attention to
international accounting systems and the balance of payments, foreign exchange markets, international
monetary systems and macroeconomic adjustment, and monetary, fiscal, and exchange rate policies in open
economies.
Intended Learning Outcomes:
This course is designed to introduce students to the theory of international macroeconomics, and to apply
that theory to current international activities in the area of international monetary economics. Throughout
this course, the focus is on two simultaneous themes: economic theory and its application to international
problems; and the interaction between economic theories and the political arena. This course will examine the
theoretical foundations of modern monetary and exchange rate relationships between countries. The course
concludes with an examination of the impact of open economy operations on the policy-making of national
governments, and the feedback this provides to the domestic and international economies.
By the end of this course, students should be able to:
 Analyze a nation’s balance of payments.
 Understand issues related to international capital flows.
 Explain how nominal and real exchange rates are determined using purchasing-power parity,
monetary, and asset-market models.
 Understand balance-of-payments, price, and income adjustments under fixed, flexible, and gold
standard exchange rate regimes.
 Use the Mundell-Fleming model to illustrate international interest rate, income, and balance of
payments changes in response to fiscal and monetary policies.
 Expand the standard aggregate supply and demand models to use in open economies.
 Debate the merits of fixed and flexible exchange rates and alternative monetary systems.
 Analyze the history of international monetary systems, including recent developments in Europe,
Asia, and Latin America.
 Use the tools developed in this class to analyze international monetary and exchange rate policies for
developed and developing economies.
How This Course Relates to the School of Business Educational Objectives and Course Sequence:
 This course emphasizes critical thinking and the application of both logical and quantitative skills.
To succeed in this course, you must communicate clearly and effectively in writing, and you must
learn to relate graphing techniques to written arguments.
 This courses stresses the application of economic theory to real-world economic problems in
international economics that are relevant to economics, international relations, and business
administration students, as well as others.
 This course is an elective course in the economics sequence. It builds on skills learned in Econ 101
and 102, which are enforced prerequisites to this course.
Textbook:
Dominick Salvatore, International Economics, 8th edition (Wiley). The accompanying study guide is
suggested. Subscription to The Economist is REQUIRED. Please go to www.economistacademic.com, and
use this registration code: 3433. I will check that you have registered for this subscription.
Grading:
Your grade will be based on four exams (10/10/10/20% each), class participation and reading assignments
(15%), and the term project (35%). The fourth exam is given during the final period. Make-ups on exams
will be given only in the case of documented emergencies. Consideration will be given to exceptional class
participation in the case of borderline grades.
What PARTICIPATION Means:
You are, in addition to the assignments and end-of-semester presentation, responsible for keeping up with
current events that are relevant to international macroeconomics in general and specifically to the country
that you have chosen (and things that may have an impact on it). Every Friday we will have a current events
discussion, and you are expected to be prepared for this. Participation is 15% of your grade. If you do not
participate, the grade you will receive is 0%… which means that if you get 100% on everything else, the
maximum grade you can receive is a B. (Participation also includes general class discussion and
attendance/discussion at the presentations of others.)
The Term Project:
During the first week of class, you will choose a country for your term project (other than the United States).
You are, in addition to the assignments and end-of-semester presentation, responsible for keeping up with
current events in the country that you have chosen. Every Friday we will have a current events discussion,
and you are expected to be prepared for this. Further information on the term project will be distributed at
the end of the first week of class. Countries are selected on a first-come, first-served basis with approval of the
professor.
You will present these findings in a term paper and presentation at the end of the semester. Presentations
will be in the last two weeks of class. Papers are due the last day of class, although earlier submission is
encouraged.
See additional handout (to follow) for further details.
Exam Schedule:
Exam 1: Tuesday, September 18
Exam 2: Tuesday, October 16
Exam 3: Tuesday, November 13
Exam 4/Final: Wednesday, December 13, 8:00-11 a.m.
Note that, other than the final, the exam schedule in this class is tentative and may change,
depending on coverage of material and on this fall’s Fed Challenge schedule, which is unknown at
this time.
We may have the final exam early and schedule presentations during the final period (attendance
and participation is mandatory).
Course Schedule:
(Chapter dates listed are tentative and subject to change.)
Week 1: August 28, 30
Chapter 1, and Review of Macroeconomics
Week 2: September 4, 6
Chapter 13
Balance of Payments
Week 3: September 11, 14
Chapter 14
Foreign Exchange Markets and Exchange Rates
Week 4: September 18, 20
Chapter 15
Exchange Rate Determination
Week 5: September 25, 27
Chapter 16
The Price Adjustment Mechanism with Flexible and Fixed Exchange Rates
Week 6: October 2, 4
Chapter 17
The Income Adjustment Mechanism and Synthesis of Automatic Adjustments
Week 7: October 9, 11
Chapter 18
Open-Economy Macroeconomics: Adjustment Policies
NO CLASS OCTOBER 9-FALL BREAK
Week 8: October 16, 18
Chapter 18, continued
Week 9: October 23, 25
Chapter 19
Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply
Week 10: October 30, November 1
Chapter 20
Flexible versus Fixed Exchange Rates, the European Monetary System, and Macroeconomy Policy
Coordination
Week 11: November 6, 8
Chapter 20, continued.
Week 12: November 13, 15
Chapter 21
The International Monetary System: Past, Present, and Future
Week 13: November 20
TBA
Week 14: November 27, 29
Presentations
Week 15: December 4, 6
Presentations
Final: Tuesday, December 18th , 12-3 p.m., same room
(No early finals will be given under ANY circumstances.)