Post-Graduate Diploma in Management
Elective Course - Concepts and current issues in International Finance
Dr. V. Anantha Nageswaran
Singapore
Course description
The course seeks to thoroughly familiarise students with contemporary issues and developments in international economies and capital markets
such as the global economic and credit crises of 2008, the crisis in the Eurozone, the accumulation of international reserves by developing
countries and the outlook for Asia. It will examine the central role of the post-WW II international monetary and currency arrangements in these
crises.
In the course of explaining these developments, students would also learn important concepts such as Purchasing Power Parity, Relative
Purchasing Power Parity, Interest Rate Parity, Real and Nominal Effective Exchange Rates, models of exchange rate determination, international
equity and bond markets.
In the process, the course would empower students to be intelligent and perceptive users of financial and economic analysis and commentary. It
would also make them sceptical investors as long-term investment is about discernment and discretion and not delusions.
Further, the course will help them learn to connect the various international dots with each other and with developments in India.
Towards that end, the classes will be a mixture of lecture and seminar-type sessions (esp. sessions 6-10).
Students are expected to complete their assigned readings for each session, preferably before the sessions (!)
Course Evaluation
Group Presentation and written submission
Mid-term exam (mostly objective type)
20%
20%
Final Exam
50%
Class participation
10%
Class participation would be evaluated for attendance, level and quality of participation rather than on the positions taken on issues. There are
no right or wrong answers.
The group presentation involves class presentations by one or all members of the groups. That will be held during the course hours. Subsequent
to the presentations, students will elaborate their presentations in the form of written submissions.
The Institute will administer the mid-term exam and the final exams outside the course hours in consultation with students.
Course text book
The latest edition of ‘International Financial Markets – Prices and Policies’ (Richard M. Levich, McGraw Hill) is the prescribed text book.
However, the class presentations made by the lecturer and other prescribed reading materials are equally, if not more, important. That is why
attendance is essential. 
Optional Reading (books)
(1) ‘Origins of financial crises’ by George Cooper
(2) ‘Exorbitant Privilege’ by Barry Eichengreen
(3) ‘Lords of Finance’ by Liaquat Ahamed (esp. for Sessions 8 -10)
(4) The First Global Financial Crisis of the 21st Century (a VoxEU publication)
(http://www.voxeu.org/index.php?q=node/1352). Pl. download the report from this site. It is a free publication.
(5) The Great Stagnation by Prof. Tyler Cowen
Useful references
(1) Giddy’s web resources in Finance: http://pages.stern.nyu.edu/~igiddy/
(2) Glossary for International Finance: http://pages.stern.nyu.edu/~igiddy/gfmgloss.html
(3) http://blogs.ft.com/alphaville (See also, ‘Beyond BRICs’ in FT)
(4) http://www.economonitor.com (a good one-stop shop for all interesting commentary on the global economy)
(5) www.bis.org (BIS annual and quarterly reports are good ones to read or at least browse through)
(6) www.imf.org (the twice-yearly World Economic Outlook reports and Global Financial Stability Reports are very useful reads)
(7) www.bloomberg.com (the revamped site is a good source of news and opinions)
(8) http://mpettis.com/ (Prof. Michael Pettis’ blog on China financial markets)
(9) www.investorsinsight.com (John Mauldin’s Investor Insight)
(10) www.hussmanfunds.org (Weekly Market Commentary by John Hussman)
(11) http://www.gmo.com (Their monthly 7-Year Return Forecasts and Quarterly News letters of Jeremy Grantham are very useful. Other
commentaries are also available for free download)
(12) http://www.marginalrevolution.com (amazing coverage of global news and views by Prof. Tyler Cowen)
(13) http://www.rbi.org.in (RBI annual report on the Indian economy and the Ministry of Finance Annual Economic Survey presented on the eve
of the budget are good documents)
(14) My columns in MINT (financial daily): http://www.livemint.com/SectionPages/Columnist.aspx?NavId=88
Session No. and date
Session Topic
Relevant reading materials for the
session
Chapter 1 – IFM
Coverage during the session
Sessions 1
Concepts, key phrases, definitions
leading up to a review of the
Indian economy
Sessions 2
Overview of global policy context
and the European crisis
2. Sessions 3 & 4
International Parity conditions –
PPP, IRP and Fisher Parities
Chapters 4, 5 – IFM
(1) Parity Conditions
(2) Big Mac Index of
“Economist”
(3) Interest Rate Futures
(4) PPT on Exchange rates and
interest rate differentials
3. Session 5
Exchange Rate determination and
other related concepts
(1) BIS note on Carry Trade
(2) Bundesbank Note on the
empirical verification of interest rate
parity
(1) Carry Trade
(2) Nominal and Real Effective
Exchange Rates
(3) Notions of exchange rate
competitiveness
(4) Exchange Rate Forecasting
Quick revision of basic
concepts – real rate, risk and
return, exchange rate units –
through a discussion of
economic developments in
India, post-2004 and esp. post2008.
Global monetary policy, esp.
since 2008 (zero interest rate
bound, quantitative easing)
with particular reference to
European crisis (including a
discussion on why is Europe
not an optimal currency area)
4. Sessions 6 –7
An Overview of International
Monetary Systems and Recent
Developments in International
Financial Markets
5. Sessions 8-9
International Capital Markets
(1) Chapter 2 - IFM
(2) The Rules of the Game –
international money in historical
perspective (Ronald McKinnon –
1993)
(3) Mirage of Fixed Exchange Rates
(Obstfeld & Rogoff)
(4) Case for exchange rate flexibility
in oil exporting nations (Brad Setser
paper)
(5) Fixed to Flexible (Barry
Eichengreen, et al)
(1) Credit Suisse Annual Investment
Returns Year Book: 2009, 2010 (the
three stand-alone essays in each of
these two year books), 2011 – the
first two essays and 2012 (all three
essays)
(2) Introduction and Chapter 1 of
William Bernstein’s ‘Four Pillars of
Investing’
Additional reading:
(1) Other miscellaneous papers on
market correlation under the folder
‘Market Correlations’
(2) ‘Baby Boomers and US Stock
Returns’ (FRBSF Economic Letter)
(3) BoJ paper on Commodities and
Loose Monetary Policy
Gold standard
Fixed exchange rates, Bretton
Woods I,
US dollar rise and decline in
eighties, Japanese yen
strength, ERM crises,
The Asian crisis and
International Reserves
Accumulation by Emerging
Markets and the European
Crisis
(1) Global Bond and Stock
Markets – Performance and
Risk Characteristics.
(2) The rise of Emerging
Markets
(3) Commodities and their
relationship to other financial
assets
(4) Global Market correlations
under ‘Dollar Standard’
Other resources
(1) World Federation of Exchanges
(www.world-exchanges.org)
(2) Asian Bonds Online
(www.asianbondsonline.org) Monthly Bond Monitors and Weekly
Debt Highlights
(3) Presentation on Investment
Research and Investment Decision
flow-chart
(4) Jeremy Grantham Newsletters
(April 2007 letter and selected
subsequent letters)
6. Session 10
Global Financial and Banking Crisis (1) Essays (1), (2) from ‘Future of
- history of sovereign debt crises
Finance’ – LSE report
and the role of derivatives
(2) ‘Credit Booms Gone Bust’
(3) ‘A panoramic view of eight
centuries of financial crisis’ – Kenneth
Rogoff and Carmen Reinhart
Additional reading:
(1) ‘Origins of financial crises’
(George Cooper)
(2) ‘Euro Area Meltdown’ – a paper
(Eurointelligence)
(3) Financial Crisis and collapse of
Ethical Behaviour (White paper)
(4) UBS Report on Risk Management
Practices
Global Financial Crisis, Origins,
Resolution, Pending Issues,
Outlook for the World
Economy including Outlook for
Europe