Iowa State University
Department of Economics
Spring 2016
Tuesdays and Thursdays, 12:40 – 2 pm
East 119
Prof. Rajesh Singh
Office: 281 Heady
E-mail: rsingh@iastate.edu
Office hours: Tuesdays, 10 am – 11 am
Thursdays, 10 – 11 am
International Finance
COURSE OBJECTIVES
This course will focus on studying macro-economic problems in interdependent
economies. The key macroeconomic variables to be studied are exchange rates and
international capital flows, both under free markets and under policy controls (as
currently practiced in a large part of the world). A part of the course will focus on
understanding exchange rate unions, particularly in the context of Euro. Along the way,
we will consider the decision problems faced by countries (its individuals and
policymakers) in an increasingly interconnected world and analyze how they interact to
determine international allocation of resources and determination of exchange and
interest rates.
TEXTBOOK
The required textbook is International Economics (or Macroeconomics), by Robert C.
Feenstra and Alan M. Taylor, third edition. (Used second edition will work fine too.)
CLASS MATERIAL ONLINE
Lecture slides used in class meetings will be available on the class website
(http://www2.econ.iastate.edu/classes/econ457/rksingh) in advance.
Since one of the main objectives of the course is to cultivate the ability to think
analytically about international capital markets and institutions, students are strongly
encouraged to become familiar with current international economic issues, for example,
current trends in US-China, US-Europe exchange rates, ongoing economic recession in
Europe and uncertainty about the future of the Euro, policy responses of central banks in
US and Europe, and the Chinese exchange rate policy. The Economist (a weekly)
provides an excellent coverage and discussion of current economic and financial events.
Some of the articles published weekly in the Economist are freely available at the
Economist's home page (http://www.economist.com). Daily coverage can be found in
Financial Times and the Wall Street Journal.
On the course website I will post a list of newspaper/magazine articles relevant to the
class. I will regularly recommend articles for you to read as a motivation for upcoming or
past course topics. Each exam will have bonus question/s on star-marked readings.
PROBLEM SETS/QUIZZES
During the term, 4 problem sets will be handed out. These problem sets will help you
learn the material presented in the class and in the text, and help you practice for the
exams. Problem sets will be worth 10% or your grades. The problem sets will be graded
on a ‘good (G)’, ‘satisfactory (S)’, and ‘unsatisfactory’ (U) basis, which will be worth 2,
1, and 0 points, respectively. Non-submission will automatically earn a 0. The solutions
to these problems will be posted on the class website after their due date.
OFFICE HOURS
Office hours are on Tuesdays and Thursdays 10 am – 11 am, or by appointment. Please
also feel free to e-mail me with questions and/or comments. I strongly encourage students
to take advantage of office hours.
EXAMS/GRADING
There will be three (each one hour-long) midterm exams (no make-ups) during the
semester, plus a final exam. The midterms will cover lectures, all the reading material,
and problem sets (see course outline). The final exam will be comprehensive. The final
grade will be based upon the following


Three midterms (best 2 out of 3): 27.5 percent each
Comprehensive final: 35 percent
The letter grades will be based on the individuals’ mastery of the course material, as
displayed by each student’s overall course score, and not on a curve. The exact cut-offs
for letter grades will be announced after the second midterm.
OUTLINE OF COURSE TOPICS
A tentative topic-wise calendar of lectures is as follows
Date
Topic
Chapters
Part I: Introduction; Understanding Exchange Rates
1/12
Why study International Finance?
Ch. 1
1/14 – 1/21
Exchange Rates and the Foreign Exchange Market
Ch. 2
1/26 – 2/2
Understanding exchange rates in the Long Run
Ch. 3
2/4 – 2/9
Understanding Exchange rates in the Short Run
Ch. 4
2/11
HOUR EXAM I – Chs. 1 - 3
Part II: Balance of Payments; Intertemporal approach to current account determination
2/16– 2/23
Understanding Exchange rates in the Short Run
Ch. 4
2/25– 3/1
National Income accounting
Ch. 5
3/3-3/8
The Gains from Financial Globalization
Ch. 6
3/10
Hour Exam II -- Chs. 4, 5, and a part of 6 (covered in class up to March
5)
Part III: International Macroeconomic Policy
3/22 – 4/5
Output, Exchange rates and Macroeconomic policies in the short run Ch.
4/7
Hour Exam III -- Chs. 6 - 7
Ch. 7
4/12 – 4/14
International Monetary Experience
Ch. 8
4/14 – 4/19
Exchange Rate Crises
Ch. 9
4/21– 4/28
Optimum Currency Area (Euro)
Ch. 10
Final Exam: Thursday, May 5, 12-2pm (East 119)