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Prior to enrolling in courses at this language level, students must have completed or tested out of a minimum of four semesters (or six quarters) of college-level Spanish at their home university in the U.S.

OBJECTIVES:

To apply the macroeconomic theory to an international context, in other words, an open macroeconomy. The student will examine the effect of the inclusion of the current account as well as a capital account (including official reserves) in macroeconomic models, with fixed prices (Keynesian model) and flexible prices (Monetarist model) and with fixed and flexible rates (including the role of expectations and the risk of a fixed exchange rate). The course will apply the theory to the context of developed countries as well as developing countries like Mexico.

COURSE CONTENT:

I. Payment Balance
1.1. Checks and balances
1.2. Registration of transactions
1.3. Concept of double entry

International Macroeconomic Models Excluding the Role of Capital Markets

II. Exchange Rate, Elasticity of Commerce
and Payment Balance
2.1 The conditions of Marshall-Lerner
2.2 The conditions of Bickerdicke, Robinson
and Metzler
2.3 The “J” Curve
2.4 The effect of elasticity over the
stability of changing markets

III. Level of Income (and employment), Interest
Rate and Payment Balance
3.1 The Keynesian model of payment balance for
small and big countries
3.2 The effect of international transmission
with fixed and flexible rates
3.3 Politics of expense reduction and
absorption
3.4 Problems of internal and external
equilibrium
3.5 The allocation problem

IV. The Supply of Money, the Level of Prices
and Payment Balance
4.1 The concept of sterilization
4.2 Flujo-especie mechanism
4.3 Power of purchase equality concept
4.4 Monetary models and monetarists of the
payment balance with fixed rates
4.5 Fixed exchange-rate systems, such as the
gold standard, currency (Bretton Woods) and
monetary councils

V. Developing Countries, National and
International products and Payment Balance
5.1 IMF and World Bank models of stabilization
and structural macroeconomic adjustment
5.2 The potential contractual effects of
devaluation in LDC’s

International Macroeconomic Models Including the Role of Capital Markets

VI. International Financial Markets
6.1 An introduction to foreign
exchange/currency markets (Euromarkets)
6.2 The liberalization and innovation of
financial markets from the 60’s to
present day
6.3 The indebtedness problem of developing
countries from the 80’s to present day

VII. Fiscal and Monetary Policy with Capital
International Mobility
7.1 The Mundell-Fleming model with capital
mobility and fixed and flexible rates
7.1 The causes, consequences and lessons of
the 1994 Mexican Peso crisis

VIII. Interdependence, Added Supply and
Coordination of Policies
8.1 The effects of international transfer of
conflict
8.2 The advantages of coordinating policies
between countries
8.3 Optimal monetary areas and the European
Monetary System

Determination of the Exchange Rates of Active International Markets

IX. Expectations, Money and Determination of
Exchange Rates
9.1. The monetarist model of flexible rates
9.2. The role of expectations in speculative
bubbles
9.3. The honey moon effect in foreign exchange
systems
9.4. Adjustment phenomenon on fixed exchange
rates in flexible-rate markets
9.5. Reasons for volatility in foreign
exchange rate markets with flexible rates

X. Exchange rate, Prediction and Risk
10.1. Prediction methods
10.2. Prize of risk-taking
10.3. Diversification of fixed exchange rates
in flexible-rate markets

BIBLIOGRAPHY:

Caves R. E.,. Frankel J. A & Jones R. W., World Trade and Payments: An Introduction, Seventh Edition, 1996.

Krugman P.R. & Obstfeld M., International Economics: Theory and Policy, Third Edition, 1994.