Course ObjectivesPrerequisitesReadingsProblem SetsAssessmentClass ScheduleEconomics 103 — Spring 2004International Monetary RelationsMarch 29, 2004Instructor: Marc-Andreas MuendlerOffice: Economics 312Office hours: TuTh 3:00pm - 4:00pmPhone: (858) 534-4799E-mail: [email protected] Assistant: Rosalin WuE-mail: [email protected]: Cognitive Science Building, Room 001Class Time: TuTh 9:30am - 10:50amClass Web Page: econ.ucsd.edu/muendler/teach/04s/1031 Course ObjectivesThis course examines the macro-economy in an international setting. The cour-se covers the exchange rate and the current account, and relates their determi-nation to world capital markets and the domestic macro-economy. The coursediscusses economic policies and their effects under different exchange rateregimes—ranging from floating rates to fixed rates to monetary unions—, andpresents implications for the current account and the economy as a whole. Afinal part of the course turns to recent issues including global financial crisesand the present US current account imbalance.2 PrerequisitesEconomics 110A-B.3 ReadingsLecture notes become available online at econ.ucsd.edu/muendler/teach/04s/103before each class.Textbook: Krugman and Obstfeld (2003)Readings: McKinnon (1993), Rogoff (1996);Obstfeld and Rogoff (1995);McKinnon (2001), Allsopp and Artis (2003), Obstfeld (1998),Stiglitz (2000)1The readings help you review the lecture material. The readings (articles)are available as custom materials from AS Soft Reserves (copyright fees apply).Most readings can also be accessed through the class web page (no copyrightcharges on campus; see link above) and the UCSD electronic library.4 Problem SetsThere will be three problem sets, due on scheduled dates throughout the quar-ter. You are encouraged to work on the problems with your classmates. Thefirst problem set will have eight questions, the latter two will have six ques-tions each. Correct answers count for four points per question.Your teaching assistant Rosalin Wu will hold review sections to help youapproach the problems. Rosalin will determine the section time with you atthe beginning of the quarter. Your solutions to the problem sets will be gradedand your performance on them will be part of the final grade. Problem setshave to be handed in before 9:30am on the due date. You may bring them toclass before it starts.5 AssessmentThere will be two midterm exams and a final exam. The two midterm examswill take 80 minutes each and the final exam will take 120 minutes. All examsare cumulative.Your final raw score will be your total points from the three exams and thethree problem sets:Problem sets: 80 points (32+24+24 points) 4/20, 5/11, 6/3Midterm 1 (80 minutes): 80 points 4/27Midterm 2 (80 minutes): 80 points 5/18Final (120 minutes): 120 points finals weekTotal: 360 pointsMidterm exams last for the time of a lecture. (Problem sets have to be handedin before 9:30am on the due date.) The final exam lasts 120 minutes.Your final letter grade will be inferred from the typical grade distribution(curve) in economics classes at UCSD. You can find this grade distribution atecon.ucsd.edu/muendler/teach/04s/103. So, the difficulty or simplicity of problemsets and exams will not matter, whereas your relative performance in compari-son to your classmates will determine your final letter grade. The overall curvewill be shifted in your favor to account for the typical students’ GPA in Econ103, which tends to be higher than average.26 Class Schedule1. Tue, March 30: Introduction to International Monetary Relations(Krugman and Obstfeld 2003/Ch. 12 and 18)2. Thu, April 1: International Monetary Systems, Past and Present(Krugman and Obstfeld 2003/Ch. 18; McKinnon 1993)PROBLEM SET 1 OUT3. Tue, April 6: Exchange Rates and Foreign Exchange Markets(Krugman and Obstfeld 2003/Ch. 13)4. Thu, April 8: An Asset Approach to the Exchange Rate(Krugman and Obstfeld 2003/Ch. 13)5. Tue, April 13: A Monetary Approach to the Exchange Rate(Krugman and Obstfeld 2003/Ch. 14)6. Thu, April 15: Monetary Policy and Exchange Rate Determination(Krugman and Obstfeld 2003/Ch. 14)7. Tue, April 20: Purchasing Power Parity(Krugman and Obstfeld 2003/Ch. 15; Rogoff 1996)PROBLEM SET 1 DUE8. Thu, April 22: Purchasing Power Parity(Krugman and Obstfeld 2003/Ch. 15; Rogoff 1996)PROBLEM SET 2 OUTTue, April 27: MIDTERM 1covering lectures 1 through 8,Krugman and Obstfeld (2003)/Ch. 12 through 15 (Ch. 18 will only be onthe following exams); and McKinnon (1993), and Rogoff (1996)9. Thu, April 29: Flexible Exchange Rates(Krugman and Obstfeld 2003/Ch. 16)10. Tue, May 4: Policy under Floating Exchange Rates(Krugman and Obstfeld 2003/Ch. 16)11. Thu, May 6: Flexible, Managed and Fixed Exchange Rates(Krugman and Obstfeld 2003/Ch. 16, 17)12. Tue, May 11: Policy under Fixed Exchange Rates(Krugman and Obstfeld 2003/Ch. 17; Obstfeld and Rogoff 1995)PROBLEM SET 2 DUE13. Thu, May 13: International Monetary Policy(Krugman and Obstfeld 2003/Ch. 18 and 19)PROBLEM SET 3 OUT3Tue, May 18: MIDTERM 2covering lectures 9 through 13,Krugman and Obstfeld (2003)/Ch. 12 through 19; and Obstfeld and Ro-goff (1995)14. Thu, May 20: The US Current Account Deficit(McKinnon 2001)15. Tue, May 25: Optimum Currency Areas and the Euro(Krugman and Obstfeld 2003/Ch. 20; Allsopp and Artis 2003)16. Thu, May 27: Capital Market Integration(Krugman and Obstfeld 2003/Ch. 21; Obstfeld 1998)17. Tue, June 1: International Financial Crises(Krugman and Obstfeld 2003/Ch. 22; Stiglitz 2000)18. Thu, June 3: International Financial Crises(Krugman and Obstfeld 2003/Ch. 22; Stiglitz 2000)PROBLEM SET 3 DUEThu, June 10 (Finals Week): 8:00am to 11:00am FINAL EXAMcovering lectures 1 through 18,Krugman and Obstfeld (2003)/Ch. 12 through 22; and McKinnon (1993),Rogoff (1996), Obstfeld and Rogoff (1995), McKinnon (2001), Allsopp andArtis (2003), Obstfeld (1998), Stiglitz (2000)ReferencesALLSOPP, C., AND M. J. ARTIS (2003): “The Assessment: EMU, Four Years On,” OxfordReview of Economic Policy, 19(1), 1–29.KRUGMAN, P. R., AND M. OBSTFELD (2003): International economics: Theory and policy.Addison Wesley, Boston, 6th edn.MCKINNON, R. I. (1993): “The Rules of the Game: International Money in HistoricalPerspective,” Journal of Economic Literature, 31(1), 1–44.(2001): “The International Dollar Standard and the Sustainability of the USCurrent Account Deficit,” Brookings Papers on Economic Activity, pp. 227–39.OBSTFELD, M. (1998): “The Global Capital Market: