BA Modern History with Economics

This one-semester course in international macroeconomics aims to provide students with the theoretical tools and empirical facts for understanding and thinking critically about macroeconomics in an international context.

At the end of the term students will be able to interpret some key international macroeconomic policy issues, presented in policy-oriented publications and the popular press, using a new core theoretical framework where banks play a prominent role, and to understand how national macroeconomic policy challenges intersect with international economic issues - including financial globalization and the COVID-19 pandemic.

ECON30031 Macro 3 and (ECON10071 Adv Maths or ECON20071 Adv Maths)

ECON30031 Macro 3 and (ECON10071 Adv Maths or ECON20071 Adv Maths)

This one-semester course in international macroeconomics aims to provide students with the theoretical tools and empirical facts for understanding and thinking critically about macroeconomics in an international context.

At the end of the term students will be able to interpret some key international macroeconomic policy issues, presented in policy-oriented publications and the popular press, using a new core theoretical framework where banks play a prominent role, and to understand how national macroeconomic policy challenges intersect with international economic issues - including financial globalization and the COVID-19 pandemic.

Syllabus (9 weeks)

The course will focus on the following topics:

Topic 1. National Accounts and the Balance of Payments. [1 session]

Topic 2. Exchange Rates and the Foreign Exchange Market. [1 session]

Topic 3. Macroeconomic Policies in an Open Economy: The FF-GG-XX model.[4 sessions]

Topic 4. Financial Globalisation: Global Banking, Capital Flows and Macro-Financial Stability. [1 session]

Topic 5. International Coordination of Macroeconomic Policies. [2 sessions]

Tutorials (5 sessions)

Session 1. Overall structure of the FF-GG-XX model (Technical Manual, Section 1and sub-Section 2.1).

Session 2. Derivation of the GG and XX curves and solution of the FF-GG-XX modelunder fixed exchange rates (Technical Manual, sub-Section 2.2).

Session 3. Policy analysis and transmission of external shocks in the FF-GG-XXunder fixed exchange rates (Technical Manual, sub-Sections 2.3 to2.5).

Session 4. Derivation of the FG and XX curves, and solution of the FF-GG-XX modelunder flexible exchange rates (Technical Manual, sub-Sections 3.1and 3.2). Session 5. Policy analysis and transmission of external shocks in the FF-GG-XXmodel under flexible exchange rates (Technical Manual, sub-Sections 3.3and 3.4).

Synchronous activities (such as Lectures or Review and Q&A sessions, and tutorials), and guided self-study

At the end of this course students should be able to understand:

1. Key concepts of national accounts in an open economy.
2. The functioning of the foreign exchange market and the role of interest parity conditions in determining fluctuations in national currencies.
3. How fiscal and monetary policies, and external shocks, affect macroeconomic aggregates - including output, prices, the current account, and the exchange rate - in an open economy where banks play a critical role in the financial system.
4. How the globalisation of banking affects the international transmission of financial shocks.
5. The benefits of international coordination of macroeconomic policies in response to a negative global shock (such as COVID-19) in a simple two-country model of the world economy.

1. Problem-solving skills;
2. Skills of analysis, and the use of analytical models;
3. The evaluation and critical analysis of arguments, theories and policies;
4. Understand and evaluate policy-oriented publications on international macroeconomic issues.

independently locate and assess relevant literature, and to draw on these to develop understanding and to construct arguments.
 

1. Select and deploy relevant information;
2. Communicate ideas and arguments in writing;
3. Apply skills of analysis and interpretation;
4. Manage time and work to deadlines.

20% Mid-term exam

Online, multiple choice questions on taught material. 
 

80% Exam

Open book exam.
 

Piazza, drop-in sessions, virtual office hours.

Beyond the Classroom: Supplementary Readings

Topic 1

The US current account deficit and twin deficits

https://www.imf.org/external/pubs/ft/fandd/basics/current.htm

Topic 2

Monetary approach to exchange rate determination: see FT, Chap. 3.

Topic 3

The AA-DD-XX model: FT Chapter 7; see Supplementary Technical Material and simulation programme on Blackboard.

Topic 4

Banking without Borders

http://documents.worldbank.org/curated/en/983971510071016607/Global-financial- development-report-2017-2018-bankers-without-borders

The New Dynamics of Financial Globalization

https://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our% 20Insights/The%20new%20dynamics%20of%20financial%20globalization/Financial% 20globalization_Full%20Report_August_29_2017%20(1).pdf

Benefits and Costs of Capital Account Liberalisation

https://www.imf.org/external/pubs/ft/fandd/basics/capital.htm

Financial Spillovers, Spillbacks, and the Scope for International Macroprudential Policy Coordination

https://www.bis.org/publ/bppdf/bispap97.htm Financial Globalization and Economic Policies

https://www.brookings.edu/research/financial-globalization-and-economic-policies/ Basel III: International Regulatory Framework for Banks

https://www.bis.org/bcbs/basel3.htm

Bank Regulation and Supervision a Decade after the Global Financial Crisis https://www.worldbank.org/en/publication/gfdr/report

Topic 5

Obstacles to International Policy Coordination, and how to Overcome Them

https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2016/12/31/ Obstaclesto-International-Policy-Coordination-and-How-to-Overcome-Them-41074 IMF, G-20 Surveillance Note, IMF Publications (Washington DC: 2020). G-20 Surveillance Note, Group of Twenty Leaders' Summit, November 21-22, Riyadh Summit, Virtual Meeting (imf.org)

History of the 1918 Flu Pandemic

https://www.cdc.gov/flu/pandemic-rescources/1918-commemoration/1918- pandemichistory.htm

General References

Robert C. Feenstra, and Alan M. Taylor, International Macroeconomics, 5th ed., Macmillan. 2021. Hereafter FT.

Pr. P.-R. Agénor, "The FF-GG-XX Model for Macroeconomic Policy Analysis in an Open Economy," Technical Manual, University of Manchester. Hereafter TM.

General References, by Topic:

Topic 1: FT Chapter 5.

Topic 2: FT Chapters 2 and 4.

Topic 3: TM (mandatory reading, except for Section 4 and Appendix). Topic 4: FT Chapter 6.

Topic 5: Technical Note (mandatory reading).

History of the 1918 Flu Pandemic.

https://www.cdc.gov/flu/pandemic-resources/1918-commemoration/1918-pandemic- history.htm

For every 10 course unit credits we expect students to work for around 100 hours. This time generally includes any contact times (online or face to face, recorded and live), but also independent study, work for coursework, and group work. This amount is only a guidance and individual study time will vary