Open economy economics 4003-202EGO
The subject matter of the course will consist of issues raised by the special problems of economic interaction between sovereign states. The course is devoted to international finance and open-economy macroeconomics issues.
We first analyze the degree of integration of the goods and financial markets to study the effectiveness of macroeconomic policy in an open economy. To assess the effectiveness of fiscal and monetary policy we discuss the importance of capital mobility and exchange rate regime. The course covers a broad range of topics including exchange rate determination, balance of payments determinants, currency crises. The incentives and consequences to operation of multinationals in foreign markets is examined. The source and the development of the financial crisis of 2009-2011 is scrutinized and the international transmission mechanism is outlined. The course will conclude with a discussion of relative advantages of fixed and flexible exchange rate systems, deep integration of world financial markets, theoretical and practical aspects of the single currency in Europe and the role of international factors on a nation’s economic performance. The issue of policy coordination in a monetary union is also addressed. The questions related to the rise of new economic poles in the world economy are also discussed.
1. International integration of the goods and financial markets. Measuring income in the open economy, purchasing power parity, Feldstein-Horioka puzzle.
2. Long run equilibrium. Classical approach to the long-run equilibrium in the loanable funds market in the open economy.
3. Exchange rate determinants. Exchange rate regimes, interest rate parity, the Mundell-Fleming approach.
4. Theory and practice of the functioning of multinational corporations
5. Costs and benefits of financial integration. Classification of financial globalization, costs and benefits of financial globalization, challenges facing policymakers in the open economy.
6. Exchange rate regimes, international monetary system and international monetary integration. International financial organizations, the theory of optimum currency areas, European Monetary Union, the functioning of the European Central Bank.
7. Macroeconomic policy coordination in a monetary union
8. The emergence of new economic poles form the perspective of international finance.
Student's workload:
lecture - 30 h
preparation to the lecture (including presentation) - 45 h
preparation to the examination - 45 h
total - 120 h
Type of course
Prerequisites (description)
Learning outcomes
Competences
KNOWLEDGE
• Knows how to define the main indicators that describe exchange rate market situation and balance of payments position.
• Understands how international trade and financial relations affect consumers, firms, and economic policy
• Knows how to critically evaluate the claims of politicians and other policymakers regarding the economic effects of their proposals of macroeconomic policy and international trade
• Understands the incentives to operate abroad faced by the multinationals
• Has factual knowledge about international trade and finance
• Knows institutions that affect the functioning of the global financial market
• Is acquainted with sources of macroeconomic data on the EU and other countries of the world.
• Knows the sources and remedies to international financial crises.
• Has knowledge about the costs and benefits of globalization
SKILLS
• Can choose the methods and tools suited for the analysis of an open economy
• Is able to use a set of tools used by economists to analyze the process of financial integration that are useful in the research on the functioning of the EU
• that will assist the international professional/business person to make better decisions related to the global economic environment
• Can interpret social and economic processes taking into account impact of the degree of openness of an economy
• Can asses the degree of country risk related to the activity of multinationals in the foreign markets.
• Predicts the challenges facing firms and individual consumers in a multipolar global economy
• Can write a short essay
SOCIAL SKILLS
• Can organize own work activities
• Knows the limits of own knowledge and is aware of the need for long-life learning to accommodate changes in social sciences
• Can elaborate recommendations related to the functioning of countries in the global economy that can be use din the preparation of social projects.
• Has communication skills required to transmit knowledge about the limitation of national economic policy in the global economy.
• Can assess the activity of firms and individuals in an open economy in terms of economic efficiency.
Assessment criteria
The grade is based on the final examination results (75%) and prepared in groups discussion of an issue presented in the news media related to the subject matter of the course (25%). The final exam consists of 30 multiple-choice questions (worth 1 mark each) and 2 out of 3 analytical problems (worth 9 marks each). The presentation can be awarded 16 marks and students cannot retake it. The pass grade is at 32 marks.
Bibliography
J. Rymarczyk (red.) Międzynarodowe stosunki gospodarcze, PWE, Warszawa 2006, ch. 3-9, 12-13.
Steven Brakman, Harry Garretsen, Charles van Marrewijk, Arjen van Witteloostuijn, Nations and Firms in the Global Economy, Cambridge University Press, Cambridge, 2006
Additional information
Additional information (registration calendar, class conductors, localization and schedules of classes), might be available in the USOSweb system: