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Jason Abrevaya, Chair 2225 Speedway, Stop C3100, Austin, TX 78712 • Admin: 512-471-3211 & Advising: 512-471-2973

Spring 2007

ECO 339L • International Finance

Unique Days Time Location Instructor
33260 TTh
9:30 AM-11:00 AM
UTC 3.124

Course Description

International Economics studies the interaction of economies with the rest of the world, and comprises two main building blocks. The first one is International Trade, comprised by theories explaining the observed flows of goods and services between countries. The second block is International Finance, which studies the flows of capital across borders, the market for currencies and the fundamentals that determine the equilibrium prices in these markets. The goal of Econ 339L is to provide students with a conceptual framework to understand the behavior of these markets and the tools to trade effectively in them. The course has two parts: the first one covers the description of international financial markets, and the analysis of its related instruments. We will start by taking the spot price for currencies and interest rates as given, and apply arbitrage arguments to price exchange-rate related instruments. We will study contracts that depend on spot and money markets, such as forwards, futures, options, eurobonds and swaps, and will focus on the use and pricing of these financial products. For the second part of the course, we will turn to the macroeconomic fundamentals of currency markets. We will cover the national accounting of the balance of payments and equilibrium models of exchange rate determination, both for the short and in the long run. We will look at the macroeconomics of economies under fixed and flexible exchange rate regimes, focusing on how fiscal and monetary policies may affect the equilibrium and lead to currency crises. Finally, we will cover some of the literature on early warning indicators for such crises, financial contagion, and discuss the cases of UK, Mexico, South East Asia, Russia, and Argentina


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