Skip to main content

International Finance


    Module description

    In this module we provide you with an overview of foreign exchange rate markets and their effect on the economy. We introduce you to balance of payments accounting, models for exchange rate determination and the relevant parity conditions governing exchange rates and monetary and fiscal policy, as well as the basics of the role of exchange rates for corporations and investors.

    Learning objectives

    By the end of the module, you will:

    • understand the relationship between balance of payments accounts and national income accounts, and the mechanics of balance of payments accounting
    • understand how the foreign exchange market functions and know common parity conditions in the foreign exchange market, including purchasing power parity, covered interest parity and uncovered interest parity
    • be able to analyse the effects of monetary and fiscal policy in an open economy and understand how market participants’ beliefs about future monetary policy affect the current exchange rate
    • know the difference between floating and pegged exchange rates and how they affect policy effectiveness
    • know what different international monetary arrangements have been in place historically.