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International Finance

Overview

    Module description

    This module provides an overview of foreign exchange rate markets and their effect on the economy; an introduction to balance of payments accounting, models for exchange rate determination and the relevant parity conditions governing exchange rates and monetary and fiscal policy; and 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 understand 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.