Lahore University of Management Sciences

ECON 352 International Finance

Spring 2016-17

Instructor Syed Muhammad Hussain

Room No. 260
Office Hours TBA
Email Muhammad.hussain@lums.edu.pk
Telephone
Secretary/TA
TA Office Hours
Course URL (if any)

Course Basics
Credit Hours 4
Lecture(s) Nbr of Lec(s) Per Week 2 Duration 110 minutes
Recitation/Lab (per week) Nbr of Lec(s) Per Week Duration
Tutorial (per week) Nbr of Lec(s) Per Week Duration

Course Distribution
Core
Elective
Open for Student Category
Close for Student Category

COURSE DESCRIPTION
The main objective of this course is to provide you with a clear understanding of the foundations of international
finance by using a blend of theoretical concepts and real world applications such as balance of payments problems
and policies and the causes of exchange rate movements. In addition, we will also examine some current policy-
related issues that have taken center stage in international media. For example, Which exchange rate regime is
better: fixed or flexible? What are the benefits and costs of forming a monetary union? Why have there been
exchange-rate crises in Asia, Russia and South America in late 1990s? How can the international monetary
system be reformed and improved? By the end of the course you should be able to understand basic analysis
of open economy models, apply this analysis to address key policy issues and take interest in the debates that
makes this area so exciting and fascinating.

COURSE PREREQUISITE(S)

Intermediate Macroeconomics

COURSE OBJECTIVES
To introduce students to the basic concepts of international finance including exchange rates and foreign exchange markets.
To enable students to analyze graphical and basic mathematical models of open economy.
To study real world problems in lights of topics learnt in the course.

Learning Outcomes
 Lahore University of Management Sciences
At the end of this course, we will discuss the experience of various developing countries and see how the theoretical models
explain the success and failure stories of these countries. We will also discuss some of the recent developments in Pakistan and
rationalize them using the tools we will have by then.

Grading Breakup and Policy

Quiz(s): 6 (one will be dropped) 30%

Midterm Examination: 30%
Final Examination: 40%

Examination Detail

Yes
Midterm
Exam

Yes
Final Exam

COURSE OVERVIEW
Recommended Objectives/
Week Topics
Readings Application
Foreign Exchange Markets, Balance of Melvin (chapters 1 5)
1-6 Payments, Exchange rates, Interest Rate Parity, Krugman & Obstfeld (chapters 12
International Capital Flows. 15)
Output and Exchange Rates in the Short Run Krugman & Obstfeld (chapter 16)
7-8 The DD-AA model

Fixed Exchange Rates and Foreign Exchange Krugman & Obstfeld (chapter 17)
9-10 Intervention

11 History of International Monetary System Krugman & Obstfeld (chapter 18)

Floating Exchange Rates Regimes
12
Special Topics in International Finance
13-14 (Optimum Currency Areas, Experience of
Developing Countries)
Krugman & Obstfeld (chapter 19)
Krugman & Obstfeld (chapters 20,
22)

Textbook(s)/Supplementary Readings

International Money and Finance, 7th edition, Michael Melvin.

International Economics: Theory and Policy, 6th edition, Krugman and Obstfeld.