International macroeconomics (PSIA)

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The course tackles the main issues in international finance and macroeconomics: financial globalization, exchange rates and capital flows, economic policies in open economies and international financial crises. The focus of the course will be on policy oriented questions. In particular, we will analyze macroeconomic events such as global imbalances, the recent financial crisis, the euro debt crisis and monetary and fiscal policy in an open economy framework with both macroeconomic theory and empirical evidence. The objective of the course is to offer empirical and theoretical tools that will help them analyze current issues related to macroeconomic policies in open economies, financial globalization and financial crises. Although the course will not be as theoretical and model oriented as a standard international macroeconomics course in a master program in economics, the students are expected to have a basic understanding of the standard modelling tools in macroeconomics as well as standard techniques in econometrics.


Grades are based on a group homework (40%) and a final examination (60%)

Homework: by groups of 4 (3 min./5 max.). To be handed back by email in pdf ( and by April 11

From a list (see below for potential papers) of academic and policy articles which deal with an issue in international macroeconomics and finance, write a policy brief of 4 pages maximum. This brief should be aimed for a policy maker. It should provide a summary of the main arguments/results, put the paper into a larger context (potentially link with previous contributions), give a critical assessment of its methodology, assumptions and original contribution and analyze its potential policy implications.

Final exam sample

Final exam (May 2018) with answers

Review session slides


Basic textbook: International Economics: Theory and Policy, 10/e by Paul R. Krugman, Maurice Obstfeld and Marc Melitz (KOM), Pearson . This textbook is a basic reference but I will often go beyond the textbook.

Required readings are marked by an asterisk * and are expected to be done before class.

Readings with ** are articles or working papers that can be used as the basis for the homework essay.


Syllabus, References and Slides

1) Globalization : stylized facts and historical comparisons, from hyperglobalization to deglobalization? (course 1)


• The measures of financial globalization

• The present and the past of financial globalization

• The comparison of commercial and financial globalization

2) Global imbalances: should we worry?  (course 2 and 3)


• Global imbalances and the US current account deficit

• Is there an “exorbitant privilege” of the dollar?

• Global imbalances and the financial crisis

US data on the Balance of payments

French data on the Balance of payments

The Greek balance of payment

3) Can one explain exchange rate movements?  (course 3 and 4)


• The exchange rate as a relative price

• The exchange rate as the price of an asset

• The uncovered interest parity condition

* KOM : chapter 14

4) The link between monetary policy, interest rate and the exchange rate (course 5-6)


• The impact of interest rates and expectations on exchange rates

• The overshooting model of Dornbush and the volatility of the exchange rate

• Exchange rates and monetary policy at zero interest rates

* KOM : chapitre 15

5) How to explain the long term exchange rate? (course 7)


• The theory of Purchasing Power Parity (PPP) and its empirical validity

• Why do poorer countries have lower prices? the Balassa-Samuelson effect

* China, PPP and its real exchange rate

* KOM : chapter 16


6) How do exchange rates affect production (and vice versa) ? (course 8-9)


• The Mundell-Fleming model (AA/DD version)

• Economic policy in an open economy, spillovers of fiscal and monetary policies ("currency wars")

* KOM: chapter 17


7) How to choose between fixed and flexible exchange rates ? (course 9-10)


Source: The Country Chronologies to Exchange Rate Arrangements into the 21st Century: Will the Anchor Currency Hold? 2017, Ethan Ilzetzki, Carmen M. Reinhart, Kenneth S. Rogoff NBER Working Paper No. 23135

• The loss of monetary policy autonomy under fixed exchange rates (the trilemma and its recent challenge)

• The case of Denmark, the Gold Standard and China

• Balance of payment crises: fundamentals based crises and self-fulfiling crises

*KOM: chapter 18


8) Is the euro an optimal currency area? (course 11)


• The theory of optimal currency areas

• Risk sharing in a monetary union

 * KOM : chapter 20


9) Sovereign debt crises and the euro crisis (course 12)

slides 1

Slides 2

  • Sovereign debt crises
  • The euro crisis
  • The debate on Eurozone reforms

*KOM : chapter 22