• Read Chapter 17: Fixed Exchange Rates and Foreign Exchange Intervention - Chapter 17 PPT
• Assignment Due THURSDAY, November 12, 2009 for 50 points
• Chapter 17: Why Study Fixed Exchange Rates?
• Central Bank Intervention and the Money Supply
  • The Central Bank Balance Sheet
  • Foreign Exchange Intervention
  • Sterlization
• How the Central Bank Fixes the Exchange Rate
  • Interest Parity Revisited
  • Money Market Equilibrium Under a Fixed Exchange Rate System - Diagram is Quiz Question #1!
• Policies with a Fixed Exchange Rate
  • Ineffective Monetary Policy - Quiz Question #2
  • Highly Effective Fiscal Policy is Quiz Question #3
  • Changes in the Exchange Rate
• Homework: Do Problems 4, 9 and 11 in Chapter 17 for THURSDAY, November 5, p. 476. (5 pts)

• Chapter 17: Fixed Exchange Rates continued
  • Balance of Payments Crises and Capital Flight
• Managed Float and Sterilized Intervention
• Reserve Currencies and the World Monetary System
  • Currency Standard
  • The Gold Standard

      Week 8

October 27, 2009     Continue Chapter 16: Output and the Exchange Rate in the Short Run

• Read Chapter 16: Output and the Exchange Rate in the Short Run - Chapter 16 PPT
• Chapter 16: Short-Run Output with the Exchange Rate - Continued
  • Temporary Changes in Monetary and Fiscal Policy
    • Monetary Policy
    • Fiscal Policy
  • Policies to Maintain Full Employment
• Revisit Monetary and Fiscal Policies
• Inflation Bias and Other Problems
• Permanent Shifts in Monetary and Fiscal Policy
  • Permanent Change in the Money Supply
  • Adjustment to a Permanent Increase in the Money Supply
• Homework: Do Problems 2, 4, 6, 7 and 14 in Chapter 16

• Chapter 16: Monetary and Fiscal Policies Continued
  • A Permanent Fiscal Expansion
• Macroeconomic Policies and the Current Account
• Gradual Trade Flow Adjustment and Current Account Dynamics
  • The J-Curve
  • Exchange Rate Pass-Through and Inflation
• Work on Homework Problems 2, 4, 6, 7 and 14 in Chapter 16 to Turn in Today.

      Week 7

October 20, 2009     Chapter 16: Output and the Exchange Rate in the Short Run

• Read Chapter 16: Output and the Exchange Rate in the Short Run - Chapter 16 PPT
• Chapter 16: Short-Run Output with the Exchange Rate
  • Aggregate Demand
    • First Disposable Income
    • The Real Exchange Rateand Aggregate Demand
    • Output Determination in the Short-Run
    • The DD Schedule - graphing
  • Asset Market Equilibrium

• Chapter 16: Monetary and Fiscal Policies Continued
  • The AA Schedule
  • Output, the Exchange Rate, and the Asset Market Equilibrium
  • Deriving and Shifting the AA Schedule
• Short-Run Equilibrium: AA and DD together
• Temporary Changes in Monetary and Fiscal Policy
  • Monetary Policy
  • Fiscal Policy
  • Policies to Maintain Full Employment

      Week 6

October 13, 2009     Chapter 15: FINISHED

• Chapter 15: PPP Long Run Model Concluded
  • Beyond PPP: A General Model of Long-Run Exchange Rates
    • The Real Exchange Rate
    • Demand, Supply, and the Long-Run Real Exchange Rate
    • Nominal and Real Exchange Rates in Long-Run Equlibrium
  • International Interest Rate Differences and the Real Exchange Rate
  • Real Interest Rate Parity

• Midterm Exam will be at 2:10 pm in Room 201 of the Wen Hui building

      Week 5

October 10, 2009     Chapter 15 continued

• Chapter 15: PPP Long Run Model Concluded
  • Empirical Evidence of PPP and the Law of One Price
  • Explaining Problems with PPP
    • Trade Barriers and Nontradables
    • Departures from Free Competition
    • Differences in Consumption Patterns and Price Level Measurement
    • PPP in the Short Run and in the Long Run
  • Beyond PPP: A General Model of Long-Run Exchange Rates
    • The Real Exchange Rate
    • Demand, Supply, and the Long-Run Real Exchange Rate
    • Nominal and Real Exchange Rates in Long-Run Equlibrium
• Midterm Exam will be on Oct. 15, 2009 at 2:10 pm in Room 201 of the Wen Hui building

• NO CLASSES UNTIL SATURDAY, OCTOBER 10, 2009

      Week 4

September 29, 2009     Chapter 15 continued

• Chapter 15: The Long Run Model of Exchange Rate Determination continued
  • Ongoing Inflation, Interest Parity and PPP
  • The Fisher Effect
  • Long-run Time Paths of Variables to a Permanent Increase in the Money Supply

      Week 3

September 22, 2009     Chapter 14 continued

• Chapter 14: The Money Supply and the Exchange Rate in the Short-Run
  • Linking Money, the Interest Rate, and the Exchange Rate
  • Pay ATTENTION to the Graphical Explanation too!
  • Money Market and Exchange Rate Linkages - see Figure 14-7
  • Changes in the Money Supply (domestic AND foreign)
• Money, the Price Level, and Exchange Rate in the LONG-Run
  • Money and Prices
  • The Long Run Effects of Money Supply Changes
  • Empirical Evidence
  • Money and Exchange Rate in the Long-Run
• Inflation and Exchange Rate Dynamics
  • Short-Run Price Rigidity versus Long-Run Price Flexibility
  • Hyperinflations - example in the text is Bolivia
  • PERMANENT Money Supply Changes and the Exchange Rate
  • GRAPH ON PAGE 316 - Figure 14-12!!!
  • Exchange Rate Overshooting

September 24, 2009    Chapter 15: Price Levels and the Exchange Rate in the Long Run

• Read Chapter 15: Price Levels and the Exchange Rate in the Long-Run - Chapter 15 PPT
• Chapter 15: The Long Run
  • The Law of One Price
  • Purchasing Power Parity (PPP)
  • Absolute and Relative PPP
• A Long-Run Exchange Rate Model Based on PPP
  • Relative Money Supplies
  • Interest Rates
  • Output Levels

      Week 2

September 15, 2009    Chapter 13 continued

• Chapter 13 continued
  • The Demand for Foreign Country Assets
  • Equilibrium in the Forex Market
  • Interest Parity Condition
  • Interest Rates, Expectations, and Equilibrium
  • Note the "A Simple Rule" section as well as the exact formula in the text (7th Ed. p. 321)
  • Do #6, 7, 8, & 14 in class!!! Note that #14 required reading the Appendix to Chapter 13.
• A News Article about Norman Borlaug, who received the 1970 Nobel Peace Prize

September 17, 2009     Chapter 14: Money, Interest Rates, and Exchange Rates

• Read Chapter 14: Money, Interest Rates, and Exchange Rates - Chapter 14 PPT
• Chapter 14: Money
  • Money Defined
  • The Demand for Money by Individuals
  • Aggregate Money Demand
  • Equilibrium Interest Rate
  • Supply and Demand
• An Introduction to The Money Supply and the Exchange Rate in the Short-Run
  • Linking Money, the Interest Rate, and the Exchange Rate

      Week 1

September 8, 2009  -  An Introduction and begin Chapter 12: National Income Accounting

• Read Chapter 12: National Income Accounting - Chapter 12 PPT - Day 1 PPT
• First part of the Chapter - NIPA - a Review from Macroeconomics
  • National Income and the relationship to Gross National Product (and GDP)
  • C + I + G + CA
  • Net Foreign Wealth and Current Account Balance
• Saving and the Current Account
  • National Saving
  • Public and Private Saving
• Make sure to read the Case Study
• The G-20 Finance Ministers' Meeting in London at the Weekend!

September 10, 2009     Finish Chapter 12 and begin Chapter 13: Exchange Rates

• Read Chapter 13: Exchange Rates - Chapter 13 PPT
• Day 2 PPT - Small
• Chapter 12: Balance of Payments
  • Relationship between the Current Account and Savings (Including Foreign Savings - KNOW this identity!!)
  • Balance of Payments Accounts
    • Current Account - Trade and Services
    • Capital Account - Small
    • Financial Account - Payments for the Trade and Services - VERY IMPORTANT!
• Chapter 13: Exchange Rates
  • The Foreign Exchnage Market - how do we "price" goods and services?
  • Spot and Forward Rates
  • Foreign Exchange Swaps - note what swaps are!
  • Futures and Options - just briefly discussed
• In class we discussed the Balance of Payments and Foreign Exchange markets - the following are not required but available for your information (FYI)
  • The Balance of Payments spreadsheet I showed in class from the BEA is available to download here.
  • The Excel Spreadsheet of Foreign Exchange I showed in Class  -  The Daily Forex at the Wall Street Journal is available here

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Last Update: September 25, 2009
By Andrew L. H. Parkes, Ph. D.