Econ 434

International Finance

Course Description and Class Policies

This course will cover basic concepts, tools, and facts needed to understand the functioning of the global economy and international financial markets. We develop a theoretical framework for the analysis of the determinants of current account deficits, international capital movements, and real and nominal exchange rates. We also examine the relationship between interest rates and exchange rates, and discuss various measures of global capital market integration. This framework is then used to discuss relevant policy issues such as the emergence of the U.S. as a foreign debtor, the developing country external debt crises, and balance-of-payment crises.

Prerequisites

ECON 304 or 333 are required for this course. Knowledge of calculus is not required, but previous exposure will be helpful. We will cover any mathematical tools that you may need. You must have the prerequisites completed successfully before taking this course.

Textbook

The following textbook is required for Economics 434 and can be purchased at the University Bookstore.

Feenstra and Taylor, International Macroeconomics 4th Edition, New York: Worth MacMillan, 2014.

The course does not rely on this particular edition of the textbook, so earlier editions also cover the necessary material. Throughout the semester we will draw material from a variety of other sources, all of which will be posted on Canvas.

Course Requirements

This course consists of homework assignments, two midterm examinations, and a final examination.

In addition, your participation in class will make up a part of your final grade.

Homework

All homework assignments will be posted on the course website. Homework assignments can be done in groups, but every student must turn in his or her own problem set. Late assignments will be penalized 10% for each day they are late. A documented family or medical emergency may exempt you from this rule.

Exams

There will be two midterm exams and one final exam. The final exam is cumulative, and covers all the material in the course. Typically, new material will make up about one half of the material on the final and the material covered on previous exams will make up the other half of the final.

The date, time, and location of the final exam will be announced by the Registrar.

Participation

Your participation grade will be a combination of engagement throughout the semester and your compliance with health and safety guidelines regarding COVID-19. Please refer to the section of the syllabus entitled ”COVID-19 Statement” for a description of your responsibilities regarding social distancing and masking requirements.

Grading

The final grade of the course will be a weighted average of participation, five problem sets, two midterms, and a final exam. See the table below for the percentage each component of the course contributes to your final grade.

The preliminary grade scale is below but is subject to a curve if necessary.

        If you disagree with the way an exam or problem set is graded, you may submit it for review. You must submit a written argument describing the reason you deserve additional points. Once the problem set or exam has been returned, the dispute must be submitted within two class periods or the grade is final.

Submitting Feedback

Please see me if you have concerns or comments about the course. If you would like to provide feedback about this course you may also contact the Director of Undergraduate Studies in Economics or leave a comment in the box that the Department maintains in 303 Kern.

Topics

A tentative list of the topics that will be covered in this course (together with the corresponding chapter in the primary textbook) is as follows.

• Exchange Rates and the Foreign Exchange Market

– Feenstra Chapters 1 and 2

• The Monetary Approach to Exchange Rates

– Feenstra Chapter 3

• The Asset Approach to Exchange Rates

– Feenstra Chapter 4

• National Income Accounting and the Balance of Payments

– Feenstra Chapter 5

• Financial Globalization

– Feenstra Chapter 6

• Macroeconomic Policies and the Balance of Payments

– Feenstra Chapter 7

• Exchange Rate Regimes

– Feenstra Chapter 8

• Currency and Debt Crises

– Feenstra Chapter 9

• The Euro and other Challenges

– Feenstra Chapter 10

Additional Comments

After the first midterm, I will reassess how the course is progressing in mixed mode. If necessary I may determine that switching to completely remote learning is a better option. This may be a moot point if the university decides to switch back to completely remote courses.

COVID-19 Statement

We know from existing data that wearing a mask in public can help prevent the spread of COVID-19 in the community (Lyu & Wehby, 2020; CDC, 2020; Johns Hopkins Medicine, 2020). In accordance with PA Department of Health regulations and guidance from the Centers for Disease Control and Prevention (CDC), The Pennsylvania State University has determined that everyone will be required to wear a face mask in university buildings, including classrooms. You MUST wear a mask appropriately (i.e., covering both your mouth and nose) in the building if you are attending class in person. Masks have been provided for students, instructors, and staff, and everyone is expected to wear one.

        Students who choose not to wear a mask may not attend class in person. This is to protect their health and safety as well as the health and safety of their classmates, instructor, and the university community. Anyone attending class in person without a mask will be asked to put one on or leave. Instructors will end class if anyone present refuses to appropriately wear a mask for the duration of class. Students should also be sure they are situated at least six feet away from their fellow students and seated in a seat that is designated to ensure that distance. Students who refuse to wear masks appropriately or adhere to other stated requirements may face disciplinary action for Code of Conduct violations. On a case-by-case basis, students may consult with Student Disability Resources for accommodations if they cannot wear a mask. Students requiring such accommodations may be advised to take advantage of and participate in the course through synchronous remote learning, if available. Students requiring such accommodations should consult with academic advisors before the end of the drop/add period to locate alternative course offerings that will allow their participation through remote learning.

        Finally, students who are experiencing COVID-19 related symptoms should not attend class in person and are encouraged to contact a health care provider.

• Centers for Disease Control and Prevention. (2020, April 3) Recommendation Regarding the Use of Cloth Face Coverings, Especially in Areas of Significant Community-Based Transmis-sion. https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/cloth-face-cover.html

• Johns Hopkins Medicine. (2020, June 17) Coronavirus Face Masks & Protection FAQs. https://www.hopkinsmedicine.org/health/conditions-and-diseases/coronavirus/coronavirus-face-masks-what-you-need-to-know

• Lyu, W. and Wehby, G.L. (2020, June 16) Community Use Of Face Masks And COVID-19: Evidence From A Natural Experiment Of State Mandates In The US. Health Affairs. https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2020.00818?url_ver=Z39.88-2003&rfr_id=ori%3Arid%3Acrossref.org&rfr_dat=cr_pub++0pubmed&

Missed Exams

Many possible situations may arise that would result in your inability to attend class, attend exams, or perform at a minimally acceptable level during an examination. Illness or injury, family emer-gencies, certain University-approved curricular and extra-curricular activities, and religious holidays can be legitimate reasons to miss class or to be excused from a scheduled examination.

        In the case of your own illness or injury, confirmation from a physician, physician’s assistant, a nurse-practitioner, or a nurse is required. Be advised that University Health Services cannot provide such verification unless they have provided treatment and the student authorizes release of information to the instructor. Further, barring extraordinary circumstances, the confirmation must be available to the instructor prior to the missed course event.

        With regard to family emergencies, you must provide verifiable documentation of the emergency. Given the vast array of family emergencies the instructor will provide precise guidance as to what constitutes adequate documentation. Unless the emergency is critical you should notify the instruc-tor in advance of your absence from the scheduled course event. In cases of critical emergencies, you must notify the instructor within one week of your absence. For University-approved curricular and extra-curricular activities, verifiable documentation is also required. The student should obtain from the unit or department sponsoring the activity a letter (or class absence form) indicating the anticipated absence(s). The letter must be presented to the instructor at least one week prior to the first absence.

        In the case of religious holidays, the student should notify the instructor by the third week of the course of any potential conflicts. If a student misses a class during which an evaluative event (e.g., a quiz or an exam) takes place, and the student has a valid excuse, it is the policy of the Economics Department that the missed event may be made up in one of two ways that are to be decided by the instructor:

1. The student will take a make-up version for the missed evaluative event; or

2. The student will be excused from the missed event, and the weight of that event in the overall course grade will be reassigned to either the course final exam or to a subset of the subsequent evaluative events in the course.

Academic Integrity

Academic integrity is the pursuit of scholarly activity in an open, honest and responsible manner. Academic integrity is a basic guiding principle for all academic activity at The Pennsylvania State University, and all members of the University community are expected to act in accordance with this principle. Consistent with this expectation, the University’s Code of Conduct states that all students should act with personal integrity, respect other students’ dignity, rights and property, and help create and maintain an environment in which all can succeed through the fruits of their efforts.

        Academic integrity includes a commitment by all members of the University community not to engage in or tolerate acts of falsification, misrepresentation or deception. Such acts of dishonesty violate the fundamental ethical principles of the University community and compromise the worth of work completed by others.

Disabilities

Penn State welcomes students with disabilities into the University’s educational programs. Every Penn State campus has an office for students with disabilities. The Student Disability Resources (SDR) website provides contact information for every Penn State campus. For further information, please visit the Student Disability Resources website .

        In order to receive consideration for reasonable accommodations, you must contact the appropri-ate disability services office at the campus where you are officially enrolled, participate in an intake interview, and provide documentation.

        If the documentation supports your request for reasonable accommodations, your campus dis-ability services office will provide you with an accommodation letter. Please share this letter with your instructors and discuss the accommodations with them as early as possible. You must follow this process for every semester that you request accommodations.

Counseling and Psychological Services

Many students at Penn State face personal challenges or have psychological needs that may interfere with their academic progress, social development, or emotional well being. The university offers a variety of confidential services to help you through difficult times, including individual and group counseling, crisis intervention, consultations, on-line chats, and mental health screenings. These services are provided by staff who welcome all students and embrace a philosophy respectful of clients’ cultural and religious backgrounds, and sensitive to differences in race, ability, gender identity and sexual orientation.

• Counseling and Psychological Services at University Park (CAPS): (814) 863-0395

• Counseling and Psychological Services at Commonwealth Campuses: http://senate.psu.edu/faculty/counseling-services-at-commonwealth-campuses/

• Penn State Crisis Line (24 hours/7 days/week): (877) 229-6400

• Crisis Text Line (24 hours/7 days/week): Text LIONS to 741741

Educational Equity

Penn State University has adopted a “Protocol for Responding to Bias Motivated Incidents” that is grounded in the policy that the “University is committed to creating an educational environment which is free from intolerance directed toward individuals or groups and strives to create and maintain an environment that fosters respect for others.” That policy is embedded within an institution traditionally committed to academic freedom. Bias motivated incidents include conduct that is defined in University Policy AD 91: Discrimination and Harassment, and Related Inappropriate Conduct. Students, faculty, or staff who experience or witness a possible bias motivated incident are urged to report the incident immediately by doing one of the following:

1. Submit a report via the Report Bias web page: http://equity.psu.edu/reportbias/

2. Contact one of the following offices:

• University Police Services, University Park: 814-863-1111

• Multicultural Resource Center, Diversity Advocate for Students: 814-865-1773

• Office of the Vice Provost for Educational Equity: 814-865-5906

• Office of the Vice President for Student Affairs: 814-865-0909

• Affirmative Action Office: 814-863-0471

3. Dialing 911 in cases where physical injury has occurred or is imminent