25752 - International Finance

Learning outcomes

The aim of the class is to let students be able to carry out independent analyses of several topics in open macroeconomics. A specific emphasis is on pros and cons of international capital mobility, on foreign debt, on global imbalances and on the political economy of financial globalization. Each student is expected to interpret and understand, with a critical touch, macro integration processes and their implications for global stability, welfare and global peaceful coexistence.

Course contents

Sessions go through specific issues of Open Macroeconomics and deliver novel interpretations of international capital mobility after 2008. Main topics are:

1. the current account (CA) of the Balance of Payments of a country as an intertemporal choice

2. the benefits of intertemporal consumption

3.1. pros, cons and risks of financial openness when there are large international assets cross flows

3.2. optimal investment in a dynamic financially open economy

4. costs and benefits of international capital mobility

5. external debt sustainability

6. currency unions (and optimal electoral areas)

7. international portfolio diversification before and after 2008: the paradox of a domestic-foreign currency (the euro)

7. 1 foreign exchange reserves and the role of the IMF

8. Lucas paradox and international financial flows.

9. Financial openness: conclusion and rejoinder on costs and benefits

10. Back to the present: external Debt, public Debt, the roots of the 2008 great recession and beyond.

Readings/Bibliography

(BI) Banca d'Italia (1995) Tematiche istituzionali: Manuale della Bilancia dei pagamenti in Italia

(BCO ) Basevi, G, G. Calzolari, G. Ottaviano (2002) Economia Politica degli scambi internazionali, Carrocci editore, Roma

(IMF) International Monetary Fund 1993 Balance of payments manual. 5th. ed. -Washington

(LR) Lucas, R. (1990) Why doesn't capital flow from rich to poor countries? American Economic Review v.80 p.92 – 103

(FT) Feenstra R. and A. Taylor (2008) International Macroeconomics Worth Publisher

(ME) Melvin, M. (2004) International Money and Finance , Addison-Wesley, New York.

(OR) Obstfeld M. and Rogoff K. (1996) Foundations of International macroeconomics. MIT Press.

(OR2000) Obstfeld M. and Rogoff K. (2000) The six major puzzles in international macroeconomics: is there a common cause? NBER Working papers n. 7777 . www.nber.org

(RO) Rodrik D. 2018 Straight talk on trade Princeton University Press

(S) Schlitzer, G. (2000) Il Fondo Monetario Internazionale. Il Mulino, Bologna.

Frankel J.A. and Rose A. K. (1996) The endogeneity of the optimum currency area criteria. NBER Working Paper # 5700

Gros, D. (2004) Profiting from the euro? Seigniorage Gains from Euro Area Accession. Journal of Common Market Studies, 42, (4) 795-813.

Feldstein, M.S. and Horioka C. Y.(1980) Domestic saving and international capital flows. Economic Journal 90, 314-29.

Blanchard, O. and Giavazzi F. (2002), “Current Account Deficits in the Euro Area: The End of the Feldstein-Horioka Puzzle,” Brookings Papers on Economic Activity 2, pp.148-186.

The Economist (The retreat from everywhere: Led by European banks, the world's lenders are pulling back to their home markets) Apr 21st 2012

Obstfeld M. (2012) Does the current account still matter? NBER working paper # 17877,

Rossini G. (2010) Lo strabismo di Maastricht http://www.lavoce.info/articoli/pagina1001698.html

Sapir and Sekkat (1999) Optimal electoral areas. Should Europe adopt a single election day? European Economic Review 1595-1619

Breuss, (2008), A common election day for the Eurozone? Kyklos 19-32

Rey Helen, (2013), Dilemmas and Trilemmas: the global financial cycle and monetary policy independence. Mimeo

Stiglitz J (2014) Reconstructing macroeconomic theory to manage economic policy NBER WP 20517

Eugeni Sara (2015) An OLG model of global imbalances , Journal of International Economics, 95 (1), 83-97.

Rossini G. and P. ZANGHIERI, (2009) "Current account composition and the sustainability of external debt." Applied Economics .41, 5, 677-683

Podrecca, E. and G. Rossini (2015) " Wages and international factors' mobility". August Review of Development Economics

All references and lectures are contained in notes available on Insegnamenti Online enrolled students

Teaching methods

Most lectures are based on theoretical analyses of international macroeconomics and political economy of open macroeconomics.

The most used tools are mathematical models and graphical presentations.

Empirical studies and statistical measurements of some key variable will be provided.

P.S. Students should possess a reasonable background in Macroeconomics, Microeconomics, Statistics and International Economics (at the laurea triennale tier). However, all students are welcome regardless of their background. If required, they may attend the course while receiving specific help from the teacher during office hours.

Assessment methods

For  students attending sessions: written test (taking place only once a year at the end the course) with an optional additional discussion. Written exam is based on multiple choice questions, open questions and a few applied exercises. During classes the teacher asks questions. Right answers are rewarded with bonuses adding to the final grade. Home assignments may be taken by students and receive further bonuses.

For students not attending sessions the exam is only verbal at the officially assigned dates (appelli).

P.S. Students are strongly advised to attend sessions.

Teaching tools

Blackboard and PC projector for files available – access restricted to enrolled students - on Insegnamenti Online without copyright limitations, specific readings provided during sessions and referred in the lecture-files online.

Office hours

See the website of Gianpaolo Rossini