25752 - International Finance

Academic Year 2023/2024

Learning outcomes

The goal of the course consists in providing students with all the knowledge to interpret the dynamics of exchange rates as well as the constraints imposed by international financial markets on domestic monetary and fiscal policies. After taking this course each student will be able to: - interpret the dynamcs of capital flows in modern economies; - study global imbalances caused by Balance of Payments fluctuations; - interpret major global economic shock and figuring out the best policy mix needed to cope with it.

Course contents

  1. Introduction to the course. Exchange Rate: spot, real, cross rates.Forward and futures.The exchange rate market.
  2. Arbitrage conditions.Exchange rate risk.Exchange-Rate regimes. The central bank’s balance sheet in open economy.
  3. Balance of payments. The ‘J’ effect and the pass through effect. The absorption approach to Balance of Payments.
  4. Economic Policy in Open Economy: the Mundell Fleming model with perfect and imperfect capital mobility. Optimal Currency Areas.
  5. The monetary approach to balance of payments.
  6. Purchasing Power Parity.
  7. Overshooting of Exchange-Rate.
  8. The portfolio balance approach to exchange-rate determination.
  9. Balance of Payment Crisis
  10. Target Zones


Pilbeam K., “International Finance”, fourth edition, 2014, Palgrave McMillan

Additional readings will be uploaded on Virtuale

Teaching methods

The course is offered on a traditional in-class lecture: there will be 10 class meetings, each of them is 3 hours-long, for a total of 30 hours.

Assessment methods

Written exam in presence. Oral exam is an option only for those who really want to show their knowledge. The starting grade is the written exam's grade: according the the performance showed in the oral session, it is possibile to improve or worsen from the written exam's grade.

Teaching tools

Slides, overheads and additional set of notes (copyrighted) will be distributed via Virtuale.

Office hours

See the website of Massimiliano Marzo