25752 - INTERNATIONAL FINANCE

Conoscenze e abilità da conseguire

The purpose of the course is to study the impact of globalization on firms strategc decisions. Attention will be focused to customization of company's offering in different countries, to standardized/differentiated approach to competition in differnt countries, to choices of reconfiguate their business model on an international basis.

Contenuti

This course is intended to provide a basic understanding of the fundamentals of international finance, and to build on this understanding through treatment of special topics: international pricing and exchange rate pass-through, the uncovered interest parity puzzle, global imbalances and valuation effects, currency crises and current account reversals, sovereign debt.

The course will provide an overview of the state of the art of both the theoretical and empirical literature available on these selected topics, thereby highlighting micro-foundations and economic rationales for the most important stylized facts.

An important part of the course will be devoted to the study of recent episodes of international financial crises.

 

Pre-requisites: A previous course in macroeconomics (and microeconomics) is highly desirable. Students without previous exposure to macroeconomics should contact the instructor at the beginning of the course.

 

Content (approximatively 4/5 hours for each topic)

1. International prices and exchange rates

   (Chapter 7 of the Handbook of International economics, Vol. 4, 2014). Evidence on relative purchasing power parity (PPP) and exchange rate pass-through (ERPT), Simple frameworks to interpret empirical findings (models with flexible prices vs. nominal rigidities in pricing), Currency of pricing and exchange rate pass-through, Models with desired variable markups, Other models of incomplete pass-through.

2. Exchange rates and interest parity

   (Chapter 8 of the Handbook of International economics, Vol. 4, 2014). Exchange rates and the uncovered interest parity (UIP); Monetary sticky-price models of exchange rates (New Keynesian monetary models and models of current account balances); Empirical studies of exchange rates; Models with ex-ante excess returns and deviations from the UPI (Risk premium models, Deviations from rational expectations, the so-called “Peso problem”).

3. External adjustment, global imbalances and valuation effects

   (Chapter 10 of the Handbook of International economics, Vol. 4, 2014). The intertemporal approach to current accounts; Stylized facts (global imbalances, world interest rates and allocation puzzle; the growth of cross-border gross positions; and the importance of valuations for the external balance sheet); Models of global imbalances with asset shortages; Bewley models and precautionary savings; Private vs. public flows and reserve accumulation; external balance sheets, valuation effects and adjustment: the case of the United States; Theoretical models and valuation effects.

4. International financial crises

   (Chapter 12 of the Handbook of International economics, Vol. 4, 2014).

   Part I: Floating vs. fixed exchange rates, devaluations and speculative attacks; Models of fiscal-monetary imbalances; Overvaluation, unemployment and multiple equilibria.

   Part II: Financial flows, sudden stops and balance sheet effects; Spread spirals and rollover crises; Sources of fragility (boom-bust cycles and banking; moral hazard; bailouts and policy-induced externalities)

5. Sovereign debt crises

   (Chapter 11 of the Handbook of International economics, Vol. 4, 2014). Introduction and conceptual issues; Empirical facts; A benchmark framework (endowment economy; debt overhang in a production economy); Richer notions of “default"(equilibrium default; renegotiation); Self-fulfilling debt crises; Incomplete market models.

Testi/Bibliografia

Materials for this course are taken entirely from the “Handbook of International Economics”, Volume 4, Pages 1-740 (2014), Edited by Gita Gopinath, Elhanan Helpman and Kenneth Rogoff.

Single chapters of the Handbook are easily available online; in any case, the corresponding url can be provided by the instructor.

Nevertheless, the original chapters of the Handbook of International Economics are by far too technical for under-graduate students, not having a strong background in Economics.

For this reason, you may find online (soon available at https://campus.unibo.it/) notes and/or slides, that will be used in the lectures. Please consider them as enough to get through the final exam and take the readings above into consideration only in case you do not understand the slides/notes provided by the instructor.

It stands to reason that class participation is indeed highly recommended in order to successfully understand the course content.

Students are kindly invited to print the slides in advance, i.e. before the lectures, for a better understanding/enjoyment.

Metodi didattici

The course will be taught using a wide variety of formats, including lectures, classroom discussions, and students’ presentations. Class attendance of at least 70% is compulsory.

A tutor, whose name is Roberto Pisano (roberto.pisano2@unibo.it) has also been assigned to this course. He is responsible for coordinating the two components of the integrated course, and assisting students with related issues.

Modalità di verifica e valutazione dell'apprendimento

For students taking the integrated course, it is mandatory to achieve a minimum mark of 18/30 in each of the two parts of the course in order to pass the exam.

The exam combines inclass assessment (class participation plus group presentation), valid for 1/3 of the total mark, and a final exam valid for 2/3 of the total mark.

• In-class assessment (10 points max): Students will be evaluated based on a combination of class participation and group performance. Each group, composed by 4 up to 5 students (max. 1 Erasmus student per group) must select a topic among those proposed by the instructor (1 different topic per group). Each group will prepare a short presentation, which will be presented during the course. Powerpoint slides will be the standard of use for each presentation, and must be send to the instructor (stefano.bolatto@unibo.it) by no later than the day before the presentation. Each presentation must consist of a maximum of 15 slides and must last no longer than 20 minutes. The contribution of each member of the group must be clearly outlined, as it will be factored into the in-class evaluation. Finally, when preparing your power-point slides, make sure to include and quote all your sources. Plagiarism will not be tolerated. Additional information and specific readings will be proposed by the instructor.

• Final exam: students will have to answer one open-ended question (10 points max) out of the two proposed by the instructors. Please keep in mind that, although the slides and notes will include a lot of math and formal notation, questions will be generic and discursive; so, answering them will not require going through equations or mathematical expressions. In addition to the open-ended question, there will be 10 multiple choice quiz (10 points max, 1 point per each one).

Further detailed information on the written exam will be given throughout the course. It is highly recommended that participants attend all lessons in order to successfully prepare the exam, that will be entirely based on materials and discussions carried out in class.

A list of preliminary topics for group presentations (inclusive of some recommended references) is available at https://sites.google.com/site/stefanobolatto/teaching/international-finance

Groups will be set up by the tutor, in order to ensure a homogeneous composition along several dimensions; further instructions on the inclass presentations will be provided in the first class

 

Additional exam rules

• Students are required to register for the exam by using the online application procedure; please do not contact the lecturer by e-mail (or any other means) for issues related to the online enrollment to the exam... The administration staff/ secretary is in charge of that!
• Students cannot refuse a passing mark. Each mark higher than 18/30 will automatically be registered by the instructor.
• Participants will not be granted the possibility to integrate/substitute marks with oral examinations.
• For students who are authorized by the Degree Course Board to register for the exam without attending the lectures, the written exam will consist of two open-ended questions (each of them worth 10 points) plus a series of multiple-choice questions (10 points). This version of the final exam will be more challenging than the simplified version for attending students.

Strumenti a supporto della didattica

The course will be taught using a wide variety of formats, including lectures, classroom discussions, and students' presentations. Moreover, case studies will be used to evaluate students' ability to apply the theoretical knowledge acquired during the course.

Office hours

By appointment (please contact the instructor at stefano.bolatto@unibo.it); preference for Wednesday morning; Office 22, Department of Economics, Strada Maggiore 45, Bologna.

Orario di ricevimento

Consulta il sito web di Stefano Antonio Bolatto