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International Macroeconomics

Name of module: International Macroeconomics

Exam number: 6407

Semester/Trimester: Semester

Duration of the module: Ein Semester

Form of the module (i.e. obligatory, elective course): Wahlpflicht

Frequency of module offer: Voraussichtlich alle drei Semester, beginnend mit dem Wintersemester 2009/2010.

Prerequisites: Die Studierenden sollen in der Lage sein, im IS-LM Modell und im AS-AD Modell makroökonomische Schocks zu analysieren. Hierzu werden Kenntnisse mathematischer Konzepte wie das totale Differenzial und die Cramersche Regel vorausgesetzt. Es werden außerdem Kenntnisse zur Methodik und Anwendung der linearen Einfachregression, des Hypothesentests, des Konfidenzintervalls sowie Kenntnisse im Umgang mit Excel erwartet. The students should be able to analyze macroeconomic shocks in the IS-LM-model and the AS-AD model in a verbal, graphical, and formal way. The students should be able to apply mathematical concepts such as the differential and Cramer's rule. Furthermore, the students should have some background in statistic and should be able to construct and interpret confidence intervals, hypotheses tests and univariate regressions.

Applicability of module for other modules and study programmes:
Verwendbar als E-Modul. Serviceveranstaltung für Masterstudierende der Kultur- bzw. Rechtswissenschaften.

Person responsible for module: Prof. Dr. Georg Stadtmann

Name of the professor: Prof. Dr. Georg Stadtmann

Language of teaching: Englisch

ECTS-Credits (based on the workload): 7 (T-Modul); 6 (E-Modul)

Workload and its composition (self-study, contact time):
T-Modul: Kontaktzeit (Vorlesung, Übung,Seminar etc.) 60 Std.; Selbststudium: 150 Std. / E-Modul: Kontaktzeit (Vorlesung, Übung,Seminar etc.) 37,5 Std.; Selbststudium: 142,5 Std.

Contact hours (per week in semester): 3+1

Methods and duration of examination:
Voraussetzung für den Erwerb eines Leistungsnachweises als T-Modul (7 ECTS-Credits) und E-Modul (6 ECTS-Credits) ist die vollständige Erbringung der Prüfungsanforderungen:
Bestandteile und Gewichtung der Prüfungsleistungen
- A complete submission of 3 group assignments on schedule (weight: 30% in sum).
- A written summary of a paper (about 4 pages) and a presentation of that paper in the tutorial (grading: pass/fail, weight: 10%).
- A successful completion of the final exam (weight: 60%).

The final grade results from the weighted average of the single graded parts.
Those students who wish to get the T-module have to write a summary (about 4 pages) of a scientific paper. The summary has to be written in groups of two students. Please submit until the 10 April, if you wish to get the T-module.

Assessment criteria
A student receives a grade of 1.0 by exhibiting
- A comprehensive overview and a very sound knowledge of the various models, theories and methods covered in class.
- A convincing general understanding of the basic assumptions of the models and theories covered in class.
- An extensive ability to explain the adjustment mechanisms of the different models, by using graphical analysis as well as mathematical calculations that describe these mechanisms.
- An extensive knowledge about individual models and theories and their applications - as reflected in a comprehensive rationale for the choice of model under given specific situations and problems.
- A sound understanding of main principles of the monetary policy conducted by the ECB and its impact on the European economy.

A student receives a grade of 4.0 – minimum acceptable grade of successful completion of the course – by exhibiting
- a basic overview and a very sound knowledge of the various models, theories and methods covered in class
- a basic general understanding of the basic assumptions the models and theories covered in class.
- an basic ability to explain the adjustment mechanisms of the different models, by using graphical analysis as well as mathematical calculations that describe these mechanisms.
- a basic knowledge about individual models and theories and their applications - as reflected in a comprehensive rationale for the choice of model under given specific situations and problems.
- a basic understanding of main principles of the monetary policy conducted by the ECB and its impact on the European economy.

Emphasis of the grade for the final grade: 2/29 (T-Modul); 1/29 (E-Modul)

Aim of the module (expected learning outcomes and competencies to be acquired):
The purpose of the course is to introduce the students to some of the most widely used models in international macroeconomics.
Purpose:
The purpose of the course is to introduce the students to some of the most widely used models in international macroeconomics.
The course provides basic tools for performing comparative static and dynamic analysis of the open economy. This tool-box contains verbal, graphical and mathematical tools. In addition, the students get hands-on experience analyzing economic data using Excel and econometric software. The course introduces basic economic models.
In relation to the study programe's qualification profile, the subject explicitly focuses on:
- Gain knowledge about the main equilibrium conditions in international macroeconomics, such as the different concepts of PPP, UIP, CIP and their empirical validity.
- Students acquire knowledge about the underlying assumptions and equilibrium conditions of common macroeconomic models of the open economy (Mundell-Fleming model, monetary model, Dornbusch model).
- Students possess the skills to analyze, compare and evaluate the consequences of various macroeconomic shocks on a small open economy. They gain also the skills to quantify these effects. To be more specific students acquire the skills to aplly, for example, Cramer's rule and Sarruss' rule to solve a linear system of equations.
- Students also possess the skills to analyze the shocks in models with nominal rigidities (Dornbusch) and highlight the interdependencies between the various macroeconomic markets in a dynamic context.
- Students have the skills to perform comparative static as well as dynamic analyses. Students are also expected to derive impulse response functions by numerical simulation methods. Various sensitivity analyses highlight the importance of the different assumptions as well as the impact of different parameter constellations.
- The various macroeconomic models build the basic modeling tools of the different crisis models. For example, the monetary model builds the basic block of first generation crises models discussed in the second half of the course. In the same respect, the Mundell-Fleming model will be augmented by the Bernanke-Gertler effect of the open economy to end up at the third generation crisis model introduced by Krugman.
- Hence, students gain the knowledge how the main building blocks can be utilized to derive insights into connected fields of study.
- Enhancing skills in application of statistical procedures to test hypotheses generated by the theoretical models. In this process the student gains the skills to collect, process, analyse and interpret data in Excel and Stata. The students master the scientific methodologies of a univariate regression analysis which includes hypothesis testing and confidence intervals. These regressions might be of time series or cross-section regressions type. Panel econometric techniques are not applied.
- Students assess theoretical/practical problems and setting up and justifying possible solutions, For example, data sets of a one-month ahead forward rate are given on a daily basis. If these data are analyzed in the raw data format, the student will run into serious autocorrelation problems. As a consequence the student is asked to melt down the data set to a monthly frequency.
- Students acquire the competence to manage work and master situations that are complex, unpredictable and require new solutions. This competence is practiced in weekly assignments which should be solved in a group of 3-4 students. Group assignments train the competence to initiate and implement research activities within a professional cooperation and take on professional responsibility. The results of the weekly assignments are presented by one group of students to train the skills to present and communicate research based knowledge in a professional manner. Subsequent class discussions train the communication competencies of the group as well as their classmates.
- In order to strengthen the competencies to independently take responsibility for own professional development and specialization each student is expected to develop a piece of work individually. This work should be published online for all class mates. This work should be related to the overall content of the class. It could be in form of summarizing a research article or a field of research or the comparison of a macroeconomic shock in various models or settings (capital mobility, exchange rate systems). This will also strengthen the skills to structure economic thinking and to communicate with professionals and non-specialists in a written form.

Contents of the module:
Lecture:
- Part 1: CIP &UIP
- Part 2: PPP and low of one price
- Part 3: Mundell-Fleming-Model (The structure of the goods, money and financial market; The balance of payments mechanisms; The effects of monetary and fiscal policy in an open economy; The effects of an increase of the foreign interest rate and foreign income)
- Part 4: Sticky prices and exchange rate overshooting
- Part 5: The monetary model of exchange rate determination
- Part 6: The news approach
- Part 7: The micro structure of the foreign exchange market: Chartists, fundamentalists and other market participants
Tutorial:
- Discussion of problems relating to models of international macroeconomics which are content of the lecture.
- The presentation of the paper which is part of the grading.
- A discussion of the group assignments.
- Review of some basics of statistics and linear regression (if time permits).

Teaching and learning methods:
Lecture, Exercise, Group Assignments

Literature (compulsory reading, recommended literature):
Copeland, Laurence S., Exchange Rates and International Finance, 4th ed. (Addison Wesley) 2005.

Further information:
Registration in Moodle required.
Chair's web page