Lahore University of Management Sciences

ECON 352 International Finance

Instructor
Room No.
Office Hours
Email
Telephone
Secretary/TA
TA Office Hours
Course URL (if any)

Spring 2016

Syed Muhammad Hussain

260
TBA
Muhammad.hussain@lums.edu.pk

Course Basics
Credit Hours
Lecture(s)
Recitation/Lab (per week)
Tutorial (per week)

4
Nbr of Lec(s) Per Week
Nbr of Lec(s) Per Week
Nbr of Lec(s) Per Week

Duration
Duration
Duration

110 minutes

Course Distribution
Core
Elective
Open for Student Category
Close for Student Category
COURSE DESCRIPTION

The main objective of this course is to provide you with a clear understanding of the foundations of international
finance by using a blend of theoretical concepts and real world applications such as balance of payments problems
and policies and the causes of exchange rate movements. In addition, we will also examine some current policyrelated issues that have taken center stage in international media. For example, Which exchange rate regime is
better: fixed or flexible? What are the benefits and costs of forming a monetary union? Why have there been
exchange-rate crises in Asia, Russia and South America in late 1990s? How can the international monetary
system be reformed and improved? By the end of the course you should be able to understand basic analysis
of open economy models, apply this analysis to address key policy issues and take interest in the debates that
makes this area so exciting and fascinating.
COURSE PREREQUISITE(S)

Intermediate Macroeconomics

COURSE OBJECTIVES
To introduce students to the basic concepts of international finance including exchange rates and foreign exchange markets.
To enable students to analyze graphical and basic mathematical models of open economy.

To study real world problems in lights of topics learnt in the course.

Learning Outcomes

Lahore University of Management Sciences

At the end of this course, we will discuss the experience of various developing countries and see how the theoretical models
explain the success and failure stories of these countries. We will also discuss some of the recent developments in Pakistan and
rationalize them using the tools we will have by then.

Grading Breakup and Policy

Quiz(s): 6 (one will be dropped) 30%
Midterm Examination: 30%
Final Examination: 40%

Examination Detail
Midterm
Exam

Yes

Yes
Final Exam

COURSE OVERVIEW
Week

Topics

Recommended
Readings
Melvin (chapters 1 5)
Krugman & Obstfeld (chapters 12
15)
Krugman & Obstfeld (chapter 16)

7-8

Foreign Exchange Markets, Balance of

Payments, Exchange rates, Interest Rate Parity,
International Capital Flows.
Output and Exchange Rates in the Short Run
The DD-AA model

9-10

Fixed Exchange Rates and Foreign Exchange

Intervention

Krugman & Obstfeld (chapter 17)

History of International Monetary System

Floating Exchange Rates Regimes

Krugman & Obstfeld (chapter 18)

Krugman & Obstfeld (chapter 19)

Special Topics in International Finance

(Optimum Currency Areas, Experience of
Developing Countries)

Krugman & Obstfeld (chapters 20,

22)

1-6

11
12
13-14

Textbook(s)/Supplementary Readings
International Money and Finance, 7th edition, Michael Melvin.
International Economics: Theory and Policy, 6th edition, Krugman and Obstfeld.

Objectives/
Application