This course reviews both traditional and modern theories of exchange rate determination. It examines the role of price, money and interest rate fundamentals for real and/or nominal exchange rates. We also discuss the role of risk in the foreign exchange market. In addition we consider approaches to modelling the real equilibrium exchange rate. The course discusses the problem of financial crises, why they are transmitted across countries and policy implications of the crisis. We go on to assess monetary unions in Europe and potentially elsewhere. It concludes with an analysis of the foreign exchange market microstructure.

A 2-hour lecture each week for 10 weeks.

None

Online Moodle Quiz (10%) - 60-minute duration

Timed Online in-course exam (40%) - 2-hour duration

Online Moodle Quiz (10%) - 60-minute duration

Timed Online in-course exam - (40%) - 2-hour duration

This course reviews both traditional and modern theories of exchange rate determination. It discusses the problem of exchange rate volatility and what can be done to reduce it. It concludes with an analysis of the conduct of macroeconomic policies within a currency union.

1. To understand the concepts and implications of volatility and misalignment of the exchange rate.

2. To appreciate and be able to discuss the problems in modelling the determination of exchange rates.

3. To appreciate and be able to discuss whether fixed exchange rates can improve macroeconomic discipline.

4. To examine critically the preconditions and consequences of common currencies.

5. To appreciate and critically evaluate the economic implications of monetary unions.

6. To be able to discuss relevant issues arising from the conduct of monetary policy in the Euro zone.

Students must submit at least 75% by weight of the components (including examinations) of the course's summative assessment.