Exchange Rates And International Finance

Part 1. The international setting: prices in the open economy - purchasing power parity; the financial markets in the open economy; open economy macroeconomics. Part 2. Exchange rate determination: flexible prices - the monetary model; fixed prices - the Mundell-Fleming model; sticky prices - the Dornbusch model; portfolio balance and the current account; currency substitution; optimum currency areas and monetary union. Part 3. A world of uncertainty: market efficiency and rational expectations; the "news" model and exchange rate volatility; the risk premium. Part 4. Conclusions: a certain uncertainty - nonlinearity, cycles and chaos; conclusions.