INTERNATIONAL ECONOMIC AND FINANCIAL POLICY

1.Knowledge and understanding

The course aims to provide conceptual tools for the macroeocnomic analysis of the global economic environment. The role of economic policy, in the current context of financial globalization will be studied by devoting a particular attention to understand different theoretical approaches to policy making. Thus, the emphasis will be focused in describing, from a macroeconomic point of view, the interaction between the real and financial side of economies, by focusing on expectations, markets and the determination of the equilibrium level of income. A specific reference to economic growth and Monetary Unions will be done. The design and the implementation of macroeconomic policies will be discussed from different standpoints deriving from competing approaches.

2. Applying knowledge and understanding

Applying knowledge and understanding: Students are required to broaden both their culture and their terminology. They should develop proactive analysis capabilities, in order to use theoretical models and verify their applicability to real cases. The degree of their ability will be monitored during the course, also by interpreting relevant facts of the critical global macroeconomic environment.

3. Making judgments

It is particularly important that students develop their own critical skills and independent judgment capacity. The macroeconomic analysis (and derived policies) is a matter of ideology, after all, and (therefore) an individual well- sounded personality should be used for the analysis of actual cases. These cultural advancements are required in order to develop the attitude to identify policy objectives, policy instruments and their applicability range, both within a domestic scenario and in a supra-national setting.

4. Communication skills

During the course, the student will have the opportunity to improve and refine the technical language and the attitude for economic reasoning (whose fundamentals should have been already learnt in previous economics courses) and to broaden their capability to express themselves in English. Communicative skills in the foreign language will not be tested, but it is obvious that the ability to reply to questions and discuss issues is “reasonably” necessary. Moreover, an adequate knowledge of basics of Macroeconomics and of Mathematics for Economics is needed.

5. Learning skills

The learning ability of the student will be checked by the teacher during the course, by encouraging participation and providing guidance for the most correct learning process. In this discipline, more than in others, analytical theoretical models should be carefully understood before they can be profitably referred to specific historical and institutional contexts.

Lectures.

Mathematics, Macroeconomics, Microeconomics, Economic Policy.

Mandatory. Students are firmly suggested to attend lectures.

Part I: National Accounting and Basics of Economic Growth Models*; The Foreign Exchange Market*; Exchange-Rate Regimes*; International Interest-Rate Parity Conditions*; The Balance of Payments*; Real and Financial Flows in an Open Economy*; The Elasticity Approach*; The Multiplier Approach*; An Integrated Approach*; The Mundell-Fleming Model*; Policy Implications of the Mundell-Fleming Model, and the Assignment Problem*; The Monetary Approach to the Balance of Payments and Related Approaches*; Portfolio and Macroeconomic Equilibrium in an Open Economy*; Growth in an Open Economy*; Exchange-Rate Determination*; Capital Movements, Speculation, and Currency Crises*; Fixed Vs Flexible Exchange Rates*; International Monetary Integration*; The European Monetary Union*; Key Events in the Postwar International Monetary System; International Liquidity, the Demand for International Reserves, and Xeno-Markets.

Part II: Complexity in Macroeconomics and Agent-Based Models*; Econophysics and Agent-based models of financial markets*; The representative agent framework: limits and critique*; Alternative Paradigms for Economic Policy*.

A star, *, indicates the topics without which the exam cannot be passed

1. Part I:

- Handouts on National Accounting and Basics of Economic Growth Models, (distributed by Studium).

- G. Gandolfo, International Finance and Open-Economy Macroeconomics. Springer 2016 (II edition).

2. Part II:

- Handouts and Scientific Articles on Econophysics and statistical properties of Financial Markets, (distributed by Studium).

- Scientific Articles on Agent-Based Models for Macroeconomic Analysis, (distributed by Studium).

Regular exam consists of a preliminary written test followed, in case of success, by the oral test.

1. Which drivers are responsible for different paths of economic growth?

2. ​Describe new policy approaches to dampen financial fluctuations: can you report which advantages they have with respect to mainstream theories?

3. Do you think that financial crises can be predicted? How?

4. Compare DSGE and ABM models in order to explain which class of models can be considered, in your opinion, more adequate for the policy approach.

5. Which factors can generate a currency crisis? Which effect does it cause to the economy? What can the policy-maker do?