International Macroeconomics

Mr Riccardo Trezzi

What is a currency war? Will global imbalances persist? What are the long-term implications of sustained Asian current account surpluses and United States current account deficits? How do government budget deficits affect interest rates, trade balances, and exchange rates? What are the channels through which monetary policy affects the economy? These are some of the questions that are not only raised in today’s press, but also pre-occupy the minds of policy makers, the business world, and academics.

This course aims to answer the above questions by developing a better understanding of international macroeconomic policy and open economy macroeconomics. The first part of the course is devoted to developing an open economy macro model based on the asset approach. This model provides a useful framework to analyze the dynamics of macroeconomic variables for any exchange rate regime. The second part of the course provides an analytical perspective on currency crises, international macroeconomic interdependence, and currency areas.

Upon completion of this course, students should have: a critical understanding of the asset approach to exchange rates, the capability to evaluate exchange rate arrangements, and a basic understanding of currency crisis and international macroeconomic interdependence.

This course is aimed at: Undergraduates from a variety of backgrounds interested in understanding current issues in international economics.

Transferrable skills: Students will develop presentational and analytical skills, and deepen their understanding of the different models used by economists. They will also learn how to obtain and work with macro data as used by economists for policy analysis.

Prerequisites: It is expected that students will be familiar with the material covered at the intermediate macroeconomics level. Hence N. Gregory Mankiw (2010), Macroeconomics, 7th edition is to be compulsorily read before the start of the course


The main reading for this course is the textbook by: Paul R. Krugman and Maurice Obstfeld (2008), International Economics: Theory and Policy, 8th edition, Parts III and IV. Students are encouraged to purchase their own copy.

Supplementary references are optional and include:

  • Paul de Grauwe (1996), International Money: Post-War Trends and Theories.
  • Paul de Grauwe (2009), The Economics of Monetary Union.
  • Peter Isard (1995), Exchange Rate Economics.
  • Jeffrey D. Sachs and Felipe B. Larrain (1993), Macroeconomics in the Global Economy

In addition, a number of journal articles are also cited in the syllabus with a hyperlink. You are also encouraged to read The Economist and the Financial Times, both before the start of the course and during the course.


  • 1 Final Exam: 45%
  • 1 Final Essay: 45%
  • Participation, progress and attendance: 10%


Lecture Hours: 12 x 1 hour 15 minutes (total 15 hours)

Seminar Hours: 8 x 1 hour 15 minutes (total 10 hours)