ECN320 International Macroeconomics

Knowledge

• An appreciation of the complex relationships underlying domestic macroeconomic indicators (savings, investment, government spending and taxation) and external transactions that make up the balance of payments (i.e., current account, capital account and change in the official reserve position);
• An understanding of the role that the exchange rate plays in changing the international relative prices of goods and hence on production and the level of national output, and in changing the values of foreign assets and hence the national wealth;
• A firm foundation in general equilibrium analysis that links foreign exchange markets, asset and money markets, and the goods markets and how the state of a macroeconomy relates to interest rates, exchange rates, output, employment, and prices;
• An appreciation of how fiscal and monetary policies affect a domestic macroeconomy under differing exchange rate regimes and differing degrees of international capital mobility;
• An understanding of the macroeconomic choices (and advantages/disadvantages that confront policymakers regarding monetary policy independence, type of exchange regime, and the degree of liberalization of capital markets and economic integration.

Skills

• Can construct a general equilibrium model (through graphical analysis) of a well-functioning macroeconomy to understand the interrelationships between interest rates, exchange rates, national output, aggregate demand and supply, inflation, and employment;
• Has the ability to relate theoretical concepts to real-world macroeconomic situations by analyzing economic shocks that affect a monetary union (i.e., the eurozone crisis), the macroeconomic policy responses to the global financial crisis or the covid-19 pandemic;
• Can apply macroeconomic theory and economic reasoning to address situations when macroeconomic imbalances become economically unsustainable (e.g., balance of payments crises, debt and default, devaluation or depreciation, hyperinflation, capital flight)

General competence:

• The ability to work in small groups on specific tasks related to international macroeconomic analysis;
• The ability to engage in critical discussion or debate on the interpretation of results related to the use of macroeconomic policies (e.g., fiscal and monetary policy) through carful reflection on the limitations of the assumptions of the their theory or models;
• The ability to communicate the tradeoffs of macroeconomic policy decisions and their implications to society (e.g., wages and unemployment, immigration, income inequality, budget deficits and national debt, capital controls)