Students taking this course are able to
- understand how the principles of arbitrage and uncovered interest parity can govern the short-run behavior of exchange rates;
- explain the law of one price and purchasing power parity that concern the long-run behavior of exchange rates;
- describe the current, financial, and capital accounts of balance of payments;
- comprehend the main arguments in favor of financial globalization;
- be familiar with the desirable and undesirable features of the regimes of fixed and flexible exchange rates;
- know how a pegged exchange rate regime is implemented in practice and the fundamental reasons for why it may break.