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International Finance

International Finance

On campus
International Finance
Layer overview of Financial system and Financial markets


22 – 25 April 2019

This short course will provide candidates knowledge of foreign exchange market, and how the value of different currencies is determined. More specifically, we will identify the main factors that affect exchange rates in the short and in the long run. Then we will examine how international financial transactions and the structure of the international financial system affect monetary policy. Students will be able to understand the central bank interventions in the foreign exchange markets, to interpret the relationships between the current account, the capital account, and official reserve transactions balance, to identify the mechanisms for maintaining a fixed exchange rate, and assess the challenges faced by fixed exchange rate regimes. Students will also study the theory of optimal currency areas, and the determination of output in an open economy.

Course delivery

Prof. Sebastien Lotz

Professor of Economics – Université Paris II Panthéon Assas


Sébastien Lotz is Professor of Economics at Université Paris II Panthéon Assas. His research focuses on Monetary Economics, and he has published in top field and general interest journals such as the Journal of Money, Credit, and Banking, the Journal of Economic Theory, the European Economic Review, the Annals of Economics and Statistics, or Economic Inquiry. He is head of the Master program in Money, Banking and Finance at Université Paris II Panthéon Assas, and was previously head of the Doctoral School of this University.


Part 1. Introduction to International Finance

  • Exchange Rates and the Foreign Exchange Market
  • Price Levels and the Exchange Rate in the Long Run
  • The Exchange Rate in the Short Run

Part 2. The International Financial System

  • National Income Accounting and the Balance of Payments
  • International Monetary Systems: An Historical Overview
  • Optimum Currency Areas and the European Experience

Part 3. Open-Economy Macroeconomics

  • Money, Interest Rates, and Exchange Rates
  • Output and the Exchange Rate in the Short Run
  • Fixed Exchange Rates and Foreign Exchange Intervention

Objectives And Skills Targeted

The objective of this course is to present the basic knowledge in International Finance to understand how the exchange rate is determined in the short and the long run, to study the different exchange rate regimes and their implications, and see how monetary policy can affect the exchange rate, the countries’ foreign reserves, and output in an open economy.

Method / Bibliography

No mathematical background is needed.

This course is based on the following books:

  • “The Economics of Money, Banking, and Financial Markets” by F. Mishkin Chap. 18, 19
  • “International Economics – Theory and policy” by P. Krugman, M. Obstfeld, M. Melitz Chap. 13-20

Various examples, historical facts, and case studies will be discussed during the presentation.

Time schedule: 4/5 theory and 1/5 practice (various exercises, applications and case studies will be discussed during classes).