Spring 2010
REQUIREMENTS
This
is the second PhD. course in International Macroeconomics and Finance.
Students
should have completed ECON 641 (and all First Year Requirements) before
taking
the course. Any student wishing to take the course without these
requirements
must obtain my permission.
Schedule
Classes
will be held every Monday
from 2:30 to 5:00. Room: ICC 550.
Grading Policy
Home Work: 30% of grade,. Take Home Final Exam: 70% OF GRADE.
Course Material
This
course will be based on my
forthcoming Textbook, Foundations
of Foreign Exchange Dynamics. A
draft will be made available to enrolled students via the secure
portion of
this website. In addition, students may find the following additional
texts
useful:
International Macro Texts
Foundations
of International Macroeconomics, by Maurice Obstfeld
and Kenneth Rogoff, MIT Press, October 1996.
International
Macroeconomics and Finance: Theory and Empirical Methods, by Nelson
Mark,
Blackwell, September 2001.
Asset Pricing
Asset Pricing, by John
Cochrane, MIT Press.
The
Econometrics of Financial Markets, by John Campbell, Andrew Lo, and
Craig MacKinlay,
Asset Pricing under Asymmetic
Information, by M. Brunnermeier, Oxford
University
Press.
The Microstructure
Approach to Exchange Rates, by R.
K. Lyons, MIT Press.
OUTLINE
1.
Macro Models without Frictions
a.
Preliminaries
b.
Empirical
Characteristics
of Real Exchange Rates
c.
Macro Exchange Rate
Models.
2.
Macro Models with
Frictions
a.
The Model
b.
Sticky Prices
c.
International
Risk-Sharing
d.
Incomplete Markets
a.
Present Value Models
b.
Monetary Models
c.
External Balance Models
d.
Predicting Exchange-Rate
Movements
PART II: Microstructure
Models
4.
Rational Expectations
Models
a.
The Set Up:
b.
Homogeneity and Common
Information
c.
Heterogeneity
d.
Problems
a.
The Set Up
b.
Exchange Rate
Determination
c.
Exchange Rate Dynamics
d.
Information Flows
e.
Public verses Private
Information
f.
The Role of Uniformed
Traders
6.
New Micro Models: An
Introduction
a.
The Structure of the
Foreign Exchange Market
b.
The Portfolio Shifts
Model
c.
Extending the Portfolio
Shifts Model
7.
New Micro Models:
Empirical Evidence
a.
Daily Analysis
b.
Intraday Analysis
c.
Forecasting Order Flow
and Feedback Trading
8.
Identifying Order
Flow
a.
Order Flow in a Rational
Expectations Model
b.
Order Flow in a Limit
Order Book
c.
Estimating Order Flow
PART III: Micro-Based
Macro
Models
9.
Order Flows and the
Macroeconomy
a.
A Micro-Based Macro
Model
b.
Order Flow and Macro
Information
c.
Re-Examining the
Disconnect Puzzle
d.
Summary
10.
Exchange Rates, Order
Flows and Macro Data Releases
a.
The Macro Perspective
b.
Micro Perspective I:
High Frequency Dynamics
c.
Micro Perspective II:
Low Frequency Dynamics
a.
FX Returns and Interest
Rates
b.
Interest Parity
c.
11.2
Macro Models
d.
Micro-Based Models