Office email:chrismarme@augustana.edu
Course Objectives: Assuming that you already understand what exchange rates are (1a) To help you develop an understanding of what drives short-run changes in the rate of exchange of major ("hard") currencies (1b) To help you develop an understanding of why this matters and how individuals and businesses react to the opportunities and risks associated with fluctuating exchange rates (1c) To help you appreciate how economic policy is affected by the trade in currencies (1d) To help you understand the current world financial system and its evolution since the early part of the last century (2) To increase your awareness of how important (1a) to (1d) are to financial analysis. (3) To help further develop your higher order thinking skills.
Emphasis in this course will be placed on knowledge, understanding, and application, especially application. Understanding key concepts well enough to apply them is not easy but is necessary if you are to understand why people dealing in financial markets worry so much about exchange rates and why international finance is an increasingly important topic.
(2) The role of the current account (Category I) in the foreign exchange market:
Chapter 24: National income and the current account.
(Read chapter 23 for the role of price changes on current account and the exchange rate).
(3) Policy and the macroeconomy in an international context (with both fixed and flexible exchange rates):
Chapters 25 and 26.
(4) Prices, production, employment, real income and growth in an open economy.
Chapter 27.
(5) Fixed versus flexible exchange rates. The international Monetary System.
Chapter 28 and 29.
Course grade and home work schedule
I will try to assess your command of the material covered in this course via weekly home work assignments.
Note that everything is cumulative! This means that, for example. I will expect you to remember what went on during the first week of class when we are working on material in the last of our three weeks together. This is to avoid what we can call "bulimic learning".
In bulimic learning you digest material well enough to purge on a given quiz or assignment and then its gone.Because of the cumulative nature of assignments, if I see evidence of
steady and appreciable progress in your learning over the term, the weights assigned to
different parts of grade can and will be adjusted to reflect this. I hope this will give you the motivation to
continue, right to the end of the term, to learn as much as possible. The final then gives you the opportunity to
demonstrate how much you've learned.
***Also note that I plan to give class works and pop quizzes (done both individually and in pairs ) throughout the next four weeks. The scores on these will be counted as part of your home work grades
The grading scale in this class is the following (Please see below for information on how borderline grades will be determined):
A 90-100%
B 80-90%
C 70-80%
D 60-70%
F <60%
(1) Attendance. Attendance is not mandatory. However, I do hold you guys responsible for material that we've covered in class, even if it is not in the textbook and even though you've missed class.
Please keep in mind that in borderline cases your grade will be decided on the basis of attendance and class participation. For example, suppose that you are on the C/D borderline. Suppose further that you have frequently cut class. Suppose that when you have come you have used it as an opportunity to catch up on your beauty sleep. In such a case I will assume that you could have done better but you simply weren't interested and will be happy with a D. The higher grade will go to students who have put in the time and the effort.
Final word on attendance: (1) Absences hinder your learning (there is reason for holding classes, just ask any student who has blown off class and then tries to pick up on what has been covered by just reading the text/reviewing somebody else's notes). (2) Absences also hurt the overall well-being of the class. As entertaining as I usually am, class is not a performance or a show. Your participation is an integral part of class and helps to shape what we all learn together. I am not the "sage on the stage" but your "guide at your side". If you're not in class to be helped or guided, I can't help or guide you. (Read the following regarding class participation.) (3) There is a statistically significant negative correlation between quiz scores (in this class 40% of your grade) and attendance.
(2) Class participation.
I don't give lectures, I conduct classes. There is an important difference between the two. In a lecture, a student is expected to passively sit and receive the little pieces of wisdom that the professor decides to share or "profess". (NB: The word lecture itself comes from the Latin word lectus or a derivative of the Latin legere "to read".) You have got a text and can read on your own. I don't need to lecture or read to you. Lectures should have gone out with the printing press. In a class or group (check the dictionary for the derivation of the word class), the student is expected to be just that, part of a group dedicated to the study of that day's topic.
(3) Annotated notes. Annotated class notes are a big help. What are annotated notes you ask? Set aside one note book completely for International Finance. Write the days notes on the sheet on the right hand side of the notebook. After each class, go over your notes. (Research indicates that the sooner after class or readings that you review the better.) On the sheet on the left hand side of your notebook write out the main formulae and the main definitions that you have worked with on that day. ALSO IT IS IMPORTANT THAT YOU DRAW THE DIAGRAMS YOURSELF ("draw the graphs, draw the graphs, draw the *@#..+-! Graphs") AND THAT YOU -ON YOUR OWN- WORK THROUGH THE NUMERICAL EXAMPLES WE DO TOGETHER IN CLASS. PLEASE NOTE THAT I OFTEN FEEL LIKE A VOICE CRYING IN THE WILDERNESS BECAUSE THIS EXCELLENT ADVICE SO OFTEN IS IGNORED. TRY IT!
(4) Key to success. Clarify your doubts right away either in class or soon after. If you are not sure about something do not pray to all that's good and holy that I will not ask you about that particular topic. You can be almost certain I will ask questions over such material.
(5) Motivation/Participation. It is my job to teach you this subject. It is YOUR job to convince yourself that what you are learning here is important and relevant. It is also YOUR job to convince yourself that what we cover in this class is interesting and worth the time you will have to invest in studying. More than just showing up and possibly answering questions when asked to, you need to think about what we're discussing in class outside of class time and to listen to questions other students raise concerning the material both in class and outside of class.
Problems with a course frequently start at the point where the student makes up his or her mind that the entire topic is not worth the close attention it demands to master it. Also note that while it is unlikely that you will feel that we are going too slowly over the material but if so please let me know. I will happily give you other material to look at. This material will add additional depth to what we are working through together in class. Finally pretend that this class is your first job. Just as you would need to be as involved and interested in what is going on at work please try to do the same here.
(6) Late work: A pain for you and most definitely a pain for me. If you turn stuff in to me on time you have a good chance of getting it back soon enough to benefit you. With work turned in late, there is far less of a chance that I will get the time to look at it carefully and to really help your learning. Bottom line, unless we've discussed it before hand and there is a good reason for the delay, late work=0 credit on that assignment.
(7) Basic truths:
Basic truth #1. Much of this material is hard. You have to put in the time and the effort to master it (Please see above). You are not to suffer silently. Keep up with the material, don't try to cram (it won't work) and, if you are having trouble, let's sit down together and review your study habits. Actively review your notes, when you don't understand something in either your notes or the text come in to see me.
Basic truth #2 You need to read the book. I had a student in one class a few terms ago who had stopped reading the book after the third week and instead relied solely on class notes. His reason for not reading the book was that it confused him. His scores however went from a 78 on the first exam (a period in which he was reading the book) to a 65 on the second exam and a 52 on the third exam. Ask yourself what one should conclude from this story.
Basic Truth #3. Once you have graduated and are in the real world a year or two a lot of this material will become exceedingly relevant to you. Any class you take should be of interest to you. The more interested and involved you are in the material the easier it should be. Also note that If you pay attention now you'll have a lot less to learn in the school of hard knocks later on.