International Finance

BMAN71181 International Finance 15 Semester 1 Postgraduate Taught Level 7 Michael Bowe Unit coordinator Alliance Manchester Business School 1 FHEQ level (Framework for Higher Education Qualifications) ' Masters/Integrated Masters P4 ' European Credit Transfer & Accumulation System Rating : 7.5 Applied and theoretical papers on:Trading activity and the operational and institutional structure of foreign exchange marketsThe choice of exchange rate regime and macroeconomic performanceMarket microstructure and structural approaches to exchange rate determinationForecasting exchange ratesForeign exchange market efficiency. Covered interest parity and the forward premium puzzleCarry trades and other models of speculative activity in currency markets and empirical determinants of currency risk premiumDollarization, the policy trilemma and thethe international transmission of financial crises <p style="background-color: transparent; color: rgb(34, 34, 34); font-family: Arial,Verdana,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; -webkit-text-stroke-width: 0px; white-space: normal; word-spacing: 0px;">Applied and theoretical papers on:<p style="background-color: transparent; color: rgb(34, 34, 34); font-family: Arial,Verdana,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; -webkit-text-stroke-width: 0px; white-space: normal; word-spacing: 0px;">Trading activity and the operational and institutional structure of foreign exchange markets<p style="background-color: transparent; color: rgb(34, 34, 34); font-family: Arial,Verdana,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; -webkit-text-stroke-width: 0px; white-space: normal; word-spacing: 0px;">The choice of exchange rate regime and macroeconomic performance<p style="background-color: transparent; color: rgb(34, 34, 34); font-family: Arial,Verdana,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; -webkit-text-stroke-width: 0px; white-space: normal; word-spacing: 0px;">Market microstructure and structural approaches to exchange rate determination<p style="background-color: transparent; color: rgb(34, 34, 34); font-family: Arial,Verdana,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; -webkit-text-stroke-width: 0px; white-space: normal; word-spacing: 0px;">Forecasting exchange rates<p style="background-color: transparent; color: rgb(34, 34, 34); font-family: Arial,Verdana,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; -webkit-text-stroke-width: 0px; white-space: normal; word-spacing: 0px;">Foreign exchange market efficiency. Covered interest parity and the forward premium puzzle<p style="background-color: transparent; color: rgb(34, 34, 34); font-family: Arial,Verdana,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; -webkit-text-stroke-width: 0px; white-space: normal; word-spacing: 0px;">Carry trades and other models of speculative activity in currency markets and empirical determinants of currency risk premium<p style="background-color: transparent; color: rgb(34, 34, 34); font-family: Arial,Verdana,sans-serif; font-size: 12px; font-style: normal; font-variant: normal; font-weight: 400; letter-spacing: normal; orphans: 2; text-align: left; text-decoration: none; text-indent: 0px; text-transform: none; -webkit-text-stroke-width: 0px; white-space: normal; word-spacing: 0px;">Dollarization, the policy trilemma and thethe international transmission of financial crises This course undertakes a detailed analysis of recent developments in a select number of major international financial markets, with a major focus on the operation of, and information transmission mechanism in, the foreign exchange (FOREX) market. We consider a variety of theories underlying the determination of exchange rates. To provide the requisite foundations, the course includes a critical appraisal of the major asset based/structural theories of exchange rate determination and also considers more recent market microstructure approaches. Particular attention will be given to recent efforts to resolve several puzzles in international finance, namely: the exchange rate determination puzzle; the excess volatility puzzle and the forward premium bias puzzle. In the process we consider the factors underpinning FOREX market efficiency, time varying risk premium and the potential for the international transmission of financial crises. We examine issues raised by the dominance of the US Dollar as the major global reserve currency. The course incorporates both theoretical and applied material. On completion of this unit successful students will have achieved the following learning outcomes: •       An understanding of the structure and operation of foreign exchange markets, including the nature and pattern of trading activity and the growth of algorithmic and high frequency trading in FOREX.•       An understanding of, and ability to, critically evaluate the major existing theories of exchange rate determination and the empirical evidence relating to these theories.•       Be able to critically evaluate the existing thinking and evidence relating to three major puzzles in the pattern of exchange rate dynamics: the determination, excess volatility and forward premium bias puzzles. •       Be able to critically evaluate the existing thinking regarding the issues arising from the global dominance of the US dollar as a reserve currency. 0 Other 100% Group Case Study - 1,800 words (30%)Written Examination - 2 hours (70%) Informal advice and discussion during a lecture, seminar, workshop or lab.Online exercises and quizzes delivered through the Blackboard course space.Responses to student emails and questions from a member of staff including feedback provided to a group via an online discussion forum.Written and/or verbal comments on assessed and non-assessed formative coursework.Written and/or verbal comments after students have given a group presentation.Generic feedback posted on Blackboard regarding overall examination performance. BMAN71181 Programme Req: BMAN71181 is only available as an elective to students on MSc Accounting & Finance and MSc Finance N There is not a single textbook which covers all the material on the course. The following book will familiarise students with the underpinnings of international finance theory at an intermediate (IFM) level. It contains much, but not all, of the basic course material.G. Bekaert and R. Hodrick, International Financial Management, Prentice Hall, 3rd edition, 2018. (henceforth IFM)Another useful overview of many of the issues addressed in the course can be found in:P-O Gourinchas, H. Rey, and M. Sauzet, “The International Monetary and Financial System”, NBER Working Paper No. 25782. (2019). 0 Assessment written exam 2 Lectures 33 0 115 Informal Contact MethodsOffice HoursOnline Learning Activities (blogs, discussions, formative self assessment questions)