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ECON 511 International Finance & Open Macroeconomy CHAPTER ONE

ECON 511 International Finance & Open Macroeconomy CHAPTER ONE. Introduction to International Finance. I. Introduction. WHY STUDY OPEN- ECONOMY MACROECONOMICS & FINANCE Are we involved with international economics in our daily lives?

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ECON 511 International Finance & Open Macroeconomy CHAPTER ONE

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  1. ECON 511 International Finance & Open MacroeconomyCHAPTER ONE Introduction to International Finance

  2. I. Introduction WHY STUDY OPEN- ECONOMY MACROECONOMICS & FINANCE • Are we involved with international economics in our daily lives? • How the international finance be a part of the international economics?

  3. WHY STUDY EXCHANGE RATE POLICY? • What is the exchange rate? • When do we need the exchange rate? • How the exchange rate policy is important?

  4. IS THERE ANY LINK BETWEEN EXCHANGE RATE POLICY & GLOBALIZATION? Think of : “ The relationship between international financial markets & exchange rate ”

  5. STUDYING THE ECONOMICS INTERNATIONAL FINANCE • Impact on output • Impact on level of employment • Impact on price level • Impact on balance of payments

  6. II. Macroeconomic Models of the Open Economy • Open Economy v.s Closed Economy • Modeling open economies is inherently complex • There are two main different approaches to model the macroeconomy • The first approach is the classical approach • The second approach is the Keynesian approach • However, there is a discussion of exchange rate overshooting

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