Faculty of World Economy and International Affairs
School of World Economy
Program:
International Currency and Financial Relationships
(taught in English)
MOSCOW 2018
1 Instructor: Eduard P. Dzhagityan, Associate Professor; e-mail: [email protected] Course Duration: September–December (Modules 1 and 2) Location: 17/1, Malaya Ordynka street (check the timetable for the possible changes of the location and the classroom number)
1. Course Description
Course Title: ‘International Currency and Financial Relationships’
Course Overview: This is an intermediate mandatory course that brings together topics in international economics, international economic relations, and macro- and microeconomics. It aims at holistic understanding of the concept, scope, core elements, principles, aspects, modalities, idiosyncrasies, framework, and outstanding issues of international currency and financial relationships (ICFR) amid the contemporary world economic order and specifics of the post- crisis recovery. The course also looks at dynamics, perspectives, and implication of ICFR in shaping the national economic systems, designing the international financial markets, and structuring the global economic environment.
Course Objectives: This Course sets sight on developing the undergraduate students’ analytical skills on various foci of the ICFR agenda, including ICFR’s role in the processes of financial globalization, regionalization, and ‘glocalization’, as well as on unraveling the most complex and sensitive areas of ICFR aspects and mechanism. It delves into the specifics of macrofinance policy conduct and how it is tailored and managed amid imperfection and asymmetries of international financial markets. This Course equips students with broad-based outlook covering functional specifics of international finance and credit, international financial institutions/ organizations, international capital flow, and ICFR weaknesses and risks, as well as expands students’ awareness of the latest developments in the global finance and amplifies their ability to systematize the most significant events and issues associated with ICFR.
Upon the successful completion of this Course, students will: Know the basics, concept, dynamics, perspectives, and outstanding issues of ICFR amid the processes of financial globalization, regionalization, ‘glocalization’, and specifics of the post- crisis recovery; Understand core principles, scope, modalities, and specifics of ICFR organization and mechanism and how ICFR are associated with rapidly changing macro-level parameters and changing priorities of macrofinance management; Comprehend the specifics of national and regional/supranational monetary systems, policy, and regulation; Discover the monetary and international credit markets instruments that secure continuum of financial markets performance; Benefit from understanding of the core principles and structure of balance of payments, the components of its accounts, how it is prepared, how to interpret it, how to overcome imbalances, and what are the balancing mechanisms; Recognize types and forms of the international trade finance instruments and follow the mechanism of their governance by the (uniform) rules of the International Chamber of Commerce; Distinguish the ICFR institutional framework by core functions and responsibilities of the international financial institutions and national central banks;
2 Delve into international monetary, credit, and securities markets, their post-crisis architecture and archetypes, and make out whether the extent of their segmentation is a source of systemic risks and whether this is critical for crisis developments and crisis management; Possess skills in systematization of the ICFR-related macro- and micro-level risks amid asymmetries of international financial markets and uncertainties of the world economy; Explore knowledge about Russia’s involvement in the ICFR processes and make sense about the perspectives of being an active ICFR actor should the adverse externalities continue to affect the national economic environment; Be able to confidently trace and identify the latest ICFR developments that most accurately associate with the integrity of the economic systems; Be comfortable in arguing, substantiating, and advocating the most disputable and challenging ICFR areas and issues, in promoting new vision, stance, and ideas in the ICFR field, including those that contribute to the effective and efficient managerial decision making; Acquire and expand expertise necessary for critical assessment and bringing together opinions, conclusions, and findings upon the research in the ICFR area and be good at working with academic publications, statistics, and other sources of information in ICFR, including international financial markets and financial institutions; Be savvy with the tools and techniques of multivariate analysis of the contemporary economic and institutional specifics of ICFR and their effect on international financial markets dynamics. Additionally, upon the successful completion of this Course students will be able to apply their knowledge to further education at the Master degree programs mostly with the focus on international economics and finance.
Prerequisites: Students must have completed courses in Macroeconomics, Microeconomics, International Economic Relations, and must have fluent English.
Materials: Lecture notes are documented as a presentation in the PowerPoint format and are sent weekly to the Class by e-mail. Further reading can be found here below and is mainly based on a selection of textbooks, academic and analytical articles, and recommended websites. Apart from lecture notes and recommended reading, students are strongly encouraged to view/read other materials from the recognized open access sources (McKinsey, BCG, Big 4 international audit companies, Big 3 global rating agencies, Bloomberg, Financial Times, Wall Street Journal, English language Russian editions, and others) so that to be aware of current events in the world economy and finance.
2. Course Schedule
Contact hours: Topic Total Independent hours Lectures Seminars work
1. World economy, and international currency 8 2 2 4 and financial relationships
2. International monetary system, policy, and 20 4 4 12 regulation
3. Balance of payments 14 4 2 8
3 4. International trade finance 10 2 2 6
5. International credit 16 4 4 8
6. International foreign exchange, credit, and 16 4 4 8 securities markets
7. Risks in international currency and 10 2 2 6 financial relationships
8. Institutional structure of international 10 4 2 4 currency and financial relationships
9. International currency and financial 10 2 2 6 relationships of Russia
TOTAL: 114 28 24 62
Topic 1. World economy, and international currency and financial relationships Financial globalization, regionalization, and ‘glocalization’ as driving forces of the world economic development. Framework and specifics of international currency and financial relationships (ICFR) in the contemporary world financial order. Core principles of ICFR. ICFR fundamentals. Primary drivers of the ICFR transformation. ICFR and global financial crisis. ICFR and the post-crisis recovery.
Reading list: Required: 1. Aaron Major. Architects of Austerity: International Finance and the Politics of Growth. Stanford University Press, 2014. 2. Frederick Betz. Stability in International Finance: Application of Price Disequilibrium Theory. Springer, 2016. 3. Kent Baker, Leigh A. Riddick. International Finance: A Survey. Oxford University Press, 2013. 4. Michael Melvin, Stefan Norrbin. International Money and Finance. 9th edition. Academic Press, 2017. 5. Paul Krugman, Maurice Obstfeld, Marc Melitz. International Finance: Theory and Policy. 10th edition. Pearson, 2014. 6. Steve Suranovic. International Finance: Theory and Policy. Saylor Foundation, 2010.
Further reading: 1. Bank for International Settlements (2012) The future of financial globalization. BIS Papers No.69. 11th BIS Annual Conference. 2. Bhattacharya A., Reeves M., Lang N., Augustinraj R. (2017) New business models for a new global landscape. BCG Henderson Institute. 3. Caruana J. (2017) International financial crises: New understandings, new data. Keynote speech on the occasion of the launch of the book Alexandre Lamfalussy: selected essays. National Bank of Belgium, Brussels, 6 February 2017.
4 4. Coudert V., Hervé K., Mabille P. (2013) Internationalization versus regionalization in the emerging stock markets. CEPII, WP No.2013-08. 5. Genberg H. (2010) Currency internationalization: Analytical and policy issues. Bank for International Settlements. 6. Georgiadis G., Jančoková M. (2017) Financial globalisation, monetary policy spillovers and macro-modelling: Tales from 1001 shocks. ECB Working Paper 2082, European Central Bank. 7. Hirata H., Ayhan Kose M. and Otrok C. (2013) Regionalization vs. globalization. Federal Reserve Bank of St. Louis. Working Paper Series. WP 2013-002A; IMF Working Paper WP/13/19. 8. Institute of International Finance (2014) Financial globalization: Maximizing benefits, containing risks. 9. International Monetary Fund (2017) Global financial stability report: Is growth at risk? 10. International Monetary Fund (2018) World economic outlook: Brighter prospects, optimistic markets, challenges ahead. 11. Kumhof M. (2018) On the theory of international currency portfolios. European Economic Review, Vol. 101, pp. 376–396. 12. Li Y., Matsui A. (2009) A theory of international currency: Competition and discipline. Journal of the Japanese and International Economies, 23 (4), pp. 407–426. 13. Lund S., Manyika J., Bughin J. (2016) Globalization is becoming more about data and less about stuff. Harvard Business Review. 14. McKinsey Global Institute (2017) The new dynamics of financial globalization. McKinsey & Company. 15. Mundell R. (2012) The case for a world currency. Journal of Policy Modeling, 34 (4), pp. 568–578.
Topic 2. International monetary system, policy, and regulation The concept of monetary system. National vs. international monetary system. Currency classification criteria. Reserve currencies. Factors affecting currency exchange rate and the exchange rate quantification mechanism. Core milestones of evolution of the world monetary system. Regionalization and integration of the monetary systems (evidence from the EU). Government-run and market-based regulation of international monetary relations. Monetary policy and its types and framework. Foreign exchange restrictions and convertibility of currencies.
Reading list: Required: 1. Barry Eichengreen, Arnaud Mehl, Livia Chiţsu. How Global Currencies Work: Past, Present, and Future. Princeton University Press, 2017. 2. Kent Baker, Leigh A. Riddick. International Finance: A Survey. Oxford University Press, 2013. 3. Michael Melvin, Stefan Norrbin. International Money and Finance. 9th edition. Academic Press, 2017. 4. Paul Krugman, Maurice Obstfeld, Marc Melitz. International Finance: Theory and Policy. 10th edition. Pearson, 2014. 5. Steve Suranovic. International Finance: Theory and Policy. Saylor Foundation, 2010.
Further reading:
5 1. Adler G., Lama R., Medina J.P. (2018) Unconventional policies and exchange rate dynamics. Journal of International Money and Finance. In press, corrected proof. 2. Akram G.M., Byrne J.P. (2015) Foreign exchange market pressure and capital controls. Journal of International Financial Markets, Institutions and Money, Vol. 37, pp. 42–53. 3. Beckmann J., Czudej R. (2017) Exchange rate expectations and economic policy uncertainty. European Journal of Political Economy, Vol. 47, pp. 148–162. 4. Caporale G.M., Gil-Alana L.A., You K. (2018) Exchange rate linkages between the ASEAN currencies, the US dollar and the Chinese RMB. Research in International Business and Finance, Vol. 44, pp. 227–238. 5. Devereux M.B., Yetman J. (2014) Globalisation, pass-through and the optimal policy response to exchange rates. Journal of International Money and Finance, Vol. 49, Part A, pp. 104–128. 6. Eichengreen B. (2011) The renminbi as an international currency. Journal of Policy Modeling, 33 (5), pp. 723–730. 7. Guzman M., Ocampo J.A., Stiglitz J.E. (2018) World Development, Vol. 110, pp. 51–62. 8. Himmels C., Kirsanova T. (2018) Discretionary policy in a small open economy: Exchange rate regimes and multiple equilibria. Journal of Macroeconomics, Vol. 56. pp. 53–64. 9. Ito H., McCauley R.N., Chan T. (2015) Currency composition of reserves, trade invoicing and currency movements. Emerging Markets Review, Vol. 25, pp. 16– 29. 10. Ito T. (2017) A new financial order in Asia: Will a RMB bloc emerge? Journal of International Money and Finance, Vol. 74, pp. 232–257. 11. Jeanneret A., Souissi S. (2016) Sovereign defaults by currency denomination. Journal of International Money and Finance, Vol. 60, pp. 197–222. 12. Kato M., Proaño C.R., Semmler W. (2018) Does international-reserves targeting decrease the vulnerability to capital flights? Research in International Business and Finance, Vol. 44, pp. 64–75. 13. McCauley R.N., Shu C. (2018) Recent renminbi policy and currency co- movements. Journal of International Money and Finance. In press, corrected proof. 14. McKinsey Global Institute (2009) An exorbitant privilege? Implications of reserve currencies on competitiveness. McKinsey & Company. 15. Ozer-Imer I., Ozkan I. (2014) An empirical analysis of currency volatilities during the recent global financial crisis. Economic Modelling, Vol. 43, pp. 394–406. 16. Ponsot J.-F. (2016) The “four I’s” of the international monetary system and the international role of the euro. Research in International Business and Finance. Vol. 37, pp. 299–308. 17. Regmi K., Nikolsko-Rzhevskyy A., Thornton R. (2015) To be or not to be: An optimum currency area for South Asia? Journal of Policy Modeling, 37 (6), pp. 930–944. 18. Seghezza E., Morelli P. (2018) Rule of law and balance of power sustain US dollar preeminence. Journal of Policy Modeling, 40 (1), pp. 16–36. 19. Sehgal S., Pandey P., Diesting F. (2017) Examining dynamic currency linkages amongst South Asian economies: An empirical study. Research in International Business and Finance. Vol. 42, pp. 173–190. 20. U.S. Department of the Treasury (2017) Foreign exchange policies of major trading partners of the United States. Report to Congress. 14 April. 21. Zhang Z., Makin A.J., Bai Q. (2016) Yen internationalization and Japan’s international reserves. Economic Modelling, Vol. 52, Part B, pp. 452–466.
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Topic 3. Balance of payments Notion, definition, and structure of balance of payments. Components of balance of payments and the balance of payments accounts. Net balance of payments (surplus/deficit) and its valuation techniques. Conceptual frameworks of balance of payments. Factors affecting the balance of payments parameters. Regulation of balance of payments. Balance of payments deficit and mechanism of minimization of imbalances.
Reading list: Required: 1. Michael Melvin, Stefan Norrbin. International Money and Finance. 9th edition. Academic Press, 2017. 2. Paul Krugman, Maurice Obstfeld, Marc Melitz. International Finance: Theory and Policy. 10th edition. Pearson, 2014. 3. Robert M. Stern. Balance of Payments: Theory & Economic Policy. Routledge, 2017. 4. Steve Suranovic. International Finance: Theory and Policy. Saylor Foundation, 2010.
Further reading: 1. Balance of payments reports by central/national/reserve banks. 2. Bhattacharya M., Inekwe J.N., Valenzuela M.R. (2018) Financial integration in Africa: New evidence using network approach. Economic Modelling, Vol. 72, pp. 379–390. 3. Cheng G. (2015) Balance sheet effects, foreign reserves and public policies. Journal of International Money and Finance, Vol. 59, pp. 146–165. 4. European Union (2017) Quality report on balance of payments (BOP), international trade in services (ITS) and foreign direct investments statistics (FDI). 5. Guerreiro D. (2014) Is the European debt crisis a mere balance of payment crisis? Economic Modelling, Vol. 44, Supplement 1, pp. s50–s56. 6. Hjortsoe I., Weale M., Wieladek T. (2018) How does financial liberalization affect the influence of monetary policy on the current account? Journal of International Money and Finance, Vol. 85, pp. 93–123. 7. IMF Committee on balance of payment statistics. 2017 Annual report. 8. International Monetary Fund (1996) Balance of Payments Textbook. 9. Mundell R. (2012) U.S. and China in the world economy: The balance of payments and the balance of power. Journal of Policy Modeling, 34 (4), pp. 525– 528. 10. Nakatani R. (2018) Adjustment to negative price shocks by a commodity exporting economy: Does exchange rate flexibility resolve a balance of payments crisis? Journal of Asian Economics, In press, accepted manuscript. 11. Sen P. (2014) The impossible trinity and Krugman’s balance of payment crisis model. International Economics, Vol. 139, pp. 174–181. 12. Sinyakov A., Yudaeva K. (2016) Central bank policy under significant balance- of-payment shocks and structural shifts. Russian Journal of Economics, 2 (3), pp. 246–278.
Topic 4. International trade finance
7 International trade finance in foreign economic relations. International trade finance instruments (Letter of Credit, Documentary Collection, Bank Transfer, Bill of Exchange, Cheque, Standby Letter of Credit, Letter of Guarantee). International payment systems. Foreign exchange clearing.
Reading list: Required: 1. Michael Melvin, Stefan Norrbin. International Money and Finance. 9th edition. Academic Press, 2017. 2. Paul Krugman, Maurice Obstfeld, Marc Melitz. International Finance: Theory and Policy. 10th edition. Pearson, 2014. 3. Steve Suranovic. International Finance: Theory and Policy. Saylor Foundation, 2010.
Further reading: 1. Beck T., Pamuk H., Ramrattan R., Uras B.R. (2018) Payment instruments, finance and development. Journal of Development Economics, Vol. 133, pp. 162– 186. 2. David Loader. Clearing, Settlement and Custody. Chapter 1 – The structure of clearing and settlement, pp. 1–16. Butterworth Heinemann, 2nd edition, 2014. 3. De Caux R., Brede M., McGroarty F. (2016) Payment prioritisation and liquidity risk in collateralised interbank payment systems. Journal of International Financial Markets, Institutions and Money, Vol. 41, pp. 139–150. 4. Deloitte (2015) Real-time payments are changing the reality of payments. 5. Hao Y., Xiao L. (2013) Risk analysis of Letter of Credit. International Journal of Business and Social Science, 4 (9), pp. 199–209. 6. Incoterms 2010 (ICC Rules for the use of domestic and international trade terms) (ICC Publication 715). 7. International Standby Practices (ISP98) (ICC Publication 590). 8. Lai R. Handbook of Blockchain, Digital Finance, and Inclusion. Chapter 12 – Understanding interbank real-time retail payment systems. Academic Press, 2018, Vol. 1, pp. 283–310. 9. Merrouche O., Nier E. (2012) Payment systems, inside money and financial intermediation. Journal of Financial Intermediation, 21 (3), pp. 359–382. 10. Uniform Customs and Practice for Documentary Credits (ICC Publication UCP 600). 11. Uniform Rules for Bank Payment Obligations (ICC Publication URBPO). 12. Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits (ICC Publication URR 725). 13. Uniform Rules for Collection (ICC Publication 522). 14. Uniform Rules for Contract Bonds (ICC Publication 524). 15. Uniform Rules for Demand Guarantees (ICC Publication URDG 758). 16. Uniform Rules for Forfeiting (ICC Publication URF 800).
Internet resources: 1. http://www.uncitral.org (UNCITRAL – United Nations Commission on International Trade Law) 2. https://iccwbo.org (ICC – International Chamber of Commerce) 3. https://www.swift.com (SWIFT – Society for Worldwide Interbank Financial Telecommunication) 4. https://www.asianclearingunion.org (ACU – Asian Clearing Union)
8 Topic 5. International credit Principles of international credit. International credit operations mechanism. Forms and types of international credit. International project finance. Leasing. Factoring. Forfeiting. Financial and payment terms of international credit. Collateral on international credit. Regulation of international credit relationships.
Reading list: Required: 1. Michael Melvin, Stefan Norrbin. International Money and Finance. 9th edition. Academic Press, 2017. 2. Paul Krugman, Maurice Obstfeld, Marc Melitz. International Finance: Theory and Policy. 10th edition. Pearson, 2014. 3. Steve Suranovic. International Finance: Theory and Policy. Saylor Foundation, 2010.
Further reading: 1. Leo Onyiriuba. Emerging Market Bank Lending and Credit Risk Control. Chapter 15 – Lease Financing Risk and Control in Emerging Markets, pp. 275–285. Academic Press, 2016. 2. Baskaya Y.S., Giovanni J., Kalemli-Özkan S., Peydro J.-L., Ulu M.F. (2017) Capital flows and the international credit channel. Journal of International Economics, Vol. 108, Supplement 1, pp. s15–s22. 3. Basu K., Morita H. (2006) International credit and welfare: A paradoxical theorem and its policy implications. European Economic Review, 50 (6), pp. 1507–1528. 4. Böninghausen B., Köhler M. (2015) Diversification and determinants of international credit portfolios: Evidence from German banks. International Review of Economics and Finance, Vol. 39, pp. 57–75. 5. Cesa-Bianchi A., Ferrero A., Rebucci A. (2018) International credit supply shocks. Journal of International Economics, Vol. 112, pp. 219–237. 6. Champagne C. (2014) The international syndicated loan market network: An “unholy trinity”? Global Finance Journal, 25 (2), pp. 148–168. 7. Cornaggia K.J., Franzen L.A., Simin T.T. (2013) Bringing leased assets onto the balance sheet. Journal of Corporate Finance, Vol. 22, pp. 345–360. 8. Fadejeva L., Feldkircher M., Reininger T. (2017) International spillovers from Euro area and US credit and demand shocks: A focus on emerging Europe. Journal of International Money and Finance, Vol. 70, pp. 1–25. 9. Gong D., Jiang T., Wu W. (2018) A foreign currency effect in the syndicated loan market of emerging economies. Journal of International Financial Markets, Institutions and Money, Vol. 52, pp. 211–226. 10. Lin J.-R., Wang C.-J., Chou D.-W., Chueh F.-C. (2013) Financial constraint and the choice between leasing and debt. International Review of Economics & Finance, Vol. 27, pp. 171–182. 11. Lin S., Ye H. (2018) The international credit channel of U.S. monetary policy transmission to developing countries: Evidence from trade data. Journal of Development Economics, Vol. 133, pp. 33–41. 12. Martin A., Ventura J. (2015) The international transmission of credit bubbles: Theory and policy. Journal of Monetary Economics, Vol. 76, Supplement, pp. s37–s56.
Topic 6. International foreign exchange, credit, and securities markets
9 International foreign exchange, credit, and securities markets amid the processes of financial globalization, regionalization, and ‘glocalization’. International foreign exchange markets. The structure and participants of international foreign exchange markets. Activity of economic agents in international foreign exchange markets. International credit and securities markets. Instruments of international capital markets. International market of hybrid financial instruments and financial derivatives. International gold markets. International financial centers.
Reading list: Required: 1. Aaron Major. Architects of Austerity: International Finance and the Politics of Growth. Stanford University Press, 2014. 2. Barry Eichengreen, Arnaud Mehl, Livia Chiţsu. How Global Currencies Work: Past, Present, and Future. Princeton University Press, 2017. 3. Michael Melvin, Stefan Norrbin. International Money and Finance. 9th edition. Academic Press, 2017. 4. Paul Krugman, Maurice Obstfeld, Marc Melitz. International Finance: Theory and Policy. 10th edition. Pearson, 2014. 5. Steve Suranovic. International Finance: Theory and Policy. Saylor Foundation, 2010.
Further reading: 1. Akram G.M., Byrne J.P. (2015) Foreign exchange market pressure and capital controls. Journal of International Financial Markets, Institutions and Money, Vol. 37, pp. 42–53. 2. Al-Yahyaee K.H., Mensi W., Yoon S.-M. (2018) Efficiency, multifractality, and the long-memory property of the Bitcoin market: A comparative analysis with stock, currency, and gold markets. Finance Research Letters, In press, corrected proof. 3. Bénétrix A.S., Lane P.R., Shambaugh J.C. (2015) International currency exposures, valuation effects and the global financial crisis. Journal of International Economics, Vol. 96, Supplement 1, pp. s98–s109. 4. Bengui J., Nguyen H. (2016) Consumption baskets and currency choice in international borrowing. Journal of International Money and Finance, Vol. 67, pp. 287–304. 5. Caporale G.M., Gil-Alana L.A., You K. (2018) Exchange rate linkages between the ASEAN currencies, the US dollar and the Chinese RMB. Research in International Business and Finance, Vol. 44, pp. 227–238. 6. Chen K., Chen G. (2015) The rise of international financial centers in mainland China. Cities, Vol. 47, pp. 10–22. 7. Chiţsu L., Eichengreen B., Mehl A. (2014) When did the dollar overtake sterling as the leading international currency? Evidence from the bond markets. Journal of Development Economics, Vol. 111, pp. 225–245. 8. Dos Santos M.B.C., Klotzle M.C., Pinto A.C.F. (2016) Evidence of risk premiums in emerging market carry trade currencies. Journal of International Financial Markets, Institutions and Money, Vol. 44, pp. 103–115. 9. Dua P., Tuteja D. (2016) Financial crises and dynamic linkages across international stock and currency markets. Economic Modelling, Vol. 59, pp. 249– 261. 10. Escobar M., Ferrando S., Rubtsov A. (2018) Dynamic derivative strategies with stochastic interest rates and model uncertainty. Journal of Economic Dynamics and Control, Vol. 86, pp. 49–71. 11. Gong D., Jiang T., Wu W. (2018) A foreign currency effect in the syndicated loan market of emerging economies. Journal of International Financial Markets, Institutions and Money, Vol. 52, pp. 211–226. 10 12. He D., Yu X. (2016) Network effects in currency internationalization: Insights from BIS triennial surveys and implications for the renminbi. Journal of International Money and Finance, Vol. 68, pp. 203–229. 13. He Q., Korhonen I., Guo J., Liu F. (2016) The geographic distribution of international currencies and RMB internationalization. International Review of Economics & Finance, Vol. 42, pp. 442–458. 14. Ito T. (2017) A new financial order in Asia: Will a RMB bloc emerge? Journal of International Money and Finance, Vol. 74, pp. 232–257. 15. Jeanneret A., Souissi S. (2016) Sovereign defaults by currency denomination. Journal of International Money and Finance, Vol. 60, pp. 197–222. 16. Kumhof M. (2018) On the theory of international currency portfolios. European Economic Review, Vol. 101, pp. 376–396. 17. Laborda R. (2018) Optimal combination of currency strategies. The North American Journal of Economics and Finance, Vol. 43, pp. 129–140. 18. McCauley R.N., Shu C. (2018) Recent renminbi policy and currency co- movements. Journal of International Money and Finance. In press, corrected proof. 19. Meng J. (2016) Asian emerging-market currencies in the international debt market (1994–2014). Journal of Asian Economics, Vol. 42, pp. 20–32. 20. Nakatani R. (2017) Structural vulnerability and resilience to currency crisis: Foreign currency debt versus export. The North American Journal of Economics and Finance, Vol. 42, pp. 132–143. 21. Picotti L.R. (2018) Jumps, cojumps, and efficiency in the spot foreign exchange market. Journal of Banking & Finance, Vol. 87, pp. 49–67. 22. Rahman A.J. (2018) Deflationary policy under digital and fiat currency competition. Research in Economics, 72 (2), pp. 171–180. 23. Seghezza E., Morelli P., Pittaluga G.B. (2017) Reserve accumulation and exchange rate policy in China: The authoritarian elite’s aim of political survival. European Journal of Political Economy, Vol. 47, pp. 163–174. 24. Shahzad S.J.H., Arreola-Hernandes J., Bekiros S., Rehman M.U. (2018) Risk transmitters and receivers in global currency markets. Finance Research Letters, Vol. 25, pp. 1–9. 25. Shaomin Li. East Asian Business in the New World. Chapter 7 – The Currency Exchange Market in East Asia, pp. 95–102. Elsevier, 2016. 26. Thapa C., Neupane S., Marshall A. (2016) Market liquidity risks of foreign exchange derivatives and cross-country equity portfolio allocations. Journal of Multinational Financial Management, Vol. 34, pp. 46–64. 27. Wang X., Yang J.-H., Wang K.-L., Fawson C. (2017) Dynamic information spillovers in intraregionally-focused spot and forward currency markets. Journal of International Money and Finance, Vol. 71, pp. 78–110. 28. Zhang C. (2014) An information-based theory of international currency. Journal of International Economics, 93 (2), pp. 286–301.
Topic 7. Risks in international currency and financial relationships Macro- and micro-level risks in ICFR. Types of risks, mechanism and instruments of their minimization. Protective clauses in the ICFR system. Forex risk and credit risk insurance. Risk hedging. Information technology and international information systems as a tool of cost optimization in the ICFR system.
Reading list: Required: 11 1. Barry Eichengreen. Globalizing Capital: A History of the International Monetary System. Princeton University Press, 2008. 2. Michael Melvin, Stefan Norrbin. International Money and Finance. 9th edition. Academic Press, 2017. 3. Paul Krugman, Maurice Obstfeld, Marc Melitz. International Finance: Theory and Policy. 10th edition. Pearson, 2014. 4. Steve Suranovic. International Finance: Theory and Policy. Saylor Foundation, 2010.
Further reading: 1. Leo Onyiriuba. Emerging Market Bank Lending and Credit Risk Control. Chapter 12 – International Trade Financing, Payments and Credit Risk Control, pp. 233–250. Academic Press, 2016. 2. Aabo T., Ploeen R. (2014) The German humpback: Internationalization and foreign exchange hedging. Journal of Multinational Financial Management, Vol. 27, pp. 114– 129. 3. Al-Abri A., Baghestani H. (2016) Foreign investment and real exchange rate volatility in emerging Asian countries. Journal of Asian Economics, Vol. 37, pp. 34–47. 4. Álvarez-Díez S., Alfaro-Cid E., Fernández-Blanco M.O. (2016) Hedging foreign exchange rate risk: Multi-currency diversification. European Journal of Management and Business Economics, Vol. 40, pp. 47–62. 5. Bae S.C., Kwon T.H., Park R.S. (2018) Managing exchange rate exposure with hedging activities: New approach and evidence. International Review of Economics and Finance, Vol. 53, pp. 133–150. 6. Bahmani-Oskooee M., Gelan A. (2018) Exchange-rate volatility and international trade performance: Evidence from 12 African countries. Economic Analysis and Policy, Vol. 58, pp. 14–21. 7. Bubák V., Kočenda E., Žikeš F. (2011) Volatility transmission in emerging European foreign exchange markets. Journal of Banking & Finance, 35 (11), pp. 2829–2841. 8. Chaudron R.F.D.D. (2018) Bank’s interest rate risk and profitability in a prolonged environment of low interest rates. Journal of Banking & Finance, Vol. 89, pp. 94–104. 9. Chen S., Chang M.-J. (2015) Capital control and exchange rate volatility. The North American Journal of Economics and Finance, Vol. 33, pp. 167–177. 10. Délèze F., Korkeamäki T. (2018) Interest rate risk management with debt issues: Evidence from Europe. Journal of Financial Stability, Vol. 36, pp. 1–11. 11. Della Corte P., Sarno L., Tsiakas I. (2011) Spot and forward volatility in foreign exchange. Journal of Financial Economics, 100 (3), pp. 496–513. 12. Deloitte (2016) How to uncover hidden FX risks. CFO Insights. 13. Driessen J., Perotti E. (2011) Confidence building on Euro convergence: Evidence from currency options. Journal of International Money and Finance, 30 (3), pp. 474–491. 14. Du D. (2013) General equilibrium pricing of currency and currency options. Journal of Financial Economics, 110 (3), pp. 730–751. 15. Grobys K., Heinonen J.-P. (2016) Is there a credit risk anomaly in FX markets? Finance Research Letters, Vol. 18, pp. 1–6. 16. Marins J.T.M., Vicente J.V.M. (2017) Do the central bank actions reduce interest rate volatility? Economic Modelling, Vol. 65, pp. 129–137. 17. Patel J., Russo V., Fabozzi F.J. (2018) Using the right implied volatility quotes in times of low interest rates: An empirical analysis across different currencies. Finance Research Letters, Vol. 25, pp. 196–201. 18. Pina G. (2017) International reserves and global interest rates. Journal of International Money and Finance, Vol. 74, pp. 371–385. 19. Ree J.J.K., Yoon K., Park H. (2015) FX funding risks and exchange rate volatility. Emerging markets review, Vol. 25, pp. 163–275.
12 20. Taylor J.B. (2013) International monetary coordination and the great deviation. Journal of Policy Modeling, 35 (3), pp. 463–472.
Topic 8. Institutional structure of international currency and financial relationships International financial institutions as the ICFR participants. The International Monetary Fund (IMF). The World Bank Group (WBG). Regional development banks. EU international financial organizations. The Bank for International Settlements (BIS). The Financial Stability Board (FSB).
Reading list: Required: 1. Barry Eichengreen. Globalizing Capital: A History of the International Monetary System. Princeton University Press, 2008. 2. Kent Baker, Leigh A. Riddick. International Finance: A Survey. Oxford University Press, 2013. 3. Michael Melvin, Stefan Norrbin. International Money and Finance. 9th edition. Academic Press, 2017. 4. Paul Krugman, Maurice Obstfeld, Marc Melitz. International Finance: Theory and Policy. 10th edition. Pearson, 2014. 5. Steve Suranovic. International Finance: Theory and Policy. Saylor Foundation, 2010.
Further reading: 1. Alyse Killeen, Rosanna Chan. Handbook of Blockchain, Digital Finance, and Inclusion, Volume 2. Chapter 10 – Global Financial Institutions 2.0, pp. 213–242. Academic Press, 2017. 2. Damon P. Coppola. Introduction to International Disaster Management, 2nd edition. Chapter 10 – Participants: Multilateral Organizations and International Financial Institutions, pp. 549–639. Butterworth-Heinemann, 2011. 3. G.G.H. Garcia. Handbook of Safeguarding Global Financial Stability. Chapter 40 – International Monetary Fund, pp. 419–434. Academic Press, 2012. 4. Hartwell C.A. (2018) The impact of institutional volatility on financial volatility in transition economies. Journal of Comparative Economics, 46 (2), pp. 598–615. 5. Rapkin D.P., Strand J.R. (2005) Developing country representation and governance of the International Monetary Fund. World Development, 33 (12), pp. 1993–2011.
Internet resources: 1. http://www.imf.org/external/index.htm (International Monetary Fund) 2. http://www.worldbank.org/ (World Bank Group) 3. https://www.bis.org/ (Bank for International Settlements) 4. http://www.eib.org/ (European Investment Bank) 5. http://www.isdb-pilot.org/ (Islamic Development Bank) 6. https://www.adb.org/ (Asian Development Bank) 7. http://www.ebrd.com/home (European Bank for Reconstruction and Development) 8. https://www.caf.com/en (CAF – Development Bank of Latin America) 9. http://www.iadb.org/en/inter-american-development-bank,2837.html (Inter-American Development Bank) 10. http://www.afdb.org/en/ (African Development Bank) 11. http://www.aiib.org/ (Asian Infrastructure Investment Bank) 13 12. http://www.bstdb.org/ (Black Sea Trade and Development Bank) 13. http://eabr.org/e/ (Eurasian Development Bank) 14. http://www.ndb.int/ (New Development Bank) 15. https://www.iib.int/en (International Investment Bank) 16. http://www.caissedesdepots.fr/en (Caisse des Dépôts et Consignations (Deposits and Consignments Fund)) 17. https://www.kfw.de/kfw.de-2.html (Kreditanstalt für Wiederaufbau (Reconstruction Credit Institute)) 18. http://www.badea.org/ (Arab Bank for Economic Development in Africa) 19. https://new.veb.ru/ (State Corporation “Bank for Development and Foreign Economic Affairs (Vnesheconombank)”)
Topic 9. International currency and financial relationships of Russia Russia in the ICFR system. Balance of payment of the Russian Federation. Monetary policy and monetary system of Russia. Russia as an international borrower and international lender. Participation of Russia in the international financial organizations. Specifics of financial interplay between Russia and other members of the Eurasian Economic Union (EAEU).
Reading list: Required: None. Lecture notes only.
Further reading: 1. OECD (2011) Payment, clearing and settlement systems in Russia. 2. Ono S. (2013) The effects of foreign exchange and monetary policies in Russia. Economic Systems, 37 (4), pp. 522–541.
3. Organization and structure of the seminars
Seminars will follow lectures and normally will consist of three types of assignments: Presentation Economic brief Article review Besides, students should be ready to comment, discuss, and answer to questions on the subject/issue/case pertaining to the seminar’s topic.
3.1. Presentations. Students will receive discussion questions that are linked to the lecture materials on a particular topic. Textbooks and further reading could be found in Section 2 ‘Course Schedule’ of this Program. It is advised that presentations are made in a PowerPoint format consisting of 10- 15 slides.
3.2. Economic briefs and article reviews. 3.2.1. Economic briefs. Students should use a hands-on approach in selecting topics or areas of discussion, which may cover the most remarkable/sound/promising/expected/ unexpected events/trends/perspectives in ICFR including international forex, credit, and securities markets, international financial institutions, and Russia’s role in the global financial markets. Economic briefs should be based on any publicly accessible sources, including HSE’s online library resources.
14 3.2.2. Article reviews. Students will receive articles published in either academic journals or specialized editions of the analytic and research organizations. Materials can be in the video format as well. Both economic briefs and article reviews should not appear as just a simple narration of what the events are or what the article is about. Students must show their skills and savvy in developing their broader vision of the issues/ideas/problems as well as in mastering their critical approach when analyzing the core aspects of the events/article so that they will be confident in framing and substantiating their own arguments and conclusions. It is not necessarily to present economic briefs and article reviews in the PowerPoint format; however, it is recommended to do so as visualization of the material is more convenient for the audience to follow. Duration of speaking in class participation: – up to 15 minutes for presentations; – up to 8 minutes for economic briefs and article reviews; and – up to 5 minutes for comments, discussion and answers to questions.
4. Review (control) work
The review (control) work appears as a test/quiz with 30 questions divided into two parts. Part 1 consists of 15 questions with multiple choice answers (4-5 choices), and students should choose the right answer(s) among them. Part 2 will also consist of 15 questions in the form of statements, and students should specify whether the given statement is true or false. Grading criteria and sample test assignments are shown below (Sections 6 and 7 respectively). Duration of the review (control) work: 45 minutes.
5. Final exam
There will be two questions in each examination card, and it will be a written exam. Grading criteria of the final exam and sample questions are shown below (Sections 6 and 8 respectively).
6. Grading Criteria
Criteria for grading are based on class participation (30%), review (control) work (30%), and a final exam (40%). Students are graded according to the 10-grade point system.
Grade Grade Criteria points Comprehensive knowledge of all the course material. Understanding of the cause-and-effect relationships of 10 core elements and processes. Strong arguments in support of own position in the comments and class discussions. Extensive use of further reading1. Correct answers to all 30 questions in the test assignment. Comprehensive knowledge of all the course material. Understanding of cause-and-effect relationships of core elements and processes. Coherent reasoning of Excellent 9 arguments in support of own position in the comments and class discussions. Extensive use of further reading. Correct answers to 27–29 questions in the test
1 Hereinafter including academic literature and reliable open access sources. 15 assignment. Sufficient knowledge of all the course materials. Understanding of cause-and-effect relationships of core elements and processes. Solid, but not enough 8 convincing or conclusive arguments in support of own position in the comments and class discussions. Extensive use of further reading. Correct answers to 25– 26 questions in the test assignment. Solid knowledge of all the course materials. Understanding of cause-and-effect relationships of core elements and processes. Consistent, but not enough convincing or conclusive arguments in support of own 7 position in the comments and class discussions. Use of academic literature with priority to reliable open access sources. Correct answers to 22–24 questions in the test Good assignment. Sufficient knowledge of all the course materials. Overall understanding of cause-and-effect relationships of core elements and processes. Overall consistent, but 6 not enough convincing or conclusive arguments in support of own position in the comments and class discussions. Limited use of further reading. Correct answers to 20–21 questions in the test assignment. Fair knowledge and understanding of the course materials, including the cause-and-effect relationships of core elements and processes. Indecisive, but overall acceptable arguments in support of own position in the 5 comments and class discussions. Very limited use of further reading with priority to required reading only. Marginal Pass Correct answers to 17–19 questions in the test assignment. Poor knowledge and understanding of the course materials, including the cause-and-effect relationships of core elements and processes. Weak but overall acceptable arguments in support of own position in the 4 comments and class discussions. Very limited use of further reading with heavy reliance to required reading only. Correct answers to 15–16 questions in the test assignment. Lack of knowledge and understanding of the course materials, including the cause-and-effect relationships of core elements and processes. Unconvincing and Fail unacceptable arguments in support of own position in 1–3 the comments and class discussions. Failure to use further reading; exclusive use of required reading only. Correct answers to 12–14 questions in the test assignment (3 grade points), 10–11 questions (2 grade points), 9 questions and less (1 grade point).
Grading Formula:
16 The final grade GF is calculated based on the weighted mean of:
Cumulative grade ( GC ), which consists of the grade for class participation (GCP ) and the
grade for review (control) work (GCW ), and
Final exam grade (GE ), as follows:
GF 0,60GC 0,30GCP 0,30GCW 0,40GE Important! 1. Students are not normally eligible to retake class participation and/or review (control) work in case they failed to pass them. 2. Cumulative grade and final exam grade are rounded up or down to the nearest whole number according to the mathematical rounding rules.
7. Sample test assignments for the review (control) work
Part I. Select the matching answer(s):
1. The difference between creditworthiness and solvency in international credit relations is in that: A. Creditworthiness is an ability of a borrower to receive a loan, while solvency is an ability of a borrower to timely and fully meet its obligations before a creditor; B. Creditworthiness is an ability of a transnational corporation to receive a loan, while solvency is an ability of a transnational corporation to timely and fully meet its obligations before a creditor; C. Creditworthiness is an ability of a borrower to receive a loan, while solvency is an ability of a creditor to timely and fully meet its obligations before a bank; D. Creditworthiness is an ability of a borrower to receive a loan, while solvency is an ability of a borrower to fully meet its obligations before a creditor.
2. Select possible answer(s) that most accurately is (are) associated with the factors affecting balance of payments of a given national jurisdiction: A. Economic development of different countries B. Improvement of international competition C. Deterioration of international competition D. Devaluation of a national currency E. Appreciation of a national currency F. All the answers above.
Part II. Are the following statements true (T) or false (F)?
1. U.S. dollar, Euro, and SDR are world reserve currencies T F
2. Difference in quantitative parameters of interest rates in international financial markets contribute to quantitative parameters of an exchange rate of the national currency T F
8. Sample Questions for the Final Exam
Topic 1. World economy, and international currency and financial relationships (ICFR) 1. The notion and concept of ICFR
17 2. The interplay between the world economy and ICFR 3. Factors determining new emerging aspects of contemporary ICFR 4. ICFR and the processes of economic globalization and regionalization 5. Transnationalization of the market participants and its contribution to ICFR 6. ICFR transformation in the post-crisis period
Topic 2. International monetary system, policy, and regulation 1. Difference between international monetary relations and international monetary system 2. What is currency? Classification of currencies 3. Currency classification criteria. Reserve currencies and how they are distinguished from other convertible currencies 4. Demonetization of gold. Core milestones of demonetization of gold 5. The exchange rate as a value based category 6. Factors affecting the exchange rate dynamics 7. Global, international, and national monetary systems 8. Specifics of the regional monetary systems 9. Differences between Jamaica monetary system and Bretton Woods monetary system 10. The background of euro. Role of euro in the development of European monetary integration 11. Market-based and government-run regulation of monetary relations 12. Forms of the monetary policy 13. Advantages and drawbacks of fixed and floating (free) exchange rates 14. Devaluation and appreciation of national currencies as instruments of the monetary policy 15. Core issues of transition to the convertibility of national currencies
Topic 3. Balance of payments 1. Balance of payments as a projection of international economic activity of the national jurisdiction 2. Structure of balance of payments 3. Classification of balance of payments accounts according to the IMF methodology 4. Balance of payments’ current account and its structure 5. International capital flow and its classification 6. The approaches to measure net balance of payments 7. Factors affecting the balance of payments parameters 8. Balance of payment as a subject of regulation 9. Balance of payment deficit and the techniques for minimization of imbalances
Topic 4. International trade finance 1. Role of international trade finance in the ICFR system 2. Role of the national and regional currencies in international trade finance 3. Role of banks in international trade finance 4. Trade finance instruments. Comparative analysis of bank’s Letter of Credit and Letter of Guarantee 5. Interplay of international forex, credit, and trade finance operations 6. What does the efficiency of the foreign trade deal depend on? 7. Foreign exchange clearings and their forms
Topic 5. International credit 1. International credit as an economic category. Principles and purpose of international credit
18 2. Role of international credit in the development of the world economy 3. Forms of international credit 4. Comparative analysis of commercial loan and bank loan 5. Reimbursement credit as one of the tools for export credit operations 6. Similarity and difference between creditworthiness and solvency 7. International project finance as a form of long-term international credit 8. International leasing. Types of leasing deals 9. Comparative analysis of factoring and forfeiting 10. Financial and payment terms of international credit 11. Cost of international credit. Types of bank fees and commissions under the credit process 12. Main factors affecting interest rate under international credit 13. Types of international credit collateral 14. Specifics of international credit relations regulation 15. Role and criticality of the export-import banks in the development of international credit
Topic 6. International foreign exchange, credit, and securities markets 1. Difference between international and national forex, credit, and securities markets 2. Structure and participants of international capital markets 3. Specifics of the contemporary international forex markets 4. Economic and institutional specifics of international forex markets 5. International, regional, and national forex markets. Forex markets instruments 6. Types of forex transactions. Foreign exchange position of banks as part of forex transactions 7. Forex options and forex arbitrage 8. International credit market as an integral part of the international financial markets 9. Instruments of international credit market 10. Specifics of the Eurocurrency market 11. Specifics of the international markets of financial derivatives 12. Structure of the international capital markets 13. International gold markets: Functional characteristics and organizational structure 14. Principal mechanisms of restructuring the external debt of national jurisdictions
Topic 7. Risks in international currency and financial relationships 1. Commercial risks of the ICFR participants 2. Forex risks of the ICFR participants 3. Credit, interest rate, and transfer risks of the ICFR participants 4. The core approaches to minimization of the forex and credit risks 5. Protective clauses in the foreign trade deals 6. Role of export-import institutions in financing export-import deals 7. Specifics of hedging risks in the international forex and credit markets
Topic 8. Institutional structure of international currency and financial relationships 1. Role of the international financial organizations in the ICFR development 2. International Monetary Fund (IMF) and the specifics of its credit mechanisms 3. Role of IMF in the ICFR system 4. IMF resources 5. Differences between IMF stabilization loan and structural adjustment loan 6. IMF stabilization programs 7. Importance of the World Bank Group for the contemporary ICFR system 8. Structure of the World Bank Group 9. Credits and credit policy of the World Bank Group
19 10. Objectives and functional responsibilities of European Bank for Reconstruction and Development (EBRD) 11. EBRD credit policy 12. Institutional structure and specifics of the regional development banks 13. European Central Bank and its contributing role to the efficacy of the post-crisis recovery 14. Specifics of Bank for International Settlements 15. Financial Stability Board and its authority in shaping the post-crisis mechanism of international banking regulation
Topic 9. International currency and financial relationships of Russia 1. Role and importance of Russia in the contemporary ICFR system 2. Specifics of the monetary policy of Russia and the Russian forex market 3. Balance of payments of Russia and its specifics 4. The limits of convertibility of the Russian ruble 5. International reserves of the Russian Federation 6. Factors affecting the exchange rate of the Russian ruble 7. Russia as a borrower and as a creditor in international credit relations 8. Participation of Russia in the international financial organizations 9. Monetary and financial interplay of Russia in the framework of the regional cooperation (evidence from Eurasian Economic Union)
9. Class Equipment and Software Support
A regular set of multimedia teaching equipment is used for visual demonstration of lecture notes, seminar materials, and student presentations.
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