The purpose of the module is to discuss some of the implications of the fact that the economy is open for the behaviour of the macroeconomy. The first section of the course discusses the law of one price, purchasing power parity and covered and uncovered interest parity. The second section considers the Mundell-Fleming model and the Dornbusch overshooting model, as well as more recent developments. The third section is devoted to policy related issues, such as target zones, speculative attacks on fixed exchange rate regimes and the East Asia financial crisis.

On completion of this module students should be able to:

• demonstrate systematic knowledge and understanding  of theories and concepts in open economy macroeconomics;
• critically analyse, using appropriate techniques, some static and dynamic open macroeconomic models;
• critically appraise policy related issues in open economy macroeconomics.