Assignment:
Below is a series of essay questions meant to test your knowledge of international finance and monetary policy. Your answers will be evaluated on how well you deploy economic theory, empirical evidence, and logic to answer each one of these questions. Your answers to these questions will be due on December 17th. Good luck. Strong performance on these essays will result in a score of 95, weaker but adequate answers will receive scores of 85, and weak and inadequate answers will receive scores of 75 and below. Good luck.
1. How can international trade in assets make countries better off?
2. Many observers believe that the largely unregulated nature of global banking activity leaves the world financial system vulnerable to bank failure on a massive scale. Is this a re; threat? If so, what measures have governments taken to reduce it?
3. Explain the issues involved with the Fed acting as a Lender of Last Resort (LLR). Did the Fed play this role during the 2008-2009 crisis?
4. Discuss the benefits and costs of joining a fixed-exchange area.
5. Discuss the effects of the reunification of eastern and western Germany in 1990 on both Germany and its neighboring European countries.
6. Is Europe an optimum currency area?
7. What does the term "original sin" refer to in international finance?
8. Describe the Asian financial crisis as it unfolds beginning with the devaluation of the Thai currency in July 1997, followed by the Malaysian, Indonesian and South Korean crises. As part of your answer, elaborate on the Malaysian response to the crisis versus its troubled neighbors' responses.
9. Discuss the Euro Crisis of 2011. How was the crisis eventually resolved? Does the Italian Debt Crisis of today threaten the stability of the Eurozone?
10. Why has capital flowed to the developed world in recent years? What prevents capital from flowing to developing markets given that capital scarcity in these markets offers the potential to make better rates of return on capital than in the developed world?