Reference no: EM133476361

Assignment: Contemporary Issues in International Finance and Economic Development

Section I

Question A. In what ways does the analytical framework provided by the international macroeconomic policy trilemma help in explaining and predicting currency crises?

Question B. In what ways has financial globalization affected the speed and virulence with which economic crises are transmitted between countries? How might the various types of financial contagion be distinguished from one another both in theory and empirically?

Question C. With reference to specific examples, evaluate the circumstances in which a policy of managed floating would be superior to one of freely flexible exchange rates?

Question D. After a protracted period when international reserves were being accumulated, emerging market and developing economies exhibited a substantial decline in reserve holdings in 2015-16. Draw on your knowledge of the relevant theory to offer a potential explanation of why this occurred.

Question E. To what extent does lending by the IMF involve a moral hazard problem? Explain carefully the difficulties in estimating the size of the problem.

Section II

Question A. To what extent can the history and evolution of the Eurozone be explained by optimum currency area theory? Sometimes currency crises appear to recur. From both a theoretical and empirical point of view assess the probability of there being another crisis in the Eurozone in the relatively near future.

Question B. Explain the pattern of surges and sudden stops with respect to international capital flows. Consider the extent to which such volatility is consistent with the efficient markets hypothesis. Analyze the extent to which the macroeconomic consequences of international capital volatility can be offset by a policy of sterilized intervention.

Question C. Assess the claim that the world is approaching the ‘end of an era' in terms of the US dollar being the principal international reserve currency. Assess the need for a global financial safety net and analyze the composition of such a safety net.