1. EC0 463 International Monetary Relations Professor Malamud BEH 502 Email: bernard.malamud@unlv.edubernard.malamud@unlv.edu Website: http://faculty.unlv.edu/bmalamudhttp://faculty.unlv.edu/bmalamud Office Hours:MTWR 12 – 1:00 pm; and by appointment

2. International Monetary Relations It’s about: –Exchange Rates & Balance of Payments How they’re determined in an open economy How they affect an open economy What you’ll gain: –Command of challenging MODELS Hone your skills of economic analysis –A feel for the international economy –Appreciation of floating and fixed exchange rates Strengths and drawbacks How policy works … and doesn’t work … under each regime How you’ll know: 2 Exams; Comprehensive Final; 8 “Discussion Questions”

3. A Tour of the World: August 2007 The USA: Global Leader Locomotive of the 1990s…now slowed Lender of last resort in the ‘90s –Mexico ’94 - 95 … East Asia ’97 - 98 –Kindleberger,World In Depression:1929-39 –Eichengreen, Golden Fetters –Bernanke, Essays on the Great Depression US at War –Ballooning Budget Deficit/Trade Deficit –Depreciating Dollar –Flight from U.S. investments Can others propel growth? –Post-bubble Japan: Its “rightful place” –Europe: Stability and Growth(?) Pact –China: Grand Ambitions … Undervalued currency –India: Great Potential

4. Energy supply Saudi Arabia Iran Iraq Chad – Cameroon Pipeline Nigeria/Gulf of Guinea … Regional Strife Afghanistan: turf wars (pipeline routes) Russia … oil and gas Russia … nuclear tech for Iran/Iraq Indonesia … political strive Venezuela … Chavez: a wild-card Alaska … environmental threat

5. The BIG Picture: global urbanization The top ten: Tokyo … 25 mil Bombay (Mumbai) … 20+ Lagos … rampant crime Sao Paulo … 20 … rampant crime Dhaka Karachi … 20- Mexico City Shanghai New York … 15 Calcutta Urbanization with inadequate infrastructure Asia’s blanket of smog

6. The Big Picture: World Income Distribution (Xavier Sala – i – Martin) 1970 – 1998: somewhat improved owing to Chinese development African decline threatens to reverse (somewhat) positive trend

12. The BIG Picture: effective use of available resources Solow Growth Model Y = A K a L (1-a) Country Technology Coefficients, A* (Nazrui Islam) HK = 38 SNG = 24 CN = 29 E = 22 US = 28 B = 22 UK = 24 F = 22 N = 24 J = 22 * Technology coefficient relative to Somalia Correlation with human capital measures “Convergence Clubs” … all countries don’t converge to same income or growth rate Natural resource effect

13. Dates April 1925 UK returns to gold October 1929 The Great Crash Sept 1931 UK leaves gold Aug 15, 1971 Nixon Econ Program Gold window closed/Import surtax Wage/Price Freeze October 1973 Arab Oil Embargo Oct 6, 1979 Volcker  M-growth 1982+ Third World Debt Crisis February 1985 $ - £ “parity” Oct 19, 1987 Black Monday Nov 9, 1989 Berlin Wall Down September 1992 ERM Collapse December 1994 Tequila Crisis Aug 1997 – 1998 East Asia Crisis Sept 1998 LTCM Jan 1, 1999 € Sept 11, 2001 January 2002 Argentine Peso Collapse August 2007 US Mortgage Bubble … and Places Bretton Woods, ‘44 Plaza, Sept 1985 Louvre, Feb 1987 –Japan bubble Maastricht, 1991