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:TR 12 – 1pm; 2:30 - 3:30 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 –Job interview talking points

3. A Tour of the World: August 2008 The USA: Still 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 –Europe: Stability and Growth(?) Pact –China: Grand Ambitions … Undervalued currency –India: Great Potential –Brazil: The country of the future?

4. 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

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

11. 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  Monetarist experiment 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 Long Term Capital Management Crisis Jan 1, 1999 € Sept 11, 2001 January 2002 Argentine Peso Collapse August 2007 US Mortgage Bubble Collapse 2008 UK / Spain Housing Bubble Collapse Credit Crunch: Bear Stearns / Fannie / Freddie … and Places Bretton Woods, ‘44 Plaza, Sept 1985 Louvre, Feb 1987 –Japan bubble Maastricht, 1991