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Course, academic year 2023/2024
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International Macroeconomics and Finance - JEM111
Title: International Macroeconomics and Finance
Guaranteed by: Institute of Economic Studies (23-IES)
Faculty: Faculty of Social Sciences
Actual: from 2021
Semester: summer
E-Credits: 6
Examination process: summer s.:
Hours per week, examination: summer s.:2/2, Ex [HT]
Capacity: 59 / 59 (59)
Min. number of students: unlimited
4EU+: no
Virtual mobility / capacity: no
State of the course: taught
Language: English
Teaching methods: full-time
Teaching methods: full-time
Additional information:
Note: course can be enrolled in outside the study plan
enabled for web enrollment
priority enrollment if the course is part of the study plan
Guarantor: doc. Mgr. Tomáš Holub, Ph.D.
Teacher(s): doc. Mgr. Tomáš Holub, Ph.D.
Alessandro Chiari
Class: Courses for incoming students
Pre-requisite : {Group of pre-requisites for JEM111 (JEM004 or JEM216)}
Files Comments Added by
download HW 1.docx HW1 due to the 26th of February Alessandro Chiari
download Seminar 1.pptx Seminar01_intertemporal trade 2024 Alessandro Chiari
Annotation -
Last update: doc. Mgr. Tomáš Holub, Ph.D. (02.02.2024)
This course is focused on advanced international macroeconomics with an emphasis on the issues associated with international financial flows. It contrasts benefits and potential challenges associated with these international financial flows. It starts with studying the intertemporal trade between economies and equilibrium current account determination with perfect financial markets. The implications of sudden stops in international lending or capital flight are then discussed. One lecture deals with the twin-deficit phenomenon and interpretation of the Feldstein-Horioka puzzle. The neo-classical growth model for a small open economy facing borrowing constraints is derived. The price level convergence is also studied using the Balassa-Samuelson effect. Attention is also paid to financial imperfections and their impact on international capital allocation. The second block of lectures starts with discussing the exchange rate regime choice, currency crises and the optimum currency area theory. The focus is then put on the inflation-targeting regime in small open economies, reaction of central banks to foreign shocks, discussion of exchange rate management under the inflation targeting, etc. The course assumes a prior good knowledge of closed-economy macroeconomics at the level of master studies.
Aim of the course -
Last update: doc. Mgr. Tomáš Holub, Ph.D. (02.02.2024)

This course builds on the advanced macroeconomics, focusing on the issues relevant for small open economies, including the challenges related to international financial markets imperfections. It leads to orientation in the current account determination, long-term growth issues, exchange rate regime choice and stabilisation policy issues for these economies.

Literature -
Last update: doc. Mgr. Tomáš Holub, Ph.D. (20.02.2024)

• Obstfeld, M., Rogoff, K.: Foundations of International Macroeconomics. London: MIT Press, 1996.

• Romer, D., 1996, Advanced Macroeconomics. New York: McGraw-Hill.

• Barro, R., Sala-i-Martin, X, 1995, Economic Growth. New York: McGraw-Hill.

• Cashin, Paul, Kent, J. Christopher, 2003, "The Response of the Current Account to Terms of Trade Shocks: Persistence Matters ," IMF WP 03143,

• Balassa, B., 1964, "The Purchasing Power Parity Doctrine: A Reappraisal," Journal of Political Economy, 72: 584-96.

• Samuelson, P.A., 1964, "Theoretical Notes on Trade Problems," Review of Economics and Statistics, 46 (May): 145-154.

• Čihák, M. and Holub, T., 2005, "Price Convergence in EU-accession Countries," Économie Internationale, No. 102, pp. 59-82.

• Holub, T. and Čihák, M., 2003, "Price Convergence: What Can the Balassa-Samuelson Model Tell Us?" Working Paper, no. 8/2003, Prague: Czech National Bank (

• Obstfeld, M., 1996, "Models of Currency Crises with Self-fulfilling Features," European Economic Review, vol. 40 (April), pp. 1037-48.

• Chang, R., Velasco, A., 1998, "Financial Crises in Emerging Markets: A Canonical Model," NBER Working Paper Series, no. 6606 (

• Krugman, P., 1999, "Balance Sheets, the Transfer Problem, and Financial Crises," International Tax and Public Finance, 6, 459-472.

• DeLong, j. B., 2001, "The International Crises of the 1990s: Analytics" (

• Linhart, C. M.; Rogoff, K. S. (2008): Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison. NBER Working Paper No. 13761.

• Fischer, S., 2001, "Exchange Rate Regimes: Is the Bipolar View Correct?" A Lecture Delivered at the Meetings of the American Economic Association, New Orleans, January 6 (

• Mundell, R., 1961, "A Theory of Optimum Currency Areas," American Economic Review, vol. 51, pp. 657-664.

• McKinnon, R.I., 1963, "Optimum Currency Areas," American Economic Review, vol. 53, pp. 717-725.

• Holub, T., 2003, "Importing Low Inflation via Pegged Exchange Rates, Currency Boards and Monetary Unions," ICEG European Center, Working Paper 21, February 2003. 

• CNB (2023): Analyses of the Czech Republic's current economic alignment with the euro area, December,

• Christiano, Lawrence J., Mathias Trabandt, and Karl Walentin. 2007, November. Introducing Financial Frictions and Unemployment into a Small Open Economy Model.  Working paper series 214, Sveriges Riksbank (Central Bank of Sweden).

• Stiglitz, J. E., Weiss, A., 1981, "Credit rationing in markets with imperfect information".

• Kyiotaki, N., Moore, J., 1997, "Credit cycles", Journal of Political Economy, vol 105, No. 2, pp. 211 -248.

• Svensson, L. E. O, 2000, "Open-Economy Inflation Targeting". London: CEPR Discussion Paper, 1989 (October).

• Fraga, A., I. Goldfajn, and A. Minella, 2003, "Inflation Targeting in Emerging Market Economies." Cambridge, MA, NBER Working Paper Series, 10019 (October).

• Mishkin, F. S.,  Schmidt-Hebbel, K. (2006): "Does Inflation Targeting Make a Difference?" CNB Working Paper, no. 13/2006 (

• Irineu E. de Carvalho Filho (2011): "28 Months Later: How Inflation Targeters Outperformed Their Peers in the Great Recession," The B.E. Journal of Macroeconomics: Vol. 11: Iss. 1 (Topics) (

• Rose, A.K. (2014): "Surprising similarities: recent monetary regimes of small economies," Journal of International Money and Finance, 49, 5-27.

• Andersena, T.B., Malchow-Møllerb, N., Nordvigc, J. (2015): "Inflation targeting and macroeconomic performance since the Great Recession." Oxford Economic Papers, 67(3), 2015, 598-613.

• Gali J., Monacelli, T., 2005, "Monetary Policy and Exchange Rate Volatility in a Small Open Economy", The Review of Economic Studies, vol 72, No. 3 (July 2005), pp. 707 - 734.

• Calvo, G. A., and C. M. Reinhart. "Fear of Floating." Cambridge, MA, NBER Working Paper, 7993, 2000.

• Bofinger, P., and T. Wollmershaeuser, 2001, "Managed Floating: Understanding the New International Monetary Order." London: CEPR Discussion Paper, 3064.

• Goldstein, M., 2002, "Managed Floating Plus." Washington, D.C.: Institute for International Economics, Policy Analyses in International Economics, 66.

• Edison, H. J.1 1993, "The Effectiveness of Central Bank Intervention: A Survey of the Literature after 1982." Princeton: Princeton University, Special Papers in International Economics, 18, 1993.

• Sarno, L., and M. P. Taylor, 2001, "Official intervention in the foreign exchange market: Is it effective and, if so, how does it work?" Journal of Economic Literature, 39 (3), 839-868.

• Holub, T., 2004, "Foreign Exchange Interventions Under Inflation Targeting: The Czech Experience." CNB IRPN, no. 1/2004.

• Geršl, A., Holub, T. Foreign Exchange Interventions Under Inflation Targeting: The Czech Experience. Contemporary Economic Policy, 2006, vol. 24, no. 4 (October), pp. 475-491, ISSN 1074-3529.

• Disyatat, P., and G. Galati, 2005, "The effectiveness of foreign exchange intervention in emerging market countries: evidence from the Czech koruna." Basel, BIS Working Paper, 172, 2005.

• Égert, B. and L. Komárek, 2005, "Foreign Exchange Interventions in the Czech Republic: Did They Matter?" Prague, CNB Working Paper Series.

• Cavusoglu, N., 2010, Exchange Rates and the Effectiveness of Actual and Oral Official Interventions: A Survey of Findings, Issues and Policy Implications. Global Economy Journal, vol. 10, iss. 4, article 3.

• Gnabo, J-Y, De Mello, J., Moccero, D., 2010, "Interdependencies between Monetary Policy and Foreign Exchange Interventions under Inflation Targeting: The Case of Brazil and the Czech Republic", International Finance, vol. 13, issue 2, pp 195 - 211.





Teaching methods -
Last update: doc. Mgr. Tomáš Holub, Ph.D. (02.02.2024)

lectures + seminars (first half of the course: mostly calculating exercises; second half: presentation and discussion of papers)

Requirements to the exam -
Last update: doc. Mgr. Tomáš Holub, Ph.D. (02.02.2024)

The grade will be based on regular written assignments (40%; 10 HWs each for 4 points at most), seminar activity (4%, i.e. 4 points at most) and a final exam (56 %; written on-site exam - 56 points maximum).  

Grading follows the standard FSV UK scale.

Syllabus -
Last update: doc. Mgr. Tomáš Holub, Ph.D. (02.02.2024)

19.2. Lecture: Benefits of international financial liberalisation in the 2-period model of intertemporal trade; Seminar: BoP terminology and identities; 2-period model - exercises 

26.2. Lecture: Further issues: borrowing constraints, productive economy, large economies; Seminar: 2-period model extensions - exercises

4.3. Lecture: Welfare implications of sudden stops in international financial flows; Seminar: Sudden stops and capital flight - exercises 

11.3. Lecture: Twin deficits in the OLG model, Feldstein-Horioka puzzle; Seminar: OLG model - exercices

18.3. Lecture: CA dynamics in the infinite-horizon model with perfect financial markets; Seminar Infinite horizon - exercises

25.3. Lecture: Long-term economic growth with international borrowing constraints; Seminar: Terms-of-trade shocks and CA balance 

(1.4. Easter holiday)

8.4. Lecture: Price level convergence and the Ballassa-Samuelson effect; Seminar guest lecture: Equilibrium real interest rate (r*) in large vs. small-open economies (speaker: Jan Vlček)

15.4. Lecture: Financial imperfections and international financial flows; Seminar: Financial imperfections - 2 country model

22.4. Lecture i: Fundamental-based vs. self-fulfilling currency crisis; Lecture ii: Exchange rate mismatches and their implications

29.4. Lecture: OCA and exchange rate regime choice; Seminar: CNB's analyses for euro adoption

6.5. Lecture: Inflation targeting in small open economies, the exchange rate transmission channel; Seminar: Performance of IT during the GFC in comparison with hard pegs 

13.5. Lecture: Foreign exchange interventions under the inflation targeting regime; Seminar: Exchange rate as an unconventional monetary policy instrument 

Entry requirements -
Last update: doc. Mgr. Tomáš Holub, Ph.D. (02.02.2024)

passing intermediate macroeconomics for closed economies

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