International Finance: Theory and Policy
Steve Suranovic, George Washington University
Pub Date: 2010
ISBN 13: 978-1-9361264-6-0
Publisher: Saylor Foundation
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The text is fairly comprehensive. It covers all the major areas of international finance and uses standard economic concepts and models. I think read more
The text is fairly comprehensive. It covers all the major areas of international finance and uses standard economic concepts and models. I think students would enjoy the chapter discussing the welfare effects of trade imbalances, which is well done with clear examples. Those who are interested in details of the foreign exchange market itself will have to look elsewhere. While interest rate parity is given a chapter, the concept of covered interest parity is only mentioned in an exercise. I was surprised that the impossible trinity or trilemma was not mentioned even though the text devoted significant attention to the limits that a fixed exchange rate regime places on monetary autonomy. The text itself does not have a table of contents, but one is available in the bookmarks of the pdf file. The text does not have a glossary, but the pdf file is easy to search. I did not see any additional instructor resources, such as an instructor's manual, a test bank, or lecture slides.
The content is generally accurate aside from minor typos and provides a balanced, unbiased approach to the major issues.
The text is focused primarily on the major economic concepts, which gives it longevity. The data used in the text only go up to around 2008. In most cases, however, there are working links to the data sources in the pdf file that would allow a reader to obtain updated data without too much hassle. It would be nice to have more coverage of recent issues to give the text greater relevance to students.
The text is clear and well written with many helpful examples.
The text is internally consistent. The macroeconomic approach developed and applied is the AA-DD model. The text gradually builds up to that model and applies it consistently.
The chapters are all divided into short sections, which makes it easy to choose among topics within a chapter. Many of the chapters are building up to the AA-DD model, which is then applied for a number of chapters, so it would not be a good idea to skip any of the major building blocks altogether.
The topics are laid out in a natural way and flow well together.
My major issue with the book is the interface. The text, tables, and figures in the pdf file are not typeset in a very professional manner. I found this to be a significant distraction and I think it would really turn students off. The graphical analyses and equations in a text like this are especially important, but they are not clearly presented here. The equations are either not properly typeset or are blurry. This could be a major roadblock for students, many of whom are uncomfortable with equations. The diagrams leave a lot to be desired and I think students would have trouble following the 3-D diagrams of the AA-DD model.
There are no major grammatical problems with the text.
The text is not culturally insensitive or offensive in any way.
I think the content itself is of high quality, but I would hesitate to assign this book to students because of the serious issues with the interface.
Table of Contents
- Chapter 1: Introductory Finance Issues: Current Patterns, Past History, and International Institutions
- Chapter 2: National Income and the Balance of Payments Accounts
- Chapter 3: The Whole Truth about Trade Imbalances
- Chapter 4: Foreign Exchange Markets and Rates of Return
- Chapter 5: Interest Rate Parity
- Chapter 6: Purchasing Power Parity
- Chapter 7: Interest Rate Determination
- Chapter 8: National Output Determination
- Chapter 9: The AA-DD Model
- Chapter 10: Policy Effects with Floating Exchange Rates
- Chapter 11: Fixed Exchange Rates
- Chapter 12: Policy Effects with Fixed Exchange Rates
- Chapter 13: Fixed versus Floating Exchange Rates
About the Book
International Finance Theory and Policy is built on Steve Suranovic’s belief that to understand the international economy, students need to learn how economic models are applied to real world problems. It is true what they say, that ”economists do it with models.“ That’s because economic models provide insights about the world that are simply not obtainable solely by discussion of the issues.
International Finance Theory and Policy develops a unified model of the international macroeconomy. The text provides detailed descriptions of major macroeconomic variables, covers the interest rate parity and purchasing power parity theories of exchange rate determination, takes an exhaustive look at the pros and cons of trade imbalances and presents the well-known AA-DD model to explore the effects of fiscal and monetary policy under both fixed and flexible exchange rates.
The models are developed, not by employing advanced mathematics, but rather by walking students through a detailed description of how a model’s assumptions influence its conclusions. But more importantly, each model and theory is connected to real world policy issues.
The Finance Text has the following unique features: o Begins with an historical overview of the international macroeconomy to provide context for the theory. o Concludes with a detailed discussion of the pros and cons of fixed and floating exchange rate systems. o Provides an extensive look at the issue of trade imbalances. Readers learn techniques to evaluate whether a country's trade deficit (or surplus) is dangerous, beneficial, or benign. o Explains how purchasing power parity is used to make cross country income comparisons. o Offers clear detailed explanations of the AA-DD model. o Applies the AA-DD model to understand the effects of monetary and fiscal policy on GDP, the exchange rate, and the trade balance.
International Finance Theory and Policy by Steve Suranovic is intended for a one-semester course in International Finance. After March 2010, you can check out the entire book online or request a desk copy.
About the Contributors
Steve Suranovic is an associate professor of economics and international affairs at the George Washington University (GW) in Washington, DC. He has a PhD in economics from Cornell University and a BS in mathematics from the University of Illinois at Urbana-Champaign. He has been teaching international trade and finance for more than twenty years at GW and as an adjunct for Cornell University’s Washington, DC, program. In fall 2002, he taught at Sichuan University in Chengdu, China, as a visiting Fulbright lecturer. He has taught a GW class at Fudan University in Shanghai during the summers of 2009 and 2010. He has also spoken to business, government, and academic audiences in Japan, Malaysia, the Philippines, China, and Mongolia as part of the U.S. State Department speaker’s programs.
His research focuses on two areas: international trade policy and behavioral economics. With respect to behavior, he examines why people choose to do things that many observers view as irrational. Examples include addiction to cigarettes, cyclical dieting, and anorexia. His research shows that dangerous behaviors can be explained as the outcome of a reasoned and rational optimization exercise. With respect to trade policy, his research seeks to reveal the strengths and weaknesses of arguments supporting various policy options. The goal is to answer the question, what trade policies should a country implement? More generally, he applies the economic analytical method to identify the policies that can attract the most widespread support.
His book A Moderate Compromise: Economic Policy Choice in an Era of Globalization will be released by Palgrave Macmillan in fall 2010. In it he offers a critique of current methods to evaluate and choose policies and suggests a simple, principled, and moderate alternative.