EC3012 International Finance Assignment-City, University of London

Instructions to students: All questions are compulsory


Dictionaries are not permitted

TASK: EC3012 International Finance Assignment

Question 1:

a)Compare the effects of a devaluation according to:

  1. The Monetary Approach to the Balance of Payments.
  2. The Elasticities Approach  to the Balance of Payments.

EC3012 International Finance

b)Assess critically which assumptions are behind the main differences in the effects of a devaluation according to the two models.


Question 2:

Analyze the effects of a sterilized foreign exchange operation/ intervention according to:

a)         The Portfolio balance model.

EC3012_ International Finance

b) The Fleming- Mundell model. After a monetary expansion, assuming imperfect

capital mobility.

EC3012_ International_Finance


Question 3: EC3012 International Finance Assignment

Discuss the following statement critically, displaying your knowledge of the two relevant models and by using equations where necessary:

“The Frankel interest rate differential model offers a more complete approach to the effects of a monetary expansion than the Dornbusch sticky price model”.

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