Foreign Exchange Markets

Credits: 20

Introduction and module objectives

The module examines markets for foreign exchange and other foreign financial assets. Some of the topics covered are: the balance of payments, interest rate parity, purchasing power parity, forward markets, empirical analysis of exchange rate determination, international capital flows and their effects, exchange rate policy, currency crises.

Learning outcomes

On completion of this module the student will be able to:

  • demonstrate comprehensive knowledge and understanding of the theories of exchange rates and their empirical relevance;
  • identify and analyse mechanisms for managing risk in foreign exchange markets;
  • critically evaluate key policy issues to be faced with regard to the exchange rate;
  • critically appraise topical issues in foreign exchange market such as currency crises, the impact of foreign direct and portfolio investment, and the European Monetary Union;
  • analyse data using a standard econometric software package to test theory.


  • Three problem sets (10% each)
  • Two hour unseen written examination (70%)