International Finance

Department of Economics and Finance.

Instructor: Prof. Pierpaolo Benigno

Office Hours: Thursday 16.00-17.30, Room 518, Viale Romania 32, LUISS.

Class Schedule:

Wednesday 16.30-18.00, Room 304B

Thursday 13.30-16.00, Room 307A

Teaching Assistant:

Dott. Guido Traficante, LUISS Guido Carli.

Objectives of the course

This course provides an in-depth analysis of models of exchange rate determination. The course starts with a review of the basics relationships in currency markets, like covered and uncovered interest parities. Monetary models of the nominal exchange rate are presented followed by the Mundell-Fleming-Dornbusch model. We will also learn how speculation can lead to a currency crisis both from a fundamental and a self-fulfilling perspective. Then, we turn to micro-founded models of the nominal exchange rate. The course will conclude by addressing the economics of liquidity traps and the occurrence of secular stagnations.

Web Page

There is a course’s web page available at which contains updated information on the syllabus and course’s materials.


Obstfeld, Maurice and Kenneth Rogoff (1996), Foundations of International Macroeconomics, The MIT Press. (OR)


Final Exam is written. The schedule is the following:


Exam Rules
There is a “boosting-grade” midterm exam scheduled on November XX, 2018. The exam will allow to earn maximum 3 points to add to the final grade of the December exam. The bonus can only be used for the December final.


Foreign Exchange-Rate Markets

Covered Interest Rate Parity

  • OR: Chapter 8.7.5

Uncovered Interest Rate Parity

A Primer on Difference Equations

  • OR: Supplement C to Chapter 2, p. 726-741.
  • Class Notes

Monetary Model of the Nominal Exchange Rate

  • OR: Chapter 8.2
  • Class Notes

Speculative Attacks on Fixed-Exchange-Rate Regimes

  • OR: Chapter 8.4.2

Self-Fulfilling Currency Crises

  • OR: Chapter 9.5.4

Exchange-Rate Models with Microfoundations

  • OR: Chapter 8.3

Liquidity Traps

  • Krugman, Paul R. (1998). It’s Baaack: Japan’s Slump and the Return of the Liquidity Trap. Brookings Papers on Economic Activity, 1998(2), 137–205.

Secular Stagnation

  • Benigno, Gianluca, and Luca Fornaro (2016). Stagnation Traps. CEPR Discussion Paper No. 11074.
  • Eggertsson, Gauti and Neil R. Mehrota (2014). A Model of Secular Stagnation. NBER Working Paper No. 20574.
  • Eggertsson, Gauti, Neil R. Mehrota, Sanjay R. Singh, Lawrence H. Summers (2016). A Contagious Malady? The Open-Economy Dimension of Secular Stagnation. NBER Working Paper No. 22299.