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GFM -- Q4 Second Year
Elective
The main difference
between this course and GFM as a FY Elective is that we do not have
guest discussion leaders in GFM as a SY Elective.
Students must take GFM as a FY Elective in order to enroll in
the SY Advanced GFM.
SY Elective: Global Financial Markets
GBUS 7602
Instructor: Frank Warnock
Q4, April 2017
Early Week, 4:30pm
IN THIS CLASS, LAPTOPS MUST REMAIN
CLOSED AND MOBILE DEVICES MUST BE PUT AWAY.
• The dollar usually trends for long
periods. But other than a sharp appreciation at the start of the global
financial crisis and a more or less offsetting depreciation afterwards, it
has been range bound the past few years. What explains recent currency
movements, and what will the likely directions be over the next year and
beyond?
• Long-term U.S. interest rates have been near historical lows. What are the likely
movements of long-term rates over the next year?
• A few years ago yield
curves in many industrial countries were quite steep, with the U.S. yield
curve being about as steep as it ever gets. More recently yield curves
have flattened somewhat. Does this suggest a coming recession, or are we
in for a sustained, strong global recovery?
• Are currency crises
predictable?
• How do we think about commodities—especially oil—as asset classes? Where
are oil prices headed over the next
year?
• For an emerging market of my choosing, where are the currency,
bond rates, and equity prices headed over the next year?
In Global
Financial Markets, we will tackle these issues and more. The main
objective is to develop the technical skills that enable students to
improve their understanding of current conditions—we primarily use
"real-time" cases and very current data—in global financial markets,
especially those for currencies and interest rates. We focus on global
financial markets, but because interest rates and exchange rates are
driven by, among other things, the state of the economy, and in turn
impact future economic performance, students can use this course to
solidify their knowledge of global economics.
Throughout, our
thinking will be anchored in models—technical notes will both elaborate on
the models and help the students translate them into actual data
series—but our applications will be from the real world. The anchoring in
theory is important: In your careers you will come across many ‘fad’
explanations for why the past didn’t turn out as planned or why the future
will be different. With the experience of applying a small toolkit of
theory to many situations, you will have the ability to examine fad
explanations—indeed, any explanation—within a tight logical framework.
The course will include cases, technical notes, outside readings from
the Street and elsewhere, and current data to analyze. Course grade is 40%
Participation, 20% Country Presentations, and 40% Final Exam.
I
will assume, from Day One, knowledge of the macro models from Core GEM,
especially the 3Pane but also Solow. You will enjoy the course more if you
review those models prior to the first class meeting. You will almost
certainly dislike the course if you’re not comfortable with those models
on Day One.
AGENDA IS SUBJECT TO CHANGE. IF IT
DOES, YOU WILL BE NOTIFIED.
Class 1 (April 3) Economics and
Forecasts Outlook 2013: Fewer Storms, More Sunny Breaks (The Bank
Credit Analyst, 64 (7))
Class 2 (April 4) Long-term U.S.
Interest Rates "The Determinants of Interest Rates" (UVA-BP-0489);
"Janet Yellen: Navigating Uncharted Waters" (UVA-GEM-0134)
Class 3 (April 5) The Information
Content of the Yield Curve, Empirical Models of Long-Term Interest Rates
"The Determinants of Interest Rates" (UVA-BP-0489), pages 9-13; "Yield
Curve and Growth Forecasts” (UVA-GEM-0106)
Class 4 (April 10) Euro Area
"Draghi’s Commitment" (UVA-GEM-0113)
Class 5 (April 11)
FX "Prospective Capital Flows and Currency Movements: Dollar v. Euro"
(UVA-BP-0545); "Exchange Rate
Models" (UVA-BP-0496)
Class 6 (April 12) The USD in the
Long Run "Global Asset Allocation: Whither the U.S. dollar?"
(UVA-F-1591)
Class 7 (April 17) Commodities
as an Asset Class: Oil "Global Asset Allocation: Crude Calculations"
(UVA-F-1647)
Class 8 (April 18)
Global Asset Allocation
“Global Asset Allocation: Investing in a Time of Debt, Deficits, and
Quantitative Easing”
(UVA-F-1738)
Class 9 (April 19)
Currency
Crises "Currency Crises in the UK and Hong Kong"
(UVA-GEM-0108)
Class 10 (April 24)
tba
Classes 11 and 12 (April 25 and
26) Country Presentations
Class 13 (May 1)
Students’ Choice
Class 14 (May
2)
Wrap Up
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