Frank Warnock

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The Global Financial Markets (GFM) Suite of Courses:

GFM as a FY Elective
               4-week intense GFM course offered at the end of the FY program. Syllabus below.

GFM as a SY Elective (subject to faculty availability)
GFM in seven weeks, offered in the SY program
               No guest discussion leaders in GFM as a SY course.

              A SY elective that provides an opportunity to explore some of the biggest issues in international finance. Prerequisite: GBUS 7602 (GFM).



FY Elective: Global Financial Markets                                                Instructor: Frank Warnock
GBUS 7602                                                                                           March 21 – May 3, 2016


The dollar surging, oil price plummeting, eurozone’s existential crisis, negative interest rates in many countries, the Fed tightening for the first time in a decade…this is the backdrop for this spring’s GFM course.

• The dollar usually trends for long periods. After being range bound for a few years, it has recently appreciated against many currencies. What explains recent currency movements, and what will the likely directions be for the rest of 2016 and beyond?
• Long-term U.S. interest rates were at historical lows of 1.5% in the summer of 2012, doubled to 3% by end-2013, and in early 2016 were languishing at (the still historically low) 2%. What are the likely movements of long-term rates in 2016 and 2017?
• Just 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?
• How do we think about commodities—especially oil—as an asset class? Where are oil prices headed in 2016 and 2017?
• The last time the dollar appreciated sharply many EMEs had a crisis. Is this time different? Where are EME 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 model. You will enjoy the course more if you review GEM 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.

You are expected to be in class every day, but especially on the presentation days (April 25 and 26). Plan accordingly. 


Class 1 (March 21) Economics and Forecasts Outlook 2016: Stuck in a Rut (The Bank Credit Analyst, 67 (7))

Class 2 (March 22) Long-term U.S. Interest Rates (1) "Janet Yellen: Navigating Uncharted Waters" (UVA-GEM-0134); "The Determinants of Interest Rates" (UVA-BP-0489)

Class 3 (March 28) Long-term U.S. Interest Rates (2) "Janet Yellen: Navigating Uncharted Waters" (UVA-GEM-0134); "The Determinants of Interest Rates" (UVA-BP-0489)

Class 4 (March 29) The Information Content of the Yield Curve "Yield Curve and Growth Forecasts” (UVA-GEM-0106); "The Determinants of Interest Rates" (UVA-BP-0489), pages 9-13

 Class 5 (April 4) Euro Area "Draghi’s Commitment" (UVA-GEM-0113)

 Class 6 (April 5) The USD in the Long Run "Global Asset Allocation: Whither the U.S. dollar?" (UVA-F-1591); "Exchange Rate Models" (UVA-BP-0496)

 Class 7 (April 11) Currency Trading and Fundamental Factors "Prospective Capital Flows and Currency Movements: Euro vs. Canadian Dollar" (UVA-GEM-0124); “A User’s Guide to the BOP and IIP: The (Incomplete) Transition from BPM5 to BPM6” (UVA-GEM-0135)

Class 8 (April 12) Currency Crises "Currency Crises in the UK and Hong Kong" (UVA-GEM-0108)

 Class 9 (April 18) Commodities as an Asset Class: Oil "Global Asset Allocation: Crude Calculations" (UVA-F-1647)

 Class 10 (April 19) Global Asset Allocation “Global Asset Allocation: Investing in a Time of Debt, Deficits, and Quantitative Easing” (UVA-F-1738)

 Classes 11 and 12 (April 25 and 26) Country Presentations

 Class 13 (May 2) Students’ Choice

Class 14 (May 3) Wrap Up