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Seminar in International Finance

Research Paper Assignment

As part of the course you will write an original paper on an international finance topic. The paper should
be short and focused. It should use original data. The paper will be written in four stages and you will
present your findings in class.

Proposal (due Tuesday, October 7): One page description of the topic that you are interested in. You
should articulate the question/hypothesis that you would like to test. You should also briefly describe the
data that you plan to use and reference at least one relevant paper (published or unpublished).

First Draft (due Tuesday, October 21): Your paper should have four parts: introduction, data, analysis,
and conclusion. The introduction should state the question that you are asking, explain why this question
is important, how you plan to answer the question, and how it is related to what others have done. The
data section should describe the data that you are using. This may include the description and discussion
of the data source, variables that you are using and a table with descriptive statistics. The analysis may
consist of a series of graphs, tables, correlations and perhaps even a regression. The conclusion should
summarize the results, state their implications, and suggests further research.

Second Draft (due Tuesday, November 4): You will need to have incorporated my comments on your
rough draft. Do not underestimate the importance of good writing. Use the Writing Center, Economical
Writing by McCloskey to help you organize your ideas clearly and concisely. Revise, be original, and
write an engaging paper. Turn in a hard copy to me in class and email a copy to two students that I will
assign to you.

Peer Comments: (due via email by midnight on Saturday, November 8) On Tuesday November 4 you
will have received two papers from two of your classmates. Write constructive and thoughtful comments
on each paper. Consider how the papers contributed to your knowledge and suggest improvements. The
objective of this assignment is to give you the opportunity to critically evaluate an analysis and to learn
from your peers. Email those comments to the two classmates by midnight on Saturday, November 8.
Make sure that you cc me on that email.

Presentation (one half of the class will present on Tuesday, November 11 and the other half on
Thursday, November 13): Your presentation should be no more than 10 minutes long. You should
prepare 5-6 slides summarizing the issue that your paper addresses, the motivation, its relation to
existing work, your findings and conclusions. Each presentation will be followed by a 10 minute
question and answer period in which all students are expected to participate.

Final Draft (due November 21)

Here is a list of possible topics and data sources:

1. Does the composition of U.S. capital inflows change? Does it matter?
2. Does the composition of U.S. capital outflows change? Does it matter?
3. Are military or U.S. government grants important in the U.S. balance of payments?
4. Why is the U.S. investing abroad when the world is investing in the U.S.?
5. Do oil prices drive capital inflows to the U.S.?
- check out the Treasury’s TIC data on monthly purchases of US securities by country
6. Is the U.S. current account deficit driven by the U.S. budget deficit?
7. How much will the dollar depreciate? Various scenarios.
8. Who is investing in the U.S. and why?
- check out the newly released report on foreign holdings of U.S. securities
9. Who is buying U.S. treasury bonds and why?
10. Why is the volume in the foreign exchange market so high?
- check out the new survey on foreign exchange volume
11. Does including off-shore financial centers make the U.S. external position worse?
- check out discussion on pages 7-8 of this document
12. Does net worth drive U.S. spending?
- check out this provocative paper
13. Why are some countries more financially integrated than others?
- check out this paper and the data used to generate it
14. Why are some countries more externally wealthy than others?
- same data as #13
15. Do capital inflows make U.S. interest rates low?
- check out this paper
16. Does the current account respond to exchange rates?
17. Does tourist traffic respond to exchange rates?
- the UN keeps statistics in this book
18. Is country X’s balance of payments sustainable?
19. What determines exchange rates? A comparison of the WSJ’s Currency Markets column and the
20. Does the WSJ Currency Market column predict exchange rates?
21. Do interest rate differentials predict exchange rates?
22. Do inflation differentials explain exchange rates?
23. Do inflation expectations predict exchange rates?
- a cool way to measure inflation expectations in the U.S. is by taking the difference between the
yield on regular and inflation-indexed bonds
24. Should Americans hold more foreign stocks?
- check out mscibarra.com for data on foreign stock returns
25. How much volatility of foreign stock returns is explained by exchange rate volatility?
- mscibarra.com has both local currency returns as well as USD returns
26. Do net bilateral positions predict relative stock market returns?
- check out this paper with this data.
27. Do Americans earn more in poor countries than in rich countries?
28. How do U.S. asset managers allocate funds across countries?
- check out this survey
29. How should company X manage its foreign exchange exposure?
30. What kinds of stocks to Sovereign Wealth Funds buy?
- check out this data