Lecturer Contact information

Course Code : SBFI6030

Lecturer : Dr. Twila-Mae Logan
twilamae.logan@uwmona.edu.jm

Course Details
Programme : MSc Corporate Finance
Course Title & Code : International Monetary Economics and Finance
No. of credits : Three
Semester-Duration of Course: Semester II 2019/2020: January 9th – April 3rd 2019.
No. of contact hours: 36
Pre-requisites: Corporate Finance, Business in a Global Environment

Course Description & Rationale

This course exposes the student to the world of international finance. The course’s major emphasis
is on international financial players and markets. Foreign exchange operations and their
interrelationships with financial management of international operations will also be covered.
Particular attention will be paid to the analysis and management of risk exposure arising from
foreign investments.

Learning Outcomes
Objectives:

1. To develop an understanding of the environment surrounding international finance and

investment including the international monetary system and foreign exchange markets.
2. To explore global investment opportunities and analyze the importance of international
finance to international trade and economic growth.
3. To familiarize students with the objectives, operations and role of multilateral financial
organizations.
4. To develop the conceptual framework and skills required of executives with responsibility
for financial strategy in a multinational corporate context.

Exit Competencies

Upon completion of the course, you will be to:

1. Compare and contrast different exchange rate regimes.
2. Classify and interpret accounts of a standard balance of payment schedule.
3. Use economic theory to determine and predict foreign exchange rates.
4. Analyze and manage of risk exposure arising from foreign investments.
5. Identify, formulate, and implement international investment and financing strategies for the
multinational enterprise. 1
Mode of Delivery
Face-to-Face

Required Textbook
Eiteman, Stonehill, Moffett (2016) Multinational Business Finance, 14th Ed. Pearson.

Recommended Readings
As indicated on weekly outline

Pedagogy:
Class sessions will consist primarily of lectures. Student-prepared cases will be used to illustrate
important concepts. However, class participation is considered an important part of the learning
process.

Assignments:

Assignments (Individual): 15% Each student will complete biweekly assignments on

MyFinanceLab.

Paper Presentation(Group) 10% Each group will do a 10 minute presentation on the stability of
the Jamaican dollar – implications for firms, investors and the central bank.

Virtual Foreign Exchange Trading (Individual): 15%

See attached project document.

Assessment Methods
Grading Assessment (example)
Assignments 15%
Paper 10 %
Simulation 15 %
Final Exam 60%
Total 100%
Class Attendance:
Students are expected to attend class regularly and to keep abreast of any changes in lecture
schedules, and test dates. Students will be held responsible for all work covered in the class
for which they have enrolled. Failure to attend class may jeopardize a student’s academic
standing.

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Marking Scheme
Percentage Letter Grade
70 – 100 A
60 – 69 B+
50 – 59 B
0-49 F

Course Content:
Session 1 January 9th
A. Introduction
B. Globalization and the Multinational Enterprise
C. Financial Goals & Corporate Governance
D. The International Monetary System
History
Current Structure
Future
Readings:
 Chapters 1&2Prescribed Text
 The World Dollar Standard and Globalization: New Rules for the Game?
 The Limits of Financial Globalization
 An Introduction to Financial Crises
 Proposed Monetary Regime
 Globalization and Caricom

Session 2 January 16th

A. Balance of Payment
Current Account
Capital Account
Financial Account
B. Global Financial Crisis

Readings:
 Chapter 3
 Balance of Payments made Simple
 Jamaica Selected Issues & 2008
 Barbados 2009 & A small foreign exchange market with a long term peg: Barbados Trinidad &
Tobago 2008
 A Currency Union for the Caribbean
 Assessing Foreign Exchange Competitiveness in the Eastern Caribbean Currency Union

Session 3 January 23rd

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 A. Foreign Exchange Markets
Functions
Participants
Size
Quotes
Cross rates & triangular arbitrage

B. International Parity Conditions

Purchasing Power Parity (Law of one price)
The Fisher Effect
The International Fisher Effect
Interest Rate Parity
Covered Interest Arbitrage

Readings:
 Chapter 5&6 , Prescribed Text

Case: Ecuadorian Debt for Development (ESL)

Session 4 January 30th

Foreign Currency Derivatives

Futures
Forwards
Options
Swaps

Readings:
Chapter 7&8 Prescribed Text
 Why risk management is not rocket science
 Roundtable on derivatives and corporate risk management
 Roundtable on enterprise risk management and corporate strategy
 Does Risk management add value? A survey of the evidence

Session 5 February 6th

Foreign Exchange Rate Determination & Forecasting

Balance of Payments Approach
Asset Market Approach
Exchange Rates in Emerging Markets
Forecasting Exchange Rates

Readings: Chapter 9,
 Exchange Rate Policies for Developing Countries: What have we learned? What do we still do
not know?
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 Exchange Rates Since the Last Global Financial Crisis: What My Crystal Ball Didn’t Tell Me in
1998
 Report to Congress on International Economic and Exchange Rate Policies May 2008
 Choosing an Exchange Rate Regime

Session 6 February 13th

A. Transaction Exposure
B. Translation Exposure
C. Operating Exposure
Readings:
 Chapter 10,11&12
Case: Luthansa (ESL)

Session 7 February 20th

Global Cost & Availability of Capital

Demand for Foreign Securities
Market Segmentation & Liquidity
Weighted Average Cost of Capital for the MME

Readings:
 Chapter 13,
 Calculating the cost of equity in emerging markets
 Designing capital structure to create shareholder value
 The Discount Rate in Emerging Markets: A guide
 Globalization, Corporate Finance and the Cost of Capital
 Still searching for the optimal capital structure
 Capital Structure and Debt Maturity

Session 8 February 27th

Sourcing Debt & Equity Globally

Cross-Listing
Managerial Compensation

Readings:
 Chapter 14
 What Companies Need to Know about International Cross-Listing
 Why cross listing does not create value
 Sovereign Wealth Funds: A growing force in Corporate Finance
 Raising Equity Globally

Case: British Columbia Hydro

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Session 9 March 13th

Foreign Direct Investment

Comparative Advantage
Existence of the Multinational Firm
Modes of FDI

Readings:
Chapter 17
 Trends in Foreign Direct Investment Flows: A Theoretical and Empirical
Analysis
 Intel: A case study of FDI in Central America
 To own or to franchise: The international control decision for service companies
 Using project finance to finance infrastructure projects
 Petrozuata: A case study of the effective use of project finance
 The decline and fall of joint ventures: How JV’s became unpopular and how that could change
 When do strategic alliances create shareholder value
 Roundtable on evaluating foreign direct investment
 Incorporating country risk in the valuation of offshore projects
 Risks in emerging markets

Sessions 10 &11 March 20th & March 27th

Multinational Capital Budgeting

Complexities of foreign projects
Project vs. Parent cash flows

Readings:
Chapter 18
 How CFO’s make capital structure and capital budgeting decisions
 Real Options: State of the Practice
 Roundtable on Real options and corporate practice
 Strategy as a Portfolio of Real Options

Course Review

Session 12 April 3rd

Presentations papers

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Office of Special Student Services:
The University of the West Indies at Mona provides special accommodations for students with special
needs. Services are provided as needs are identified and include assistance for the hearing impaired
and those with physical disabilities. If you have a disability for which you believe you require services,
please contact your respective program coordinator.

Examination:
A student who does not take an examination in a course for which he or she is registered is deemed to
have failed the examination unless permission to be absent was granted. A student who on the grounds
of illness or in other special circumstances referred to in examination Regulation 25 fails to take an
examination in a course for which he or she is registered may be given special consideration by the
board of examiner to take the examination at the next available opportunity, without penalty,
(Faculty of Social Science Student handbook 2013-2014).

Academic Integrity:
Cheating
Cheating is any attempt to benefit oneself or another by deceit or fraud. Plagiarism is a form of
cheating. Plagiarism is the unauthorized and unacknowledged use of another person’s intellectual
efforts, ideas and creations under one’s own name howsoever recorded, including whether
formally published or in manuscript or in typescript or other printed or electronically presented
form. Plagiarism includes taking passages, ideas or structures from another work or author without
attribution of such source(s), using the conventions for attributions or citing used in this University.
Since any piece of work submitted by a student must be that student’s own work, all forms of
cheating, including plagiarism, are forbidden (Faculty of Social Sciences, Graduate Handbook,
Appendix a Regulations for Graduate Diploma & Degrees pg. 156- 169 University of the West
indies).

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Code of Conduct
1. During the conduct of any class, there shall be no activity which disturbs the assembly and
affects the order of the proceedings. Instructors have the right to require any student to
leave the classroom if she/he is involved in disorderly conduct, or alternatively instructors
have the right to leave the classroom themselves.
2. Cell phones, pagers and alarms of any type shall be turned off during classes. If there is an
emergency for which a student or instructor may need to use the phone, this shall be
indicated at/or just prior to the start of the class in a manner indicated by the instructor.
(Code of Conduct: Faculty of social sciences undergraduate handbook (pg.175) University of
the West Indies 2013-2014).

Student’s Responsibility
Students are expected to:
 Take responsibility of obtaining and becoming familiar with a copy of the Course Outline.
 Independently study the textbook and the assigned reading of the text, readings and assigned
cases prior to class.
 Use the MSB-ELS course container and other suggested web sites as necessary to obtain
materials relevant to the course.
 Attend all classes in the absence of extenuating circumstances and where not able to attend
classes to indicate to the instructor the reasons for failure to do so.
 Participate as fully as possible in class discussions.
 Recognize that the presentation of other people’s work as their own represents the worst form of
academic misconduct. Be familiar with the University rules which prescribe very stiff penalties
for this form of behavior.
 Be punctual for class.
 Hand in all assignments by the deadline set. Assignments handed in after the deadline will have
points deducted.

Instructor’s Responsibility
The instructor is expected to:
 Treat each student fairly and impartially.
 Make himself/herself available for consultation with individual students or groups of students as
necessary.
 Ensure that the course is delivered at the highest possible academic standard.
 Ensure that sufficient and relevant material is made available for students).
 To be punctual at all times (except in extenuating circumstances.
 Maintain ongoing consultation with the students to ensure that the course is at all times meeting
the needs of the students.

Group Work:
 Students will be assigned to groups when necessary for the purpose of collaborative learning
and engagement
 Faculty member will ensure full participation of each group member and that each group
member makes an equitable contribution to the work of the group. Each group member will be
held accountable for a specific area of each assigned group project.
 Each group member will independently evaluate his/her contribution of a group project by filling
out the student accountability form provided by the course faculty.

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 When necessary, each group member will give an oral presentation of assigned component of
group project.
 Fill out group accountability form provided by instructor

Graduate Coursework Accountability

Please see link below to “Graduate Coursework Accountability Statement.” This document is to be
read by all students.
http://coe-msb.org/Graduate_Coursework_Accountability_Statement_MSBM_Version.pdf

Adapted from the Instructional Development Unit template & FSS Grad Course Checklist