International Finance: Theory and Policy
Steve Suranovic, George Washington University
Copyright Year: 2010
ISBN 13: 9781936126460
Publisher: Saylor Foundation
Conditions of Use
The book does cover most of the concepts. It gives due justice to concepts such as Trade Imbalances, Purchasing Power Parity, Interest Rate Parity, Interest Rate Determination, Fixed and Floating Exchange Rates, and Interest Arbitrages. Some of... read more
The book does cover most of the concepts. It gives due justice to concepts such as Trade Imbalances, Purchasing Power Parity, Interest Rate Parity, Interest Rate Determination, Fixed and Floating Exchange Rates, and Interest Arbitrages. Some of the topics that I cover but are missing from the book are: Foreign Currency Derivatives and Foreign Exchange Pass Through. I wish that the book delved deeper into the quantitative aspects of the concepts. There are very few numerical examples and very few numerical problems in exercises.
The text is accurate in its explanation of the materials. Some of the links provided in the texts are not accessible anymore. (e.g., the link to spreadsheet, available on Bureau of Economic Analysis (BEA), site provided on page 104.)
The book provides many numbers such as the GDP per capita for a country, inflation rates, which may become obsolete after some time. Also, with the everchanging nature of global economy and new events (such as Brexit), some concepts may require a fresh examination. Also, as noted previously, the book has has some broken links.
The concepts are mostly clear, though it could use more visuals (images, etc.) to make it more comprehensible. A little more examination of the numerical aspects of some concepts (like arbitrage) would make the analyses more convincing.
The text is internally consistent in terms of terminology and framework.
The material is mostly organized well. The book could use more images, graphs, and tables to complement the text, mainly in the first few chapters. The book is divided into 13 chapters, and each chapter is further divided into several subsections. There is a “Key Takeaway” section and exercise at the end of each of these subsections. This allows for students to gauge their understanding of materials covered in the subsection as soon as they are done with that subsection. The book I accessed is in PDF format. So, for those who feel comfortable with PDF documents in general, this book is very easy to use. It has the Table of Content for each chapter and each subsection that can be easily accessed via the links in the table.
The book is organized well. It first goes into the basics of international finance, such as GDP, Foreign Exchange Rates, and Balance of Payments, and then moves on to more advanced concepts such as Interest Rate Parity, Purchasing Power Parity, and Fixed vs. Floating Exchange Rates. There is a good flow in the presentation of subsections within each of the chapters.
The book feels monotonous at times in that it is presented like a research paper with just texts after texts with not much opportunity for interaction or enquiry. Would be better if the author incorporated analysis of cases and current events shaping the world markets. Plus, the tables could use more formatting and could be more colorful.
I didn't notice any grammatical issues, and if there is any, it is not at all significant.
I didn't find the text to be culturally insensitive or offensive in any way.
This book is a great first international finance textbook. The few issues that I have noted do not deter me from recommending this book in addition to another book that I am using. But if this book is used alone, it may need to be supplemented with additional notes, cases, and discussion of current events shaping the world markets. Thanks to the author for making this an open textbook!
This textbook provides thorough explanations of various topics, such as trade imbalance, exchange rate systems, IRP, and PPP, etc. However, it does not cover the exchange rate risk management, which is a major part that I usually cover in my course. read more
This textbook provides thorough explanations of various topics, such as trade imbalance, exchange rate systems, IRP, and PPP, etc. However, it does not cover the exchange rate risk management, which is a major part that I usually cover in my course.
The content is accurate and unbiased.
Many tables in this textbook need to be updated with more current data. With the link provided, it should be relatively easy.
It would be preferred if the author can incorporate more recent issues into the discussion of the textbook, such as "trade war" and "Brexit", etc.
The textbook is well written with ample examples explaining any jargon/technical terminology.
The text is internally consistent. It gradually builds up the concepts needed for future chapters.
The text is divided into chapters and subchapters. Within each subchapter, it starts with learning objectives and concludes with key takeaways and exercises. Professors should be able to take some topics out and reorganize them to meet their own teaching purposes.
The topics are organized in a logical and clear fashion.
Some of the charts need to be edited to avoid breaking up the text (eg, p.117). Some of the equations are blurry (eg, p. 200).
There are no major grammatical errors.
The text is not culturally insensitive or offensive.
This textbook needs some updates to include current issues in the international financial markets. It provides some good examples in explaining some major concepts. I would assign it as a supplementary textbook in my class, but may not use it as the required textbook for the following reasons: 1. it lacks some important topics (exchange rate risk management) that we cover in class, 2. it does not come with any instructor resources, such as a test bank, instructor manuals, PowerPoint slides, etc.
The textbook covers almost all the content that I usually cover in my International Finance class. I wish the specific chapter/section's content would be more comprehensive. For example, for the balance of payments account, I prefer that students... read more
The textbook covers almost all the content that I usually cover in my International Finance class. I wish the specific chapter/section's content would be more comprehensive. For example, for the balance of payments account, I prefer that students see the IMF framework of four categories and the general definition on debit and credit entries. The author did provide a good, comprehensive example.
I found only few typos.
The textbook used examples and recent data to demonstrate theoretical models, which makes it easy to digest but requires more updates. The data sources are listed in the textbook so update is not difficult but it may affect the arguments.
The text is very readable. The examples make difficult concepts and models understandable in an enjoyable way. The text also clarified misconceptions seen in media and held by students. Good job!
The text is internally consistent in terms of terminology and framework. It flows.
The text divisible enough. I may even combine some sections.
The topics in the text are presented in a logical and clear fashion. It is easy to follow.
The text is free of significant interface issues.
There is no major grammatical errors.
The text is fair and objective, not culturally offensive at all.
This book is more readable for undergraduate students than the one I have been using in my International Finance class in the past 10 years. It is not heavily model intensive and it is not purely narrative either. It covers major topics in International Finance in an logical order. It uses recent data to demonstrate concepts and relations.
My reservations are: 1. Topics are broken down in too small/short sections that I wish the discussion could continue . 2. I wish it came with a test bank. As of now, I would like to assign a few chapters/sections for students to read then discuss in class but may not completely switch to this book as the required textbook.
The text is fairly comprehensive. It covers all the major areas of international finance and uses standard economic concepts and models. I think students would enjoy the chapter discussing the welfare effects of trade imbalances, which is well... read more
The text is fairly comprehensive. It covers all the major areas of international finance and uses standard economic concepts and models. I think students would enjoy the chapter discussing the welfare effects of trade imbalances, which is well done with clear examples. Those who are interested in details of the foreign exchange market itself will have to look elsewhere. While interest rate parity is given a chapter, the concept of covered interest parity is only mentioned in an exercise. I was surprised that the impossible trinity or trilemma was not mentioned even though the text devoted significant attention to the limits that a fixed exchange rate regime places on monetary autonomy. The text itself does not have a table of contents, but one is available in the bookmarks of the pdf file. The text does not have a glossary, but the pdf file is easy to search. I did not see any additional instructor resources, such as an instructor's manual, a test bank, or lecture slides.
The content is generally accurate aside from minor typos and provides a balanced, unbiased approach to the major issues.
The text is focused primarily on the major economic concepts, which gives it longevity. The data used in the text only go up to around 2008. In most cases, however, there are working links to the data sources in the pdf file that would allow a reader to obtain updated data without too much hassle. It would be nice to have more coverage of recent issues to give the text greater relevance to students.
The text is clear and well written with many helpful examples.
The text is internally consistent. The macroeconomic approach developed and applied is the AA-DD model. The text gradually builds up to that model and applies it consistently.
The chapters are all divided into short sections, which makes it easy to choose among topics within a chapter. Many of the chapters are building up to the AA-DD model, which is then applied for a number of chapters, so it would not be a good idea to skip any of the major building blocks altogether.
The topics are laid out in a natural way and flow well together.
My major issue with the book is the interface. The text, tables, and figures in the pdf file are not typeset in a very professional manner. I found this to be a significant distraction and I think it would really turn students off. The graphical analyses and equations in a text like this are especially important, but they are not clearly presented here. The equations are either not properly typeset or are blurry. This could be a major roadblock for students, many of whom are uncomfortable with equations. The diagrams leave a lot to be desired and I think students would have trouble following the 3-D diagrams of the AA-DD model.
There are no major grammatical problems with the text.
The text is not culturally insensitive or offensive in any way.
I think the content itself is of high quality, but I would hesitate to assign this book to students because of the serious issues with the interface.
Table of Contents
- Chapter 1: Introductory Finance Issues: Current Patterns, Past History, and International Institutions
- Chapter 2: National Income and the Balance of Payments Accounts
- Chapter 3: The Whole Truth about Trade Imbalances
- Chapter 4: Foreign Exchange Markets and Rates of Return
- Chapter 5: Interest Rate Parity
- Chapter 6: Purchasing Power Parity
- Chapter 7: Interest Rate Determination
- Chapter 8: National Output Determination
- Chapter 9: The AA-DD Model
- Chapter 10: Policy Effects with Floating Exchange Rates
- Chapter 11: Fixed Exchange Rates
- Chapter 12: Policy Effects with Fixed Exchange Rates
- Chapter 13: Fixed versus Floating Exchange Rates
About the Book
International Finance Theory and Policy is built on Steve Suranovic's belief that to understand the international economy, students need to learn how economic models are applied to real world problems. It is true what they say, that ”economists do it with models.“ That's because economic models provide insights about the world that are simply not obtainable solely by discussion of the issues.
International Finance Theory and Policy develops a unified model of the international macroeconomy. The text provides detailed descriptions of major macroeconomic variables, covers the interest rate parity and purchasing power parity theories of exchange rate determination, takes an exhaustive look at the pros and cons of trade imbalances and presents the well-known AA-DD model to explore the effects of fiscal and monetary policy under both fixed and flexible exchange rates.
The models are developed, not by employing advanced mathematics, but rather by walking students through a detailed description of how a model's assumptions influence its conclusions. But more importantly, each model and theory is connected to real world policy issues.
The Finance Text has the following unique features: o Begins with an historical overview of the international macroeconomy to provide context for the theory. o Concludes with a detailed discussion of the pros and cons of fixed and floating exchange rate systems. o Provides an extensive look at the issue of trade imbalances. Readers learn techniques to evaluate whether a country's trade deficit (or surplus) is dangerous, beneficial, or benign. o Explains how purchasing power parity is used to make cross country income comparisons. o Offers clear detailed explanations of the AA-DD model. o Applies the AA-DD model to understand the effects of monetary and fiscal policy on GDP, the exchange rate, and the trade balance.
International Finance Theory and Policy by Steve Suranovic is intended for a one-semester course in International Finance. After March 2010, you can check out the entire book online or request a desk copy.
About the Contributors
Steve Suranovic is an associate professor of economics and international affairs at the George Washington University (GW) in Washington, DC. He has a PhD in economics from Cornell University and a BS in mathematics from the University of Illinois at Urbana-Champaign. He has been teaching international trade and finance for more than twenty years at GW and as an adjunct for Cornell University’s Washington, DC, program. In fall 2002, he taught at Sichuan University in Chengdu, China, as a visiting Fulbright lecturer. He has taught a GW class at Fudan University in Shanghai during the summers of 2009 and 2010. He has also spoken to business, government, and academic audiences in Japan, Malaysia, the Philippines, China, and Mongolia as part of the U.S. State Department speaker’s programs.
His research focuses on two areas: international trade policy and behavioral economics. With respect to behavior, he examines why people choose to do things that many observers view as irrational. Examples include addiction to cigarettes, cyclical dieting, and anorexia. His research shows that dangerous behaviors can be explained as the outcome of a reasoned and rational optimization exercise. With respect to trade policy, his research seeks to reveal the strengths and weaknesses of arguments supporting various policy options. The goal is to answer the question, what trade policies should a country implement? More generally, he applies the economic analytical method to identify the policies that can attract the most widespread support.
His book A Moderate Compromise: Economic Policy Choice in an Era of Globalization will be released by Palgrave Macmillan in fall 2010. In it he offers a critique of current methods to evaluate and choose policies and suggests a simple, principled, and moderate alternative.