Course syllabus TEIAC - Theory of Economic and Monetary Integration (FBE - WS 2013/2014)

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Course code: TEIAC
Course title in language of instruction: Theory of Economic and Monetary Integration
Course title in Czech: Theory of Economic and Monetary Integration
Course title in English: Theory of Economic and Monetary Integration
Mode of completion and number of credits: Exam (6 credits)
(1 ECTS credit = 28 hours of workload)
Mode of delivery/Timetabled classes: full-time, 2/2 (hours of lectures per week / hours of seminars per week)
Language of instruction: English
Level of course: master
Semester: WS 2013/2014
Name of lecturer: prof. Ing. Lubor Lacina, Ph.D. (examiner, instructor, lecturer, supervisor, tutor)
Ing. Klára Plecitá (tutor)
Ing. Pavel Žiaran, Ph.D. (examiner, instructor, tutor)
Prerequisites: Intermediate Macroeconomics
Aims of the course:
The course introduces basic theory of optimum currency area (monetary union). The historical background of European monetary integration is also briefly described. The core of the course is aimed at analyses of the theory of monetary integration, fiscal policy and the role of European Central Bank within European Monetary Union.
Course contents:
1.Theory of Economic and monetary integration (allowance 2/2)
a.Steps of economic and political integration in West Europe - from custom to monetary union
b.The influence of EURO introuction on business operations

2.The EU Budget (allowance 4/4)
a.Public Finance and European Integration, historical overview
b.Budget Rules, Budget Resources
c.Making Budgets
d.Internal EU Expenditures
e.External EU Expenditures
f.Managing the Finances of Union
g.The Second Financial Arm on the Union: Borrowing and Lending
h.Future of EU Finances

3.The Economics of Monetary Integration (allowance 2/2)
a.Costs and Benefits of Monetary Union
b.The Costs of a Common Currency
c.Different Preferences of Countries about Inflation and Unemployment
d.Differences in Labour Market Institutions
e.Differences in Growth Rates
f.Different Fiscal Systems and the Seigniorage Problem

4.The Theory of Optimum Currency Areas: A Critique (allowance 4/4)
a.How Relevant are the Differnes Between Countries?
b.Nominal and Real Deprecations of the Currency
c.Devaluation, Time Consistency, and Credibility
d.The Cost of Monetary Union and the Openness of Countries

5.The Benefits of a Common Currency (allowance 2/2)
a.Direct Gains from the Elimination of Transaction Costs
b.Indirect Gains from the Elimination of Tranaction Costs
c.Wefare Gains from Less Uncertainty
d.Exchange Rate Uncertainty and the Price Mechanism
e.Exchange Rate Uncertainty and the Economic Growth
f.Benefits of Monetary Union and the Openness of Countries

6.Cost and Benefits Compared (allowance 2/2)
a.Monetary Union, Price and Wage Rigidities, and Labour Mobility
b.Asymmetric Shocks and Labour Market Flexibility
c.Costs and Benefits in the Long Run

7.Incomplete Monetary Unios: The European Monetary System (EMS) (allowance 2/2)
a.The Credibility Problem
b.The Liquidity Problem in Pegged Exchange rate Systems
c.The EMS During the 1980s
d.The Disintegration of the EMS in 1992-3
e.Credibility of the EMS: A Formal Analysis
f.Disinflation in the EMS
g.The EMS and the Recession of 1992-3
h.The EMS since 1993

8.The transition to a Monetary Union (allowance 2/2)
a.The Maastricht Treaty
b.Why Convergence Requirements?
c.Problems with the Maastricht Streategy
d.Alternative Transition Scenarios
e.The Political Economy of Monetary Union in Europe
f.Suggestion for a Different Approach

9.The Design of a European Central Bank (allowance 2/2)
a.The Design of the ECB
b.Political Independence and Inflation
c.The Design of the ECB: Further Issues

10.Fiscal Policies in Monetary Unions (allowance 3/3)
a.Fiscal Policies and the Theory of Optimum Currency Areas
b.Sustainability of Government Budget De
c.The Argument for Rules on Government Budget Deficits
d.Fiscal Discipline in Monetary Unions
e.Risks of Default and Bailout in a Monetary Union
f.The Stability Act: An Evaluation

11.Entrance of new members to EMU (allowance 3/3)
a.Potential scenarios
b.How to Fix the Conversion Rates
c.How to Make Irrevocably Fixed Exchange Rates Credible?
d.The Parallel Currency Approach to Monetary Unification
e.How to Organize Realtions between the "Ins" and "Outs"?

Learning outcomes and competences:
Generic competences:
-Ability to communicate with professionals in different field of study
-Ability to make decisions
-Ability to solve problems
-Ability to understand foreign cultures and customes
-Skilled at utilizing and processing information

Specific competences:
-Ability to predict future changes of basic macroeconomic indicators
-Student study the main thesis of the optimum currency area theories
-To accommodate their decisions to the recent changes in international economic policy
-Understanding to the basic principles of monetary policy decision making process

Type of course unit: required
Year of study: Not applicable - the subject could be chosen at anytime during the course of the programme.
Work placement: There is no compulsory work placement in the course unit.
Recommended study modules: -
Learning activities and study load (hours of study load):
Type of teaching methodDaily attendance
Direct teaching
     lecture28 h
     practice28 h
     preparation for exam72 h
     preparation for regular testing40 h
Total168 h
Assessment methods:
Three 50 minutes written tests (60% of the total mark) during the block (you have to receive minimum 36 points from maxim 60 to receive credit). The course is finished with oral exam (40% of the total mark).
Credit is compulsory for final exam participation. For Credit you have to receive minimal paint from 3 partial written tests. Participation on test is compulsory.

Written tests -- 3 written tests will be during the course. Maximum points for each test is 20, so maximal total receive points could be 60. For Credit is necessary to have at least 36 points. Test will be written 5th, 8th and 11th week of the semester. Participation on the written tests at aforementioned weeks is compulsory.
Recommended reading:
TypeAuthorTitlePublished inPublisherYearISBN
RQLACINA, L. -- FIDRMUC, J. -- RUSEK, A.Economic Performance of European Union: Issues, Trends and PoliciesHoundmillsPalgrave Macmillan2008978-0-230-22227-4
RQLACINA, L. et al.Měnová integrace: náklady a přínosy členství v měnové uniiPrahaC.H. Beck2007978-80-7179-560-5
RQKAPOUNEK, S. -- LACINA, L.Taylor Rule and EMU - Monetary Policy Determination and ECB's Preferences2006ISSN 1211-8516
RQLACINA, L. -- ROZMAHEL, P. -- RUSEK, A.10 Years of Euro: Success?Plzeňnakladatelství Aleš Čeněk2009978-80-7380-226-4
REGrauwe de P., The Theory of Monetary Integration, Oxford: Oxford University Press, Fifth Edition, 2003.


Last modification made by Ing. Jiří Gruber on 05/21/2013.

Type of output: