The University of Southampton

MANG6021 International Finance

Module Overview

This course deals with the economics of exchange rates, the spot and the forward markets of exchange rates, the operation of common currency systems and the implementation of monetary and fiscal policies in the open economy.

Aims and Objectives

Learning Outcomes

Knowledge and Understanding

Having successfully completed this module, you will be able to demonstrate knowledge and understanding of:

  • distinguish the difference between different regimes of the exchange rate;
  • understand how the exchange rate system operated during the different regimes
Transferable and Generic Skills

Having successfully completed this module you will be able to:

  • have the opportunity to develop key skills in problem solving, IT and analysis.
Subject Specific Intellectual and Research Skills

Having successfully completed this module you will be able to:

  • evaluate the advantages and disadvantages of these regimes;
  • analyse the relationship between the spot exchange rate and the forward exchange rate, and how this relationship may be used to reduce risk in international investments;
  • describe the theoretical and the empirical setup of the spot and forward rate relationship;
  • evaluate how central banks and governments deal with unemployment, inflation, high interest rates, etc when the exchange rate is fixed or floating


• The Foreign Exchange Market This section looks in depth at the structure and working of foreign exchange market. Different forms and types of the foreign exchange rate and foreign exchange regimes are also studied. The section also looks at the history of the exchange rate and its different regimes. • The International Monetary System This section studies the European Monetary System (EMS), the Exchange Rate Mechanism (ERM) and the European Union in detail. Advantages and disadvantages of the EMS and ERM are analysed in detail. Other monetary systems in operation are also studied. A comparison between all the present systems of exchange rate (in different regions of the world) will also be conducted. • Exchange Rate and International Investments This section studies the forward and spot foreign exchange markets. The effect of exchange rate risk on international investment. The concept of covered and uncovered foreign investments. Purchasing power parity and interest rate parity. The relationship between spot and forward rates and the empirical testing of this relationship (the forward market efficiency) is also studied in this section. • Open-Economy Macroeconomics This sections looks at the working of an economy under a fixed and a floating exchange rate regime. The section starts with a brief look at the balance of payments accounts and then a more in depth look at the interaction between the goods market, the money market and the asset market both under the fixed and the floating exchange rate regimes. Both the short and the long term effects of the exchange rate regime (fixed and floating) on the economy are investigated. • Exchange Rate Determination This sections looks at the different theories of exchange rate determination. Special attention is given to the Monetary model and the Market Microstructure approach to Foreign Exchange Markets. How to empirically test these models would also be looked at.

Learning and Teaching

Teaching and learning methods

Teaching methods include Lecturing and videos Learning activities include Mini case study (A trading strategy note from Deutsche Bank where they develop a trading strategy from some of the theoretical models covered in the lectures).

Independent Study126
Total study time150

Resources & Reading list

Moffett, Stonehill and Eiteman (2013). Fundamentals of Multinational Finance. 





MethodPercentage contribution
Examination  (2 hours) 70%
Multiple choice Test  (40 minutes) 30%


MethodPercentage contribution
Examination  (2 hours) 100%


MethodPercentage contribution
Examination  (3 hours) 100%
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