Tuesday, 7 June 2011

The IS-LM-FX Equilibria

We're going to shift tack here.

Most of our posts over the past few months have been about admissions procedures, the student body, faculty, careers and internships. What have we perhaps under-clubbed?


SAIS is fundamentally an academic experience. It prepares one for a host of careers. Students are able to tap into a formidable alumni network spread around the world. Faculty, many of them famous in their fields, are accessible and approachable. There is an enjoyable social aspect to a program that is part of a large research university -- Johns Hopkins -- but with separate, self-contained campuses just for SAIS students.

Still, the main challenge is academic. It is true that the course work ties up nicely with career opportunities including internships, making the academic experience especially relevant. But it is not networking with a scholarly gloss. Studies are front and center.

Prof. Akin
In that light, I thought it would be interesting to publish a question from the final exam that Prof. Çiğdem Akin gave to her SAIS Bologna students this spring in International Monetary Theory.

Before I give the question, keep in mind that International Monetary Theory is one of four economics courses that are required of all MA candidates. The others are Microeconomics, Macroeconomics and International Trade Theory. The Micro and Macro courses are at the intermediate level. A student can place out of intermediate Micro or Macro either by taking the corresponding course in pre-term or by passing a waiver exam. (Waiver exams are also offered in Monetary, Trade and Statistics.) One does not earn a course credit towards one's degree by placing out, but it does mean the student can take different courses. Finally, in addition to the four courses mentioned above, an MA candidate has to take two other economics courses, for a total of six, to graduate.

For more on the economics requirements, click here.

Why so much economics? Let me quote from the International Economics home page:

"The SAIS international economics program is designed to provide students with an understanding of the international economic system, enabling them to work effectively on international matters in both the private and public sectors.... These skills are an important component of modern training in international affairs."

You're dying to see the exam question? Bear with me just a bit longer.

As a reader of our blog, you likely fall into one of two categories:

- You are an incoming student. If so, this is the kind of exam question you'll be facing soon.

- You are a prospective student. Don't be turned off if the question seems hard. The whole point is that after a one-term course in International Monetary Theory, you will be able to answer the question because during the course you will have mastered:

"... the foundations of international macroeconomics, including foreign exchange markets, exchange rate regimes, balance of payments analysis, open-economy models, capital movements and other aspects of financial interdependence, policy responses to external shocks, monetary cooperation at the regional and international levels and the international monetary system."

Enough lecturing. Here is Question 1 on Prof. Akin's exam. It counted for 20 out of 100 points on the three-hour exam. Students should have spent 15-20 minutes answering the question.

Feel free to send your answers to admissions@jhubc.it. We'd be happy to take a look at them.

Nelson Graves