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POLSC411: International Political Economy

Unit 4: Monetary Systems and Currency Regimes   In Unit 4, you will learn about the international monetary system and exchange rate regimes.  The globalization of trade and production has made the international monetary system critical to the smooth operation of the global economy.  After all, trade, debt, and investments must ultimately be paid for with money.  In this unit, we will review different types of money (currencies) and examine their connections and inter-operations in the global economy.  We will also look closely at the development of the Euro, the most extensive and successful attempt at monetary integration in history.

Unit 4 Time Advisory
This unit should take you 21.5 hours to complete.

☐    Subunit 4.1: 2 hours ☐    Subunit 4.1.1: 2.5 hours

☐    Subunit 4.1.2: 2.5 hours

☐    Subunit 4.1.3: 2.5 hours

☐    Subunit 4.1.4: 2.5 hours

☐    Subunit 4.2: 3 hours

☐    Subunit 4.3: 5 hours

☐    Assessment: 1.5 hours

Unit4 Learning Outcomes
Upon successful completion of this unit, the student will be able to:
- Explain the development of the international currency system and analyze the effects of domestic policies. - Explain and analyze the role of budget deficits in a floating exchange rate system. - Describe and evaluate the significance of the Euro as a political-economic process.

4.1 History of the International Monetary System   - Reading: iTunes U: Middlebury College: James Ashley Morrison’s “Lesson 11: The International Monetary System” The Saylor Foundation does not yet have materials for this portion of the course. If you are interested in contributing your content to fill this gap or aware of a resource that could be used here, please submit it here.

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4.1.1 Early Gold Standard   - Lecture: iTunes U: Middlebury College: James Morrison’s “Lecture 12: The Gold Standard” The Saylor Foundation does not yet have materials for this portion of the course. If you are interested in contributing your content to fill this gap or aware of a resource that could be used here, please submit it here.

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4.1.2 Interwar Instability   - Lecture: iTunes U: Middlebury College: James Morrison’s “Lecture 13: Decline and Fall of the Gold Standard” The Saylor Foundation does not yet have materials for this portion of the course. If you are interested in contributing your content to fill this gap or aware of a resource that could be used here, please submit it here.

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4.1.3 Post-World War II Bretton Woods System   - Reading: University of California, Santa Barbara: Benjamin Cohen’s "The Bretton Woods System" Link: University of California, Santa Barbara: Benjamin Cohen’s “The Bretton Woods System” (HTML)
 
Instructions: Read Cohen’s synopsis of the Bretton Woods system, taking note of the extensive interdependence he portrays as a hallmark of the system.
 
Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

  • Lecture: iTunes U: Middlebury College: James Morrison’s “Lecture 14: Bretton Woods” The Saylor Foundation does not yet have materials for this portion of the course. If you are interested in contributing your content to fill this gap or aware of a resource that could be used here, please submit it here.

    Submit Materials

4.1.4 Collapse of the Bretton Woods System   - Lecture: iTunes U: Middlebury College: James Morrison’s “Lecture 15: After Bretton Woods” The Saylor Foundation does not yet have materials for this portion of the course. If you are interested in contributing your content to fill this gap or aware of a resource that could be used here, please submit it here.

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  • Web Media: YouTube: danieljbmitchell’s “Nixon Ends the Bretton Woods Monetary System” Link: YouTube: danieljbmitchell’s “Nixon Ends Bretton Woods Monetary System” (YouTube)
     
    Instructions: Watch the video of President Nixon’s speech where he declared the United States was unilaterally leaving the Bretton Woods monetary system.  Think about the repercussions of this speech given the context of domestic and international economics at the time.
     
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4.2 Exchange Rate Regimes   - Reading: International Economics: Theory and Policy: “Chapter 21: Policy Effects with Floating Exchange Rates” Link: International Economics: Theory and Policy: “Chapter 21: Policy Effects with Floating Exchange Rates” (PDF)
 
Instructions: Please read this introduction in its entirety.  We now turn our attention to how exchange rates are maintained and their relation to domestic trade policies.  The author explains the theory behind the floating exchange rate system and its effect on domestic fiscal and monetary decisions.
 
Terms of Use: This text was adapted by The Saylor Foundation under a Creative Commons Attribution-NonCommercial-Share-Alike 3.0 License without attribution as requested by the work’s original creator or licensee.

  • Lecture: iTunes U: Middlebury College: James Morrison’s “Lecture 11: International Monetary System” The Saylor Foundation does not yet have materials for this portion of the course. If you are interested in contributing your content to fill this gap or aware of a resource that could be used here, please submit it here.

    Submit Materials

4.3 The Euro   The Euro is a bold monetary experiment which has economic, political, financial, social, and cultural implications.  The Euro Zone unifies the majority of countries in Europe under an umbrella of a single currency and monetary policy.  The Euro has met with varying success and is facing perhaps its greatest challenge with potential sovereign defaults in a handful of countries.

  • Reading: The European Central Bank: Hanspeter K. Scheller’s “The European Central Bank - History, Role and Functions: Introduction and Chapter One” Link: The European Central Bank: Hanspeter K. Scheller’s “The European Central Bank - History, Role and Functions: Introduction and Chapter One” (PDF or ePub)
     
    Instructions: Go to this webpage and locate Hanspeter K. Scheller’s “The European Central Bank - History, Role and Functions.”  Click on the “en” hyperlink after “Languages” to download the English version of the PDF file, or select the ePub format.  Read the Introduction and Chapter One (28 pages), and focus on the reasons for forming the Euro Zone and its consequences.
     
    Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

  • Lecture: iTunes U: The Carnegie Endowment for International Peace’s “2011 Global Economic Outlook: The Euro Crisis, Currency Tensions, and Recovery” Link: iTunes U:  The Carnegie Endowment for International Peace’s “2011 Global Economic Outlook: The Euro Crisis, Currency Tensions, and Recovery” (iTunes U)
     
    Also available in:
    Adobe Flash Video, Mp3
     
    Instructions: Scroll down to item 17 titled “2011 Global Economic Outlook,” and click on the “View in iTunes” hyperlink to download the podcast for free.  Listen to the entire lecture (72 minutes).  Think about how the single monetary policy ought to be a vehicle for sound and long term economic growth.  Has the Euro accomplished this uniformly?
     
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Unit Four Quiz   - Assessment: The Saylor Foundation’s “Unit 4 Quiz” Link: The Saylor Foundation’s “Unit 4 Quiz” (PDF)
 
Instructions: Please take this short quiz.  When you are finished, compare your answers to The Saylor Foundation’s “Unit 4 Quiz Answers.” (PDF)