International Finance

Research Paper Assignment

As part of the course, you will write an original paper on an international finance topic. The paper
should be short and focused. It should use original data. The paper will be written in four stages and you
will present your findings in class. This is an individual assignment, not a group assignment.

Proposal (due Saturday, 13th Jan 2018): One page description of the topic that you are interested in. You
should articulate the question/hypothesis that you would like to test. You should also briefly describe the
data that you plan to use and reference at least one relevant paper (published or unpublished).

First Draft (due Saturday, 20th Jan 2018): Your paper should have four parts: introduction, data,
analysis, and conclusion. The introduction should state the question that you are asking, explain why this
question is important, how you plan to answer the question, and how it is related to what others have
done. The data section should describe the data that you are using. This may include the description and
discussion of the data source, variables that you are using and a table with descriptive statistics. The
analysis may consist of a series of graphs, tables, correlations and perhaps even a regression. The
conclusion should summarize the results, state their implications, and suggests further research.

Second Draft (due Thursday, 25th Jan 2018): You will need to have incorporated my comments on your
rough draft. Do not underestimate the importance of good writing. Take some external help so you
organize your ideas clearly and concisely. Revise, be original, and write an engaging paper. Turn in a
hard copy to me in class and email a copy to one student that I will assign to you along with cc to
me.

Peer Comments: (due via email by midnight on Sunday 28th Jan 2018) On Thursday, 25th Jan 2018, you
will have received one paper from one of your classmates. Write constructive and thoughtful comments
on each paper. Consider how the papers contributed to your knowledge and suggest improvements. The
objective of this assignment is to give you the opportunity to critically evaluate an analysis and to learn
from your peers. Email those comments to the classmates by midnight on Sunday 28 th Jan 2018. Make
sure that you cc me on that email.

Presentation: Your presentation should be no more than 10 minutes long. You should prepare 5-6 slides
summarizing the issue that your paper addresses, the motivation, its relation to existing work, your
findings and conclusions. Each presentation will be followed by a 10 minute question and answer period
in which all students are expected to participate. (Date will be announced later)

Final Draft (due on Wednesday 31th Jan 2018)

Here is a list of possible topics and data sources:

1. Does the composition of India’s capital inflows change? Does it matter?
2. Does the composition of India’s capital outflows change? Does it matter?
3. Why is the U.S. investing abroad when the world is investing in the U.S.?
4. Do oil prices drive capital inflows to the U.S.?
- check out the Treasury’s TIC data on monthly purchases of US securities by country
5. Is the U.S. current account deficit driven by the U.S. budget deficit?
6. How much will the dollar depreciate? Various scenarios.
7. Who is investing in the U.S. and why?
- check out the newly released report on foreign holdings of U.S. securities
8. Who is investing in the India and why?
Who is buying U.S. treasury bonds and why?
9. Why is the volume in the foreign exchange market so high?
- check out the new survey on foreign exchange volume
10. Does including off-shore financial centers make the U.S. external position worse?

11. Why are some countries more financially integrated than others?

12. Why are some countries more externally wealthy than others?

13. Do capital inflows make U.S. interest rates low?

14. Does the current account respond to exchange rates?

15. Does tourist traffic respond to exchange rates?

16. Is country X’s balance of payments sustainable?

17. What determines exchange rates? A comparison of the WSJ’s Currency Markets column and the
textbook
18. Does the WSJ Currency Market column predict exchange rates?
19. Do interest rate differentials predict exchange rates?
20. Do inflation differentials explain exchange rates?
21. Do inflation expectations predict exchange rates?
- a cool way to measure inflation expectations in the U.S. is by taking the difference between the
yield on regular and inflation-indexed bonds
22. Should Americans hold more foreign stocks?
- check out mscibarra.com for data on foreign stock returns
23. How much volatility of foreign stock returns is explained by exchange rate volatility?
- mscibarra.com has both local currency returns as well as USD returns
24. Do net bilateral positions predict relative stock market returns?

25. Do Americans earn more in poor countries than in rich countries?

26. How do U.S. asset managers allocate funds across countries?

27. How should company X manage its foreign exchange exposure?

28. What kinds of stocks to Sovereign Wealth Funds buy?