EC5901 International Finance 2015/16

[1] EC5901 International Finance 2015/16 University of St Andrews Dr. Gosia Mitka Technical Assignment Situation: A delegation from the Gulf Cooperation Council (GCC) is visiting the European Central Bank (ECB) to meet with the PresidentMario Draghi and his experts. The delegates will ask for advice and discuss issues related to implementation of a monetary and common currency union of the GCC. Task: Prepare a briefing for the ECB President addressing the following questions: Critically assess the prospects for introduction of a common currency in the GCC Member States. Discuss the feasibility and potential benefits of this currency union. Will this be an optimal currency area? What lessons can the GCCMember States learn from the European experience? Remember: The President is a very busy person. Although he wants to know the background of the monetary and currency union formation he does not have time to read lengthy documents. He needs processed and condensed information. He will know that you invested time and effort in it anyway. If you do a good job he may promote you! Word limit: 1500 words Suggested questions to consider in your essay: What is an economic, monetary, and currency union? What are their costs and benefits? What is an optimum currency area? Do you think that the Gulf Monetary Union with single currency will be one? Why / why not? What are the challenges that the GCC economies are currently facing? What steps have been taken so far to establish monetary union and introduce the common currency? In the light of these past and recent developments how likely do you think will the common currency be implemented? How likely are the remaining countries to join? In your answer refer to the European experience (is EMU an optimal currency area?). References thatmay help you start: ? Coppeland (2013) Chapter 11: “Optimumcurrency areas and monetary union” ? Pilbeam (2013) Chapter 16: “The European Monetary System and European Monetary Union” [2] ? Krugman, Obstfeld, Melitz (2015) Chapter 10: “Optimum Currency Areas and the Euro” ? Mundell (1961) “A Theory of Optimum Currency Areas”, American Economic Review ? Sturm, Siegfried (2005) “Regional Monetary Integration in the Member States of the Gulf Cooperation Council”, ECB Occasional Paper No. 31 ? Fasano (2003) “Monetary Union Among Member Countries of the Gulf Cooperation Council”, IMF Occasional Paper ? Khamis and Senhadji (2010) “Impact of the Global Financial Crisis on the Gulf Cooperation Council Countries and Challenges Ahead: An Update”, IMF Check the websites: ? The Gulf Cooperation Council: The Monetary Union and the Single Currency (http://www.gcc-sg.org/eng/indexeeff.html?action=Sec-Show&ID=58) ? Gulf Monetary Council (http://en.gmco.int/) General points to take into account ? The essay should reflect a good understanding of the theory and empirical findings. Hence, students should aim for argument and analysis rather than a simple list of facts. ? Econometric analysis is not expected. However, you are expected to support your answer with the analysis of economic data using graphs. You are also encouraged to use a model like the GG-LL framework (in Ch 10 Krugman, Obstfeld and Melitz). ? The word limit should be strictly observed, and penalty applies if the rule is broken (remember – the President is a busy person!). ? Please pay attention to the proper format of citations and references. The Harvard referencing system is the most frequently used; it is also known as the Author-Date style. In this system the name of the creator of a piece of information and the date of publication is emphasized, with the list of references in alphabetical order at the end of your piece of work. [3] Submission ? You are required to word process your essay and to submit it electronically via MMS by Tuesday 17th November 2015 at 12 noon. If your assignment is submitted after the published submission date you will be AUTOMATICALLY penalized. ? YOU MUST SUBMIT YOUR ASSIGNMENT IN PDF FORMAT. ? This assignment can be done individually or in groups of up to 3 people. IF YOU WORK IN GROUPS PLEASE SUBMIT ONLY ONE COPY OF THE ESSAY and make sure you incorporate the registration numbers of all the members of the group. ? Plagiarism, inadvertent or otherwise, is the second worst academic sin. Do not commit it. Use your own words. Never cut and paste for the purposes of this activity. Here are simple rules for avoiding plagiarism: 1. If you quote more than four words directly from a text, you must put them between inverted commas and give the precise reference. 2. Whenever you paraphrase (express the same idea, but not in the precisely same words) from a source (text, paper, book, website etc.), you must give the precise reference. 3. It is forbidden to “borrow” or refer to another student’s essay (whether in the same year or not, and whether at St Andrews or elsewhere) or from your own essays prepared for other modules. 4. We do both human and automatic checks (against comprehensive and always up to date databases) for plagiarism! The consequences are dire and it’s really not worth the risk! Format: IMF Staff Briefing Style (1. For information, 2. For decision) Part of the exercise is to learn how to draft documents that present information in an efficient way and are used in large international organizations. We will use option 1. For information. Often information is presented as a background for a decision, and then a policy recommendation or recommended steps/actions are included. In this case we focus on presenting a briefing for information. As a guideline please use the IMF Staff Discussion Note SDN/15/05: “Islamic Finance: Opportunities, Challenges, and Policy Options” by Alfred Kammer, Mohamed Norat, Marco Piñón, Ananthakrishnan Prasad, Christopher Towe, Zeine Zeidane, and an IMF Staff Team. [4] Since there is a word limit your document will be much shorter than the one in the example. Therefore you don’t need to include the table of content nor a fancy title page. Focus on the part from page 6 onwards. Your document should be organized as follows: ? Executive summary should contain a small introduction of the context in which the document has been prepared. It should contain the punch line of the document. You can skip conclusions and include them here instead. This part should be written at the very end. ? You can divide the main body into sections and give them titles. Each section can contain a number of paragraphs. ? The first sentence in each paragraph should be in bold and should summarize the paragraph. It should be possible for a busy reader to get the message by reading the text in bold only. ? Data and figures should be presented in Figure Boxes e.g. on page 13. Each figure should be accompanied with an action title in italics, which is the message that the reader should take away from reading the diagram. ? It’s up to you if you wish to include Boxes, as Box 3 on page 21, to drawreader’s attention and make some information stand out (e.g. particular theory). ? In case you wish to include some information that you refer to in the text which is relevant yet would hinge the flow in the main body you can include it as an Annex, as Annex 1 on page 33-34 (this section is not compulsory – just an option). Hint: It’s a little bit like baking a cake. First you need to decide what cake to bake (essay question – no problem here - it’s given, you can choose your own name – the title), then you need to make the list of ingredients and get them (decide what topics to include, do the reading, get the data/diagrams), choose the baking form (decide for sections) and then you bake it (write the paragraphs). Once it’s done you put the icing and decorate it (sentences in bold and executive summary). The President cares about how you present it (be clear and get to the point) and how it tastes (get good ingredients/content). I wish you good luck and happy baking! Upps, I meant happy writing! Gosia