Chapter 1: Orientation to Level II Economics Vignettes
- 1.1 Understanding the Item Set Format
- 1.2 Key Differences from Level I Economics
- 1.3 Effective Vignette Reading and Time Management
- 1.4 Common Pitfalls and How to Avoid Them
- 1.5 Integrating Quantitative and Qualitative Data
Chapter 2: Currency Market Mechanics
- 2.1 Spot and Forward Currency Quotes and Bid–Offer Spreads
- 2.2 Calculating Forward Premiums and Discounts
- 2.3 Mark-to-Market Value of Forward Contracts
- 2.4 Triangular Arbitrage Opportunities
- 2.5 Practical Vignette Applications in Currency Markets
Chapter 3: International Parity Conditions in Action
- 3.1 Covered and Uncovered Interest Rate Parity
- 3.2 Purchasing Power Parity and the International Fisher Effect
- 3.3 Relation among Parity Conditions
- 3.4 Forecasting Exchange Rates under Parity Theories
- 3.5 Vignette-Style Problem Sets and Worked Examples
Chapter 4: Balance of Payments and Currency Valuation
- 4.1 Balance of Payments Accounts: Overview and Economic Flows
- 4.2 Trade Balance, Capital Flows, and Exchange Rate Impacts
- 4.3 Assessing Long-Run Fair Value (PPP, FEER, BEER)
- 4.4 Carry Trades: Rationale and Profit Calculation
- 4.5 Case Studies: Central Bank Actions and Impact on Exchange Rates
- 4.6 Additional Tools: Marshall-Lerner Condition, J-Curve, and Twin Deficits
Chapter 5: Monetary and Fiscal Policy Effects on Exchange Rates
- 5.1 Monetary Policy (Interest Rates, QE) and Currency Valuation
- 5.2 Fiscal Policy and Market Reactions
- 5.3 Intervention Objectives and Capital Controls
- 5.4 Early Warning Signs of Currency Crises
- 5.5 Practice Vignettes: Coordinated Policy Actions
Chapter 6: Economic Growth Factors and Forecasting
- 6.1 Neoclassical, Classical, and Endogenous Growth Models
- 6.2 Potential GDP and the Sustainable Growth Rate
- 6.3 Factors Enhancing or Constraining Growth in Developed vs. Emerging Markets
- 6.4 Forecasting Tools and Economic Indicators
- 6.5 Vignette Demonstrations: Growth Impacts on Investment Decisions
Chapter 7: Capital Deepening, Technology, and Convergence Themes
- 7.1 Capital Deepening vs. Technological Progress
- 7.2 Demographic Shifts, Labor Force Participation, and Immigration
- 7.3 Convergence Hypotheses: Absolute vs. Conditional
- 7.4 Trade Barriers, Resource Constraints, and Future Growth
- 7.5 Vignette Exercises: Growth Scenarios for Different Economies
Chapter 8: Business Cycles, Market Structures, and Asset Valuation
- 8.1 Business Cycle Phases and Investment Implications
- 8.2 Yield Curves, Interest Rate Volatility, and Credit Spreads
- 8.3 Equity and Debt Market Valuations Across the Business Cycle
- 8.4 Linking Corporate Credit Quality to Economic Conditions
- 8.5 Vignette Analysis: Policy Shifts, Sentiment, and Sector Rotation
- 8.6 Market Structures: Overview
- 8.7 Market Structures and Asset Valuation
Chapter 9: Macroeconomic Integration into Investment Decisions
- 9.1 Integrating Growth Forecasts into Equity and Fixed Income Valuation
- 9.2 Currency-Adjusted Returns and Portfolio Implications
- 9.3 Inflation, Interest Rates, and Real Return Expectations
- 9.4 Risk Premia and Consumption Hedging Properties of Equities
- 9.5 Advanced Vignette Practice: Combining Macro Drivers for Portfolio Strategy
Chapter 10: Comprehensive Practice Cases and Mock Item Sets
- 10.1 Multi-Topic Vignettes: Currency, Growth, and Policy
- 10.2 Scenario Analysis: Predicting Exchange Rate Movements
- 10.3 Synthesis Cases: Parity Conditions, Central Bank Intervention, and Crises
- 10.4 Full-Length Mock Item Sets: Timed Practice
- 10.5 Debrief and Review of Key Techniques
Chapter 11: Exchange Rate Pass-Through and Corporate Decisions
- 11.1 Pass-Through Mechanics and Pricing Strategies
- 11.2 Currency Volatility and Profit Margins
- 11.3 Working Capital Management Across Currencies
- 11.4 Item Set Analysis: Reconciling FX Shifts and Corporate Policies
- 11.5 Applications in Multinational Operations
Chapter 12: Advanced Parity Models and Empirical Methods
- 12.1 Extensions of Interest Rate Parity
- 12.2 Real Exchange Rate Determination
- 12.3 Empirical Testing of Purchasing Power Parity
- 12.4 Non-Linear Models and Forecasting Exchange Rates
- 12.5 Vignette Exercises: Testing Parity in Real-World Data
- 12.6 Additional Considerations and Practical Implementation
Chapter 13: Trade Policies, Regional Blocs, and Competitiveness
- 13.1 Tariffs, Quotas, and Subsidies in Practice
- 13.2 Economic Integration and Trade Agreements
- 13.3 Import Substitution vs. Export Promotion
- 13.4 Real Effective Exchange Rate and Competitiveness
- 13.5 Scenario Analysis: Policy Shifts and Sector Outcomes
Chapter 14: Sovereign Debt and Fiscal Dynamics
- 14.1 Fiscal Deficits and Debt Sustainability
- 14.2 Sovereign Credit Ratings and Default Risk
- 14.3 Debt Monetization and Inflation Pressures
- 14.4 Market Perceptions of Sovereign Risk
- 14.5 Item Set Exploration: Public Debt Implications
Chapter 15: Global Real GDP Drivers and Economic Shocks
- 15.1 Productivity Trends and Resource Allocation
- 15.2 Supply-Side Shocks and Sector Risks
- 15.3 Demand-Side Shocks and Policy Responses
- 15.4 Modeling Externalities and Multiplier Effects
- 15.5 Practice Vignettes: Identifying and Reacting to Economic Shocks
Chapter 16: Behavioral and Political Economy Factors
- 16.1 Political Cycles and Election Effects on Policy
- 16.2 Government Stability and Market Sentiment
- 16.3 Behavioral Economics in Macroeconomic Decisions
- 16.4 Geopolitical Risks and Asset Pricing
- 16.5 Vignette-Based Scenarios: Policy Shifts and Investor Behavior
Chapter 17: Sector and Industry Dynamics in Macro Context
- 17.1 Cyclical vs. Defensive Sectors Over Economic Phases
- 17.2 Supply Chain and Input Cost Variations
- 17.3 Global Competitive Pressures and Market Concentration
- 17.4 Sector Rotation Strategies with Macroeconomic Signals
- 17.5 Exercises: Linking Industry Outlooks to Forecasts
Chapter 18: International Investment Flows and Hedging
- 18.1 Capital Account Activities and Investment Decisions
- 18.2 Managing Currency Risk in Cross-Border Portfolios
- 18.3 Global Sector Allocation with Currency Overlay
- 18.4 Direct Foreign Investment and Political Risk Insurance
- 18.5 Case Studies: Hedging Strategies in Volatile Markets
Chapter 19: Technological Progress, Productivity, and Global Imbalances
- 19.1 Technology Adoption and GDP Growth
- 19.2 Productivity Slowdowns and Structural Adjustments
- 19.3 External Imbalances and Exchange Rate Re-alignments
- 19.4 Shifts in Global Supply Chains
- 19.5 Vignette Applications: Policy Responses and Investment Outcomes
Chapter 20: Extended Exercises and Complex Scenario Analysis
- 20.1 Large-Scale Item Sets Merging Parity and Policy
- 20.2 Growth and Currency Crisis Simulations
- 20.3 Sector Rotation Under Multiple Macroeconomic Indicators
- 20.4 Bundled Vignette Challenges: Policy, Trade, and Fiscal Shifts
- 20.5 Timed Exam Simulations and Review

Chapter 13: Trade Policies, Regional Blocs, and Competitiveness

In this section

Tariffs, Quotas, and Subsidies in Practice
Explore how trade policies like tariffs, quotas, and subsidies shape global supply-demand dynamics, impact welfare, and influence market competitiveness. Includes diagrams, real-world examples, and practical CFA exam-style questions.
Economic Integration and Trade Agreements
Explore how trade blocs, free trade agreements, and customs unions shape global economics, from fundamental integration concepts to real-world implications of trade creation vs. trade diversion.
Import Substitution vs. Export Promotion
A deep dive into policy approaches that shape industrialization and trade strategies, focusing on Import Substitution Industrialization (ISI) and Export-Led Growth models.
Real Effective Exchange Rate and Competitiveness
Learn how the Real Effective Exchange Rate (REER) shapes a nation’s external competitiveness and policy decisions through real-world examples, step-by-step calculations, and practical CFA®-style applications.
Scenario Analysis: Policy Shifts and Sector Outcomes
Explore how simultaneous trade policies—tariffs, accords, and currency interventions—can redefine sector dynamics in domestic and global markets, and learn a structured approach to scenario analysis for CFA Level II item sets.

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Chapter 12: Advanced Parity Models and Empirical Methods

Chapter 14: Sovereign Debt and Fiscal Dynamics

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Chapter 13: Trade Policies, Regional Blocs, and Competitiveness

In this section