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 14: Sovereign Debt and Fiscal Dynamics

In this section

Fiscal Deficits and Debt Sustainability
Explore how fiscal deficits evolve into public debt challenges, examining primary and overall deficits, debt accumulation dynamics, and the interplay of growth rates and borrowing costs.
Sovereign Credit Ratings and Default Risk
Explore how sovereign credit ratings affect bond yields, investor sentiment, and default risk, along with methods agencies use to assess a country’s creditworthiness.
Debt Monetization and Inflation Pressures
Explore the concept of debt monetization, how it differs from quantitative easing, and understand the inflationary risks it can bring. This comprehensive guide examines historical examples, the transmission mechanism, market reactions, and key strategies for CFA Level II candidates.
Market Perceptions of Sovereign Risk
Examine how global markets gauge sovereign creditworthiness through yield spreads, CDS contracts, and currency forwards, incorporating liquidity conditions, risk appetite, and real-world case studies.
Item Set Exploration: Public Debt Implications
Learn how to evaluate sovereign debt sustainability using real-world fiscal and macroeconomic data in a vignette-style format, focusing on deficits, inflation, central bank intervention, and rating catalysts.

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Chapter 13: Trade Policies, Regional Blocs, and Competitiveness

Chapter 15: Global Real GDP Drivers and Economic Shocks

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Chapter 14: Sovereign Debt and Fiscal Dynamics

In this section