This text is based on notes from lectures held for master students at the University of Oslo. Selected sections have also been used for third-year undergraduates in Oslo, for PhD students in Finland and for master students at the Norwegian University of Science and Technology. This also describes the intended audience of the book which is advanced students, primarily at the masters level. I have in mind both students who will later practise economics in government, finance and industry and those who want to become researchers. Compared to other advanced texts, I have given more weight to the first group, but it should also give PhD students a good background for ventures into the journal literature. Subsets of the book suitable for third- or fourthyear undergraduates can be selected in a number of different ways; some suggestions are given on the book's homepage www.cup.cam.ac.uk, which also contains suggested answers to the exercises.

Over the years I have benefited from comments from those with whom I have taught open economy macroeconomics: Christian Riis, Bent Vale, Birger Vikoren, Espen Frayland and Ragnar Nymoen. I am also grateful for comments on earlier versions from Steinar Holden, Kai Leitemo, Halvor Mehlum, Tørn Rattsø, Jon Strand, Ragnar Torvik, Atle Seierstad and Knut Sydsster, and from a large number of students in Oslo and Helsinki. Sveinung Skjesol drew the originals of the graphs and has provided me with excellent assistance in so many ways. Lately, his job has been taken over by Jens Festervoll who continues in the same good spirit. Thanks also to Helen Viland and Inger Lande.