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Economics 600: International Economics 

Once upon a time international economics was a rather obscure subject which few Americans studied. In the last ten years, this situation has changed dramatically. Today it is difficult to mention any economic problem which does not have an international component. In this course, we will study the basic theories of international trade and finance along with many recent developments in the field.

Text and reading: The main texts are International Economics, by Pugel & Lindert, and International Economics and International Economic Policy, by King.  The exam questions will draw heavily from the readings as well as the text and lectures.  In addition, readings will be assigned either as links on this web page (see below) or as readings on reserve or handed out in class.  Many of the articles below are composed as Adobe acrobat PDF files.  In order to read these files you must download the FREE adobe acrobat reader.  I would suggest you do this at night or when you have some time--it will take some time to download the software (do it while making dinner or doing homework or whatever).  I also strongly suggest not waiting until the last minute (e.g., the night before an exam) to download  the readings.  The server may be overloaded with your fellow classmates trying to download the same material.  You can read these articles on-screen or print them out.  (I suggest the latter.)  One Final note:  If an article is no longer available on the web, you are not responsible for it, BUT  if you wait until the last minute and find you cannot download the article because everyone else is--I warned you.

Grading and attendance: Grades in the class will be determined by two midterm examinations, a final exam, either a class presentation from an assigned article or a synopsis of the readings (see below), and class participation. Attendance is considered an important part of participation (if you don't attend you're not participating). The grade breakdown is as follows:

2 Midterm Exams 20% each
Final Exam 30%
Class Presentation or Synopses 15%
Class Participation 15%
Total 100%

Class presentations/Readings synopsis: Everyone is expected either to give a short class presentation or to write a short (2-3 paragraph) synopsis of each of the presentations made to the class. First choice for presentations will be given to students who get an A on the first midterm. If you decide to give a presentation, you may be able to do it with a partner. The presentations should be short and to the point: roughly 10-15 minutes long. I expect about 10 presentations will be given. (This works out to one per week after the first exam.)

If you have any questions, feel free to e-mail me.

 

International Trade

I. Introduction

Reading: Pugel/Lindert ch. 1

II. The pure theory of international trade

  1. The pure theory of exchange and the Edgeworth box
  2. Ricardian Trade theory and comparative advantage
  3. The Heckscher-Ohlin-Samuelson model
  4. The Heckscher-Ohlin theorem
  5. The Stolper-Samuelson theorem
  6. The factor price equalization theory
  7. Empirical tests of Heckscher-Ohlin and Leontief's paradox

Reading: Pugel/Lindert ch. 2, 3, 4

III. Recent theories of international trade and strategic trade policy

  1. Strategic trade policy and the theoretical critique of Heckscher-Ohlin
  2. Models with imperfect competition and economies of scale
  3. The role of technology and product cycle models
  4. Deindustrialization and industrial policy
  5. Creating comparative advantage

Reading: Lindert, ch. 6; King, readings 1 and 2

IV. The political economy of trade restrictions

  1. GATT and the Uruguay round
  2. The basic analysis of a tariff
  3. Quotas and VER's
  4. Super 301 and Managed trade
  5. Dumping
  6. Labor issues
  7. Sanctions

Reading: Pugel/Lindert ch. 7- 10, 14; King, readings 3-7, 9

Steel: Big Problems, Better Solutions

How big is the brain drain?

Decision-making in the WTO

The Elusive Goal of Agricultural Trade Reform

V. Trade and Growth

a. The Solow Model

b. The empirics of Growth

c. Does Trade promote Growth?

Reading:Pugel/Lindert ch.5, Handout on Solow Model

(Optional) Geography and Economic Development, by Gallup, John and Jeffrey Sachs with Andrew Mellinger

(Optional) Natural Resource Abundance and Economic Growth, by Jeffrey D. Sachs and Andrew M. Warner

VI. Globalization, North/South trade and the problem of economic development

  1. Trade strategies for development
  2. Import substitution
  3. Export promotion
  4. Autarchy
  5. Dependency theory
  6. Multinational corporations and the problem of economic development

Reading: Pugel/Lindert, ch. 13, 25, 27; King, readings 10, 11, 14, 15

The World Bank, Assessing Globalization

Factors Driving Global Economic Integration

The Developing Countries' Hazardous Obsession with Global Integration

FOUR SIMPLE PRINCIPLES FOR DEMOCRATIC GOVERNANCE OF GLOBALIZATION

THe Global Governance of Trade as if Development Really Mattered

Is Globalization Really Different Today?

Globalization and Inequality

VII. Trade Blocs and the theory of economic Integration

  1. The theory of customs unions
  2. Trade creation vs. diversion
  3. The European Union
  4. NAFTA

Reading: Pugel/Lindert ch. 11; King, readings 12, 13

Has NAFTA changed North American trade?    [Look for publications, then economic reasearch, then Economic Review]

VIII. Trade and Natural resources

  1. OPEC
  2. The IBA
  3. Trade and the environment

Reading: Pugel/Lindert ch. 12; King, readings 16, 8

WTO report: the need for environmental cooperation

International Finance

IX. The landscape of international finance

  1. Exchange rate regimes
  2. Fixed rates (including gold standards)
  3. Floating rates
  4. Target zones and the EMS
  5. Forward markets and foreign exchange
  6. The balance of payments accounts
  7. Bretton Woods and the role of the IMF
  8. The Eurodollar market

Reading: Pugel/Lindert ch. 15-17; King, readings 17, 19, 20

Is the Large US Current Account Deficit Sustainable?

X. Foreign exchange: Do we know what determines foreign exchange rates?

  1. Basic supply and demand analysis of foreign exchange
  2. Purchasing power parity and the exchange rate
  3. The law of one price
  4. Relative vs. absolute PPP
  5. Empirical tests of PPP
  6. The Big Mac index and PPP
  7. Interest rate arbitrage with efficient capital markets
  8. Monetary theories of exchange rates
  9. Foreign exchange and the balance of payments
  10. Do devaluations increase exports?
  11. The J-curve
  12. Foreign exchange effects and income elasticities

Reading: Pugel/Lindert ch. 18-20; King, readings 18

Exchange Rate Choices

The Economists' Bid Mac Index

Who Cares about Volatility?

XI. Macro policy adjustment under fixed and floating exchange rates

  1. Flexible price models
  2. Adjustments with fixed exchange rates
  3. Adjustments with floating exchange rates
  4. Fixed price models-- THe IS/LM/BP curve
  5. Adjustments with fixed exchange rates
  6. Adjustments with floating exchange rates
  7. Fiscal policy and exchange rate fluctuations
  8. Do high deficits or low savings rates lead to devaluations?
  9. Recent actions of the Fed and the U.S. exchange rate

Reading: Pugel/Lindert ch. 21-24; King, readings 21, 22, 31, 32

Dollarization: A Scorecard

Full Dollarization: The Pros and Cons

XII. Monetary Integration and the European Monetary System

  1. Mundell's theory of Optimal currency areas
  2. The problem of credibility in a monetary union
  3. The Bundesbank and EMS
  4. Does anyone believe the Italians?
  5. Micro benefits from monetary integration
  6. Is Europe an optimal currency area?
  7. Is the U.S. and optimal currency area?

Reading: King, readings 23-25

Perspectives on a Potential North American Monetary Union

The ECB and the Euro: The First Year

Corsetti's Euro Homepage

XIII. Debt crises

  1. International financial instability and the history of   debt crises
  2. The problem of sovereign lending
  3. The Asian debt crisis
  4. Should the IMF be abolished?

Reading: Pugel/Lindert ch. 26; King, readings 26-30, 33

Lender of Last Resort: What are the Choices