ECON 2110 - International Economics

Credit Hours: 3.00

Objectives:

1. Provide a general overview of the growth of globalization since World War II.
2. Identify the major issues facing the international economies today.
3. Evaluate the history and functions of three key international institutions in the global economy.
4. Examine the role of regional trade agreements in the global economy.
5. Analyze the arguments opposing international economic institutions.

Outcome 2: Upon completion of the course, students will be able to analyze the theory of trade and the predicted net costs of protectionist measures.

Objectives:

1. Contrast comparative advantage with both absolute advantage and competitiveness.
2. Model and analyze how nations maximize their material welfare by specializing in goods and services.
3. Analyze the factors which may cause differences in countries’ comparative advantage:
   1. Heckscher-Ohlin model
4. Evaluate economic models of trade in terms of their impacts on income distribution:
   1. Stolper-Samuelson theorem
   2. Specific factors model
5. Model and analyze the distinction between tariffs and quotas, and explain their benefits and costs to an economy.

Outcome 3: Upon completion of the course, students will be able to compare and contrast the theory of trade and protectionist measures with observed trade patterns.

Objectives:

1. Evaluate the results of empirical tests on comparative advantage.
2. Explain why many countries import the same goods that they export.
3. Analyze the development of regional clusters of production of many exported goods and services.
4. Examine how and why many countries select and plan the development of their export industries.
5. Examine the estimated dollar costs of the effects of tariffs and quotas in the European Union, the U.S., and Japan in the agriculture, clothing, and textile industries.
6. Analyze the most common reasons for countries to protect certain industries.
7. Identify other mechanisms used to provide industry protection.
8. Identify the remaining obstacles to international economic integration: national laws, regulations, and standards.
9. Analyze the relationship between trade flows and labour standards, and between trade flows and environmental standards.

Outcome 4: Upon completion of the course, students will be able to analyze global financial practices.

Objectives:

1. Identify the three major parts of the international balance of payments, and understand the use of the most commonly posted accounting entries.
2. Explain the relationships between domestic investment, domestic savings, and the international flows of goods, services, and financial assets.
3. Model and analyze the use of fixed, floating, and crawling peg exchange rate systems.
4. Analyze the relationship between the balance of payments and the exchange rate to each other and to the national economy.
   1. Focus particularly on the interactions of the current account, exchange rates, consumption, investment, and government spending.
5. Examine how macroeconomic policies affect the exchange rate and the current account.
6. Examine the ways in which financial crises develop and spread, and identify mechanisms to either prevent or remedy such crises once they begin.

1. Introduction: The United States in a Global Economy
   1. Elements of International Economic Integration
   2. Index of Openness
   3. Twelve Themes in International Economics
2. Major International Governmental Organizations
   1. International Public Goods
   2. The International Monetary Fund (IMF), World Bank, and the World Trade Organization (WTO)
   3. Multilateral Trade Agreements- WTO negotiating rounds d. Regional Trade Agreements (RTAs)
   4. Criticism of International Institutions
3. Traditional Theory of the Gains from Trade
   1. Economic Nationalism (Mercantilism)
   2. Absolute Productivity Advantage
   3. Comparative Advantage
   4. Absolute and Comparative Advantage Contrasted
   5. Comparative Advantage and Competitiveness
4. Modern Trade Theory
   1. Comparative Advantage and Factor Endowments
   2. Heckscher-Ohlin (HO) Model Predictions
   3. Specific Factors Model Predictions
   4. Impact of Trade on Wages and Jobs
   5. Empirical Tests of the Theory of Comparative Advantage
5. More Reasons to Trade
   1. Intraindustry Trade
   2. Geography, Transportation costs, and Internal Economies of Scale
   3. External Economies
   4. Justification for Industrial Policy (Government Intervention)
6. Theory of Tariffs and Quotas (Costs of Protection)
   1. Consumer and Producer Surplus
   2. Consumption and Efficiency Losses, and Other Potential Costs of Tariffs
   3. Small Country Case Contrasted with Large Country Case
   4. Revenue Effects and Deadweight Losses Associated with Quotas
   5. Quotas and Tariffs Contrasted in Terms of Efficiency
   6. Other Types of Protectionist Measures
7. Commercial Policy and Jobs
   1. Protection in the European Union, U.S., and Japan- particularly agriculture, clothing, textiles
   2. Empirical Costs of Protection
   3. Impact of Protection on Developing Countries
   4. Arguments for Protection
   5. Common Forms of (Paths to) Protection
   6. Alternative Policies (Macro and Labor Market Policies) for Protection
8. International Trade and Labor and Environmental Standards
   1. Harmonization, Mutual Recognition, or Separate
   2. Evidence of Low Labor Standards as a Predatory Practice
   3. International Labor Organization
   4. Transboundary and Non-transboundary Effects of Trade on the Environment
9. Trade and the Balance of Payments
   1. Introduction to the Current Account, Financial Account, and Capital Account
   2. The Current Account and the Macroeconomy
   3. International Investment Position
10. Exchange Rates and Exchange Rate Systems
    1. Reasons for Currency Trading and Exchange Rate Risk
    2. The Supply and Demand for Foreign Exchange (Flexible Exchange Rate System)
    3. Determinants of Exchange Rates in the Short-run, Medium-run, and Long-run
    4. Purchasing Power Parity
    5. Interest Rate Parity
    6. The Nominal versus the Real Exchange Rate
    7. Fixed and Pegged (In-Between) Exchange Rate Systems
11. Open Economy Macroeconomics
    1. Role of Fiscal and Monetary Policies on Interest Rates, Exchange Rates, Current Accounts, and Business and Consumer Decision Making
    2. Addressing Macroeconomic Imbalances
    3. Expenditure-Switching and Expenditure-Reducing Policies
    4. Effectiveness of Coordination Policies
12. Recent International Financial Crises
    1. Challenge of Integration
    2. Definition of a Financial Crisis
    3. Types of Crises
    4. Domestic Issues in Crisis Avoidance and Policies for Crisis Management
    5. The Mexican Peso Crisis (1994), The Asian Crisis (1998), and the Global Crisis (2008)
13. Regional Issues in the Global Economy