Presentation on theme: "International Economics"— Presentation transcript:
1 International Economics Professor Ivar BredesenRoom PI-536
2 International Economics Specific subjectsInternational trade theory. The basis for trade and the gains from tradeInternational trade policy. The reasons for and the effects of trade restrictionsBalance of payments. A nations total receipts and total payments to the rest of the worldForeign exchange markets. Exchange of one national currency for anotherOpen economy macroeconomics. Stabilisation policies in the open economy
3 International Economics Basically, the course is divided into two partsInternational trade theory and trade policyInternational MacroeconomicsIt will be assumed that students master basic microeconomics and macroeconomicsWe will mostly explore theory using graphical analysis with little use of mathematics4-hour closed book exam in DecemberChoice of 4 among 6 questionsNo continous assessment
5 International Economics Required readingFeenstra and Taylor: International Economics, 3rd ed. 2014Chapter 1 – 6, 8, 9, 19, 21Baldwin/Wyplosz, ch. 15A study guide by Stephen Yeaple is also available for the Feenstra/Taylor bookTextbook web:
6 Recommended readingExcellent non technical book written by one of the leading trade economists in the world, Elhanan HelpmanRecommended as a supplement, but cannot replace textbook
7 International Economics International Economics - economic interdependence among nationsGlobalisationFlow of goods and services across bordersMovement of people and firmsSpread of culture and ideas between countriesTight integration of financial marketsKofi Annan, former secretary general of the United Nations (2000)The main losers in today`s very unequal world are not those who are too much exposed to globalization. They are the ones who have been left out.
9 Trade in a Global Economy Why do countries trade?They can get products from abroad cheaper or of higher-quality than those obtained domestically.The fact that Germany is among he largest exporter of goods shows its technology for producing high-quality manufactured goods.China produces goods more cheaply than most industrialized countries.In the first part of the course, we will examine several models explaining international tradeHow do we measure the volume of trade?Bilateral trade flows can be hard to interpretAnother way to measure trade is by looking at its ratio to GDP.
11 Trade and the financial crisis FIGURE 1-5Change in the Value of Trade, 2007–2009 (percent)As a result of a worldwide financial crisis and economic recession, the value of trade plummeted between early 2008 and early 2009.
12 International TradeThe First “Golden Age” of Trade was from , and the second one in the period after WW2Trade had a setback in the interwar period, partly due to trade barriers. This decline in the world economy lead the Allied countries to meet after WWII to develop policies to keep tariffs low. General Agreement on Tariffs and Trade (GATT) which became the World Trade Organization (WTO)Trade barriers refer to all factors that influence the amount of goods and services shipped across international borders.
13 Barriers to Trade Figure 1.4 Average Worldwide Tariffs, 1860–2000 Figure 1.4: Average Worldwide Tariffs, 1860–2000 This diagram shows the world average tariff for 35 countries from 1860 to The average tariff fluctuated around 15% from 1860 to After World War I, however, the average tariff rose sharply because of the Smoot-Hawley Tariff Act in the United States and the reaction by other countries, reaching 25% by Since the end of World War II, tariffs have fallen.Source: Michael A. Clemens and Jeffrey G. Williamson, 2004, “Why did the Tariff-GrowthCorrelation Change after 1950?” Journal of Economic Growth, 9(1), 5–46.