1. International Economics
Professor Ivar Bredesen
Room PI-536

2. International Economics
Specific subjects
International trade theory. The basis for trade and the gains from trade
International trade policy. The reasons for and the effects of trade restrictions
Balance of payments. A nations total receipts and total payments to the rest of the world
Foreign exchange markets. Exchange of one national currency for another
Open economy macroeconomics. Stabilisation policies in the open economy

3. International Economics
Basically, the course is divided into two parts
International trade theory and trade policy
International Macroeconomics
It will be assumed that students master basic microeconomics and macroeconomics
We will mostly explore theory using graphical analysis with little use of mathematics
4-hour closed book exam in December
Choice of 4 among 6 questions
No continous assessment

4. International Economics

5. International Economics
Required reading
Feenstra and Taylor: International Economics, 3rd ed. 2014
Chapter 1 – 6, 8, 9, 19, 21
Baldwin/Wyplosz, ch. 15
A study guide by Stephen Yeaple is also available for the Feenstra/Taylor book
Textbook web:

6. Recommended reading
Excellent non technical book written by one of the leading trade economists in the world, Elhanan Helpman
Recommended as a supplement, but cannot replace textbook

7. International Economics
International Economics - economic interdependence among nations
Globalisation
Flow of goods and services across borders
Movement of people and firms
Spread of culture and ideas between countries
Tight integration of financial markets
Kofi 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.

8. Worlds largest exporters

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 trade
How do we measure the volume of trade?
Bilateral trade flows can be hard to interpret
Another way to measure trade is by looking at its ratio to GDP.

10. Trade vs. GDP

11. Trade and the financial crisis
FIGURE 1-5
Change 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 Trade
The First “Golden Age” of Trade was from , and the second one in the period after WW2
Trade 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-Growth
Correlation Change after 1950?” Journal of Economic Growth, 9(1), 5–46.