Introduction International economics is the study of interrelationships among nations.

Introduction International economics is the study of interrelationships among nations. It deals with questions such as: imports

Introduction International economics is the study of interrelationships among nations. It deals with questions such as: imports exports

Introduction International economics is the study of interrelationships among nations. It deals with questions such as: imports exports domestic jobs vs. jobs abroad

Introduction International economics is the study of interrelationships among nations. It deals with questions such as: imports exports domestic jobs vs. jobs abroad domestic prices vs. international prices

Introduction International economics is the study of interrelationships among nations. It deals with questions such as: imports exports domestic jobs vs. jobs abroad domestic prices vs. international prices trade deficits (surpluses) --are they harmful ?

Introduction International economics is the study of interrelationships among nations. It deals with questions such as: imports exports domestic jobs vs. jobs abroad domestic prices vs. international prices trade deficits (surpluses) --are they harmful ? --to whom are they harmful

Introduction International economics is the study of interrelationships among nations. It deals with questions such as: imports exports domestic jobs vs. jobs abroad domestic prices vs. international prices trade deficits (surpluses) --are they harmful ? --to whom are they harmful -- are they beneficial?

Introduction International economics is the study of interrelationships among nations. It deals with questions such as: imports exports domestic jobs vs. jobs abroad domestic prices vs. international prices trade deficits (surpluses) --are they harmful ? --to whom are they harmful -- are they beneficial? -- to whom are they beneficial?

Introduction what is so important about the value of the dollar ?

Introduction is the dollar any different from other currencies (international currency)?

Introduction This course provide some answers to all of the questions posed above. We will discuss the trade questions first and then we engage with the international finance aspects of the course.

Introduction All countries are different. When one deals with international economic questions, it is difficult to classify and analyze all countries and all problems in a same fashion. There are:

Country Classification PopulationSize small population large population small countriesFiji, Japan Luxembourg large countriesAustralia, India Greenland China,

Terminology GNP: Value of all goods and services produced by domestic factors of production regardless of their location, in or out of the country.

Terminology GDP: value of all goods and services produced within a country.

Terminology Therefore, wages paid to a Canadian worker in a Ford plant in Canada is included in the U.S GNP and in Canada's GDP (not in the U.S.'s GDP).

Terminology GDP: wages paid to a Canadian worker in a Ford plant in the U.S. is included in the US GDP and Canada’s GNP (it is excluded From Canada's GDP but included in the Canadian GNP)

Terminology Canadian worker in a Ford Plant in U.S.in Canada U.S. GNP no yes U.S. GDP yes no Canadian GNP yes no Canadian GDP no yes

index of openness the ratio of Exports/GDP the ratio of (Imports + Exports/GDP

index of openness Imports: goods purchased by domestic economic agents from foreign economic agents Exports: goods purchase by foreign economic agents from domestic economic agents

Pattern of Trade 1-- Industrialized countries account for the most of the world trade. They are largest exporters and importers in the world. year% of total world trade % %

Pattern of Trade 1-- Industrialized countries account for the most of the world trade. They are largest exporters and importers in the world. 2-- Over years, pattern of trade has changed.

Pattern of Trade 1-- Industrialized countries account for the most of the world trade. They are largest exporters and importers in the world. 2-- Over years, pattern of trade has changed. Asian countries have gained a great deal of importance in the international trade arena at the expense of African and Latin American countries.

Pattern of Trade 1-- Industrialized countries account for the most of the world trade. They are largest exporters and importers in the world. 2-- Over years, pattern of trade has changed. Asian countries have gained a great deal of importance in the international trade arena at the expense of African and Latin American countries. Even though world exports has increased by a factor of 22 between 1965 and 1992, exports of Asian countries (china, Japan, NICs) have increased by a factor of 48.

Pattern of Trade 1-- Industrialized countries account for the most of the world trade. They are largest exporters and importers in the world. 2-- Over years, pattern of trade has changed. Asian countries have gained a great deal of importance in the international trade arena at the expense of African and Latin American countries. Even though world exports has increased by a factor of 22 between 1965 and 1992, exports of Asian countries (china, Japan, NICs) have increased by a factor of 48. Their share of world exports have increased from 12% in 1965 to 25% in 1992 Asia yearshare of world exports % % Latin America yearshare of world exports 19657% 19925% Africa yearshare of world exports 19655% 19922% North America yearshare of world exports % % 3-- U.S. is a major trading partner for most countries. 4-- Distance plays a roll in magnitude of trade. The largest U.S. trade partner is Canada; France, England, and West Germany are each others large trade partners. Iran, Pakistan, and Turkey have their own trading bloc. What goods nations trade There are several factors explaining the goods countries trade: 1-- availability of resources is one important determinant. One could compare United States and Japan. Looking at the U.S. one can observe that the US exports a great deal of agriculture products. The reason is very simple. The United States has: --Vast farmland --enormous forests --skilled labor Looking at Japan one can observe that Japan exports a great deal of manufactured products. The reason is very simple. Japan: does not have much raw material of its own, but it does have a very skilled and productive labor force. Therefore, Japan imports and processes the imported raw material and export them as finished products. This is, in essence, the Heckcher-Ohlin theory of international Trade.

Pattern of Trade Asia yearshare of world exports % %

Pattern of Trade Latin America yearshare of world exports 19657% 19925%

Pattern of Trade Africa yearshare of world exports 19655% 19922%

Pattern of Trade North America yearshare of world exports % %

Pattern of Trade 3-- U.S. is a major trading partner for most countries.

Pattern of Trade 4-- Distance plays a roll in magnitude of trade. The largest U.S. trade partner is Canada; France, England, and West Germany are each others large trade partners. Iran, Pakistan, and Turkey have their own trading bloc.

What goods nations trade There are several factors explaining the goods countries trade: 1-- availability of resources is one important determinant. One could compare United States and Japan. Looking at the U.S. one can observe that the US exports a great deal of agriculture products. The reason is very simple.

What goods nations trade There are several factors explaining the goods countries trade: 1-- availability of resources is one important determinant. One could compare United States and Japan. Looking at the U.S. one can observe that the US exports a great deal of agriculture products. The reason is very simple. The United States has: --Vast farmland

What goods nations trade There are several factors explaining the goods countries trade: 1-- availability of resources is one important determinant. One could compare United States and Japan. Looking at the U.S. one can observe that the US exports a great deal of agriculture products. The reason is very simple. The United States has: --Vast farmland --enormous forests

What goods nations trade There are several factors explaining the goods countries trade: 1-- availability of resources is one important determinant. One could compare United States and Japan. Looking at the U.S. one can observe that the US exports a great deal of agriculture products. The reason is very simple. The United States has: --Vast farmland --enormous forests --skilled labor

What goods nations trade Looking at Japan one can observe that Japan exports a great deal of manufactured products. The reason is very simple. Japan:

What goods nations trade Looking at Japan one can observe that Japan exports a great deal of manufactured products. The reason is very simple. Japan: does not have much raw material of its own, but it does have a

What goods nations trade Looking at Japan one can observe that Japan exports a great deal of manufactured products. The reason is very simple. Japan: does not have much raw material of its own, but it does have a very skilled and productive labor force.

What goods nations trade Looking at Japan one can observe that Japan exports a great deal of manufactured products. The reason is very simple. Japan: does not have much raw material of its own, but it does have a very skilled and productive labor force. Therefore, Japan imports and processes the imported raw material and export them as finished products.

What goods nations trade Looking at Japan one can observe that Japan exports a great deal of manufactured products. The reason is very simple. Japan: does not have much raw material of its own, but it does have a very skilled and productive labor force. Therefore, Japan imports and processes the imported raw material and export them as finished products. This is, in essence, the Heckcher-Ohlin theory of international Trade.