Applied International Economics - Applied International Economics -

INTRODUCTION THE SCOPE OF INTERNATIONAL ECONOMICS THE OUTPUT OFTHE WORLD ECONOMY IMPORTS AND EXPORTS OF GOODS IN THE WORLD ECONOMY INTERNATIONAL TRADE IN SERVICES CAPITAL FLOWS IN THE WORLD ECONOMY TRENDS IN INTERNATIONAL PRODUCTION AND TRADE GLOBALIZATION SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES Why countries trade INTRODUCTION INTERNATIONAL TRADE VERSUS INTERREGIONAL TRADE TRADE IN AN INDIVIDUAL PRODUCT TRADE BASED ON ABSOLUTE ADVANTAGE Absolute advantage The gains from specialization and trade with absolute advantage TRADE BASED ON COMPARATIVE ADVANTAGE Comparative advantage The gains from specialization and trade with comparative advantage TRADE BASED ON OPPORTUNITY COSTS Opportunity costs The gains from specialization and trade with opportunity costs DYNAMIC GAINS FROM TRADE SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES Comparative advantage and the production possibilities frontier INTRODUCTION THE PRODUCTION POSSIBILITIES FRONTIER AND CONSTANT COSTS The production possibilities frontier Production and consumption without specialization and trade Production and consumption with specialization and trade THE TERMS OFTRADE Changes in the gains from specialization and trade Demand conditions and the terms of trade Distribution of the gains from trade TRADE UNDER INCREASING OPPORTUNITY COSTS Increasing costs and the production possibilities frontier Production and consumption without specialization and trade Production and consumption with specialization and trade INTERNATIONAL TRADE UNDER INCREASING COSTS: AN ADVANCED ANALYSIS SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES Factor endowments and the commodity composition of trade INTRODUCTION THE FACTOR-PROPORTIONS THEORY Assumptions of the factor-proportions theory The factor-proportions theory FACTOR-PRICE EQUALIZATION AND THE DISTRIBUTION OF INCOME Factor-price equalization Trade and the distribution of income Trade and income inequality THE SPECIFIC-FACTORS MODEL EMPIRICAL EVIDENCE CONCERNING THE FACTOR-PROPORTIONS THEORY The Leontief paradox Explanations of the Leontief paradox INTERNATIONAL TRADE NOT EXPLAINED BY THE FACTOR-PROPORTIONS THEORY SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES APPENDIX 4.1: FACTOR-PROPORTIONS THEORY: AN ADVANCED ANALYSIS Intra-industry trade INTRODUCTION DEFINING INTRA-INDUSTRY TRADE THE INCREASING IMPORTANCE OF INTRA-INDUSTRY TRADE INTRA-INDUSTRY TRADE IN HOMOGENEOUS PRODUCTS INTRA-INDUSTRY TRADE IN DIFFERENTIATED PRODUCTS Economies of scale The product cycle Overlapping demands EMPIRICAL EVIDENCE ON INTRA-INDUSTRY TRADE THE WELFARE IMPLICATIONS OF INTRA-INDUSTRY TRADE SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES The firm in the world economy INTRODUCTION THE FIRM IN INTERNATIONAL TRADE Firm heterogeneity THE MULTINATIONAL CORPORATION The importance of MNCs Reasons for the existence of MNCs OFFSHORING AND MNCs GLOBAL VALUE CHAINS PUBLIC P0LICYT0WARD MNCs SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES International factor movements INTRODUCTION INTERNATIONAL TRADE VERSUS INTERNATIONAL FACTOR MOVEMENTS INTERNATIONAL MOVEMENTS OF CAPITAL Reasons for the international movement of capital Welfare effects of international capital movements Capital movements and public policy INTERNATIONAL MOVEMENTS OF LABOR Reasons for the international movement of labor Welfare effects of the international movement of labor Immigration and public policy SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES Tariffs INTRODUCTION TARIFFS: SOME PRELIMINARY DETAILS Types of tariffs Methods of valuing imports WELFARE EFFECTS OF TRADE IN AN INDIVIDUAL PRODUCT Consumer and producer surplus: a review The effects of free trade THE ECONOMIC EFFECTS OF TARIFFS The effects of a tariff for a small country The effects of a tariff for a large country THE EFFECTIVE RATE OF PROTECTION ARGUMENTS FOR TARIFFS Infant government National defense Infant industries Senile industry protection Tariffs, trade, and jobs SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES Nontariff distortions to trade INTRODUCTION NONTARIFF BARRIERS TO TRADE QUOTAS THE ECONOMIC EFFECTS OF A QUOTA OTHER NONTARIFF DISTORTIONS Industrial policy Technical barriers to trade Subsidies Government procurement CORRUPTION AND INTERNATIONAL TRADE ECONOMIC SANCTIONS LABOR AND ENVIRONMENTAL STANDARDS TRANSPORTATION COSTS AND TRADE THE GRAVITY EQUATION AND INTERNATIONAL TRADE SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES International trade policy INTRODUCTION THE POLITICAL ECONOMY OF PROTECTIONISM Protectionism and public choice The structure of protection THE EVOLUTION OF U.S.TRADE POLICY THE FORMULATION OF U.S.TRADE POLICY ANTIDUMPING, COUNTERVAILING DUTIES, AND SAFEGUARDS Antidumping Types of dumping History of antidumping law in the United States Countervailing duties Safeguards THE GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT)GATT AND MULTILATERAL TRADE NEGOTIATIONS THE WORLD TRADE ORGANIZATION (WTO)THE FUTURE OF INTERNATIONAL TRADE NEGOTIATIONS SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES APPENDIX 10.1: PRICE DISCRIMINATION Regional economic arrangements INTRODUCTION DEGREES OF ECONOMIC INTEGRATION RULES OF ORIGIN IN INTERNATIONAL TRADE TRADE EFFECTS OF ECONOMIC INTEGRATION THE STATIC EFFECTS OF A CUSTOMS UNION THE EUROPEAN UNION NAFTA AND OTHER U.S.TRADE AGREEMENTS NAFTA Other U.S. trade agreements MULTILATERALISM VERSUS REGIONAL TRADE AGREEMENTS SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES International trade and economic growth INTRODUCTION THE DEVELOPING COUNTRIES Economic development GDP of developing countries ECONOMIC GROWTH Preconditions for growth Economic growth and the factors of production Basic growth theory Changes in capital stock and technology INTERNATIONAL TRADE AND ECONOMIC GROWTH Openness and growth Capital flows, technology transfers, and economic growth ECONOMIC DEVELOPMENT STRATEGIES Primary products Import substitution Export promotion OFFICIAL DEVELOPMENT ASSISTANCE The role of official development assistance Flows of official development assistance MULTILATERAL DEVELOPMENT ORGANIZATIONS The World Bank and regional development banks The United Nations agencies SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES National income accounting and the balance of payments INTRODUCTION NATIONAL INCOME ACCOUNTING The measurement of GDP Items excluded from GDP GDP and changes in prices The components of GDP GDP AND THE TRADE BALANCE GDP in a closed economy GDP in an open economy Imports, exports, and GDP Intertemporal trade Saving, investment, the government budget, and the trade balance Adjustments to trade imbalances THE BALANCE OF PAYMENTS ACCOUNTS The balance on current account The balance on capital and financial accounts SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES Exchange rates and their determination: A basic model INTRODUCTION EXCHANGE RATES THE DEMAND FOR FOREIGN EXCHANGE SHIFTS IN THE DEMAND FOR FOREIGN EXCHANGE Changes in domestic income Changes in relative prices THE SUPPLY OF FOREIGN EXCHANGE SHIFTS IN THE SUPPLY OF FOREIGN EXCHANGE Changes in foreign income Changes in relative prices EQUILIBRIUM IN THE FOREIGN EXCHANGE MARKET CHANGES IN THE EQUILIBRIUM EXCHANGE RATE EXCHANGE RATE VOLATILITY AND INTERNATIONAL TRADE EXCHANGE RATE PASSTHROUGH PRICE LEVELS AND THE EXCHANGE RATE IN THE LONG RUN THE LAW OF ONE PRICE PURCHASING POWER PARITY Absolute purchasing power parity Relative purchasing power parity Purchasing power parity in the short run and the long run THE REAL EXCHANGE RATE Changes in the real exchange rate SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES Money, interest rates, and the exchange rate INTRODUCTION MONEY DEFINED: A REVIEW THE SUPPLY OF MONEY THE DEMAND FOR MONEY THE EQUILIBRIUM INTEREST RATE:THE INTERACTION OF MONEY SUPPLY AND DEMAND THE INTEREST RATE AND THE EXCHANGE RATE IN THE SHORT RUN INTEREST RATES,THE EXCHANGE RATE, AND THE BALANCE OF PAYMENTS SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES APPENDIX 15.1 THE RELATIONSHIP BETWEEN THE MONETARY BASE AND THE MONEY SUPPLY APPENDIX 15.2: INTEREST PARITY AND COVERED INTEREST ARBITRAGE Open economy macroeconomics INTRODUCTION AGGREGATE DEMAND AND AGGREGATE SUPPLY: A REVIEW Aggregate demand Changes in aggregate demand AGGREGATE SUPPLY Changes in aggregate supply Aggregate equilibrium DETERMINANTS OFTHE CURRENT ACCOUNT Exports Imports EXCHANGE RATE CHANGESAND EQUILIBRIUM OUTPUT IN AN OPEN ECONOMY Exchange rate appreciation Exchange rate depreciation EXCHANGE RATE SHOCKS SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES Macroeconomic policy and floating exchange rates INTRODUCTION FISCAL AND MONETARY POLICY CHANGES IN FISCAL POLICY Expansionary fiscal policy Contractionary fiscal policy CHANGES IN MONETARY POLICY Expansionary monetary policy Contractionary monetary policy MONETARY AND FISCAL POLICY IN AN OPEN ECONOMY CONSISTENT POLICY MIXES Inconsistent policy mixes TRADE FLOW ADJUSTMENT AND CURRENT ACCOUNT DYNAMICS SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES Fixed exchange rates and currency unions INTRODUCTION INCONVERTIBLE CURRENCIES Difficulties associated with exchange controls INTERVENTION IN THE FOREIGN EXCHANGE MARKET Macroeconomic adjustment under fixed exchange rates: Part I Macroeconomic adjustment under fixed exchange rates: Part II Fiscal policy and internal balance The effects of expansionary and contractionary fiscal policy Sterilization Pegging the exchange rate with monetary policy CURRENCY UNIONS THE TRILEMMA THE EUROPEAN MONETARY UNION SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES International monetary arrangements INTRODUCTION THE GOLD STANDARD The gold standard and monetary policy The macroeconomics of the gold standard COSTS AND BENEFITS OFTHE GOLD STANDARD THE BRETTON WOODS SYSTEM AND THE INTERNATIONAL MONETARY FUND The Bretton Woods System The International Monetary Fund The demise of the Bretton Woods System THE POST-BRETTON WOODS ERA CLEAN FLOATS Fixing the exchange rate OPTIONS FOR INTERNATIONAL MONETARY REFORM SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTES REFERENCES Capital flows and the developing countries INTRODUCTION CAPITAL FLOWS TO DEVELOPING COUNTRIES Debt versus equity Servicing foreign debt EXCHANGE RATE SHOCKS Macroeconomic consequences of exchange rate shocks Sources of exchange rate shocks COMMODITY PRICE SHOCKS EXCHANGE CONTROLS INTERVENTION, CAPITAL FLIGHTS, AND DEFAULTS THE IMF AND DEVELOPING COUNTRIES IMF conditionality The future of the IMF SUMMARY KEY CONCEPTS AND TERMS PROBLEMS AND QUESTIONS FOR REVIEW NOTE REFERENCES APPENDIX: GDP, population, and exports for U.S. regions and states, 2018 GLOSSARY