School of Marketing and Management
INTERNAL SUBJECT OUTLINE
Autumn 2006
ECO320
International Economics
Subject Lecturer
Dr. Roderick Duncan
Office:
Building C02- Room 232
Telephone: (02) 6338-4982
Email
rduncan@csu.edu.au
Class Contact Lecture
/Tutorials Monday
Consultation
Monday
Monday
Tuesday
12:00 - 1:50pm
C02-G05
10:00am - 12:00 C02-232
3:00pm - 5:00pm C02-232
2:00pm - 5:00pm C02-232
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INTRODUCTION TO THE TEACHING STAFF
Roderick Duncan
Rod is a lecturer in economics at the School of Marketing and Management, Charles Sturt
University, Bathurst. Before working at CSU, Rod taught at the Georgia Institute of Technology in
Atlanta, Georgia. He studied for his undergraduate degrees in economics and law at the Australian
National University and his doctorate in economics at Stanford University. His research interests
centre on development problems in less developed countries and especially the links between natural
resources and development. He has also written papers on topics such as the economics of
regulation and on the links between rising female education and falling marriage rates.
SUBJECT OBJECTIVES
The purpose of this subject is to provide students with a thorough grounding in the theory of
international trade and international policy, and to demonstrate the relevance of the theory to analysis
of (a) existing patterns of international trade and what determines them, (b) the conduct of trade
policy, and (c) the economic implications of international trade, and (d) to survey the basics of the
effects of various globalisation and technological issues on the domestic and world economy.
At the end of the subject the student should:
 understand at the level of formal analysis the major models of international trade, both traditional
and modern;
 understand the principle of comparative advantage and its formal expression and interpretation
within different theoretical models;
 be able to analyse the linkages between international trade and information technology and
international movements of capital and labour, and to be able to relate this to the analysis of
policy issues raised by international migration and the spread of multinational corporations;
 be able to discuss and analyse the economic effects of:
o (a) trade, competitive policy, tariffs, quotas, export taxes, export subsidies, voluntary
export restraints, voluntary import expansion measures, parallel imports;
o (b) the creation of regional trading arrangements such as free trade areas, customs unions
and common markets; and
o (c) intellectual property rights instruments such as copyright, patents;
 be able to define key issues in international trade negotiations and the characteristics and
economic effects of different types of regional trading arrangements;
TEXTBOOK (compulsory)
Salvatore, D. 2004, International Economic. 8th ed. Wiley, New York
RECOMMENDED TEXT(S) (optional)
Root, F.R. International trade and investment, South-Western, Cincinnati.
Krugman, P. R. and Obstfeld International Economics: Theory and Policy, Addison-Wesley,
Readings Massachusetts.
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Woods, N. ed., The Political Economy of Globalization, Macmillan Press, London.
Schwartz, H. States versus Markets: The Emergence of Global Economy, Macmillan Press, London.
King, P. International Economics and International Economic Policy: A Reader, 3rd edition, Irwin
McGraw-Hill
All notices and class handouts will be distributed through the subject webpage. The address for the
subject webpage is:
http://athene.riv.csu.edu.au/~rduncan/Teaching/teaching.html
The lectures are based around the Salvatore textbook. The recommended texts should be consulted
only if you feel that you require an alternative description of a particular topic.
Note: You should read articles from international economic journals (see the library), The
Economist and the Australian Financial Review. You should also visit Internet sites of WTO,
World Bank, and IMF.
WEB REFERENCES (optional)
Some interesting web sites: WTO http://www.wto.org
UNCTAD http://www.unctad.org
OECD http://www.oecd.org
IMF http://www.imf.org
World Bank http://www.worldbank.org
A useful gateway to economics-related
http://www.helsinki.fi/WebEc/WebEc.html
materials
on
the
web
is
WebEc,
at
SUBJECT PROGRAM
The subject comprises four broad areas:
1. International Trade Theories
2. Commercial Policies
3. Foreign Exchange
4. Open Economy Macroeconomics.
The subject is divided into twelve distinct topics which will be the focus of the lectures. Each week
of the subject will have a two hour contact period. Generally the first hour of the contact period will
be a formal lecture with class notes based on the reading for that week. The second hour will have a
more informal structure and be devoted to discussing the class material, working through problems
based on the class material, practicing examination-type problems and studying with real-world data.
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WEEK
LECTURE TOPIC
TEXTBOOK
20 February
Topic 1 Introduction to International Economics
Chapter 1 (1.1; 1.2; 1.3;
1.4)
27 February
Topic 2 The Law of Comparative Advantage
Chapter 2 (except 2.7)
6 March
Topic 3 The Standard Theory of International
Trade; Demand and Supply Curves and the Terms
of Trade
Chapter 3
Chapter 4 (4.2 and 4.6)
13 March
Topic 4 Factor Endowments and Hecksher Ohlin Theory
Chapter 5 (except 5.6)
20 March
Topic 5 Leontief Paradox and Complementary
Trade Theories
Chapter 5 (5.6 except
5.6c)
Chapter 6 (6.1; 6.2;6.3;6.4
and 6.5)
27 March
Topic 6 Trade Restrictions : Tariffs and NonTerrif Barriers
Chapter 8 (8.1; 8.2; and
8.3)
Revision
3 April
Topic 7 History of U.S. and Australian
Commercial Policies, the GATT, the Uruguay
Round and the WTO
Chapter 9
Mid-Term Examination
10 April
Topic 8 Foreign Exchange Markets and Exchange
Rates
Chapter 14 (except 14.7)
Mid-Term Discussion
Chapter 15 (15.2A; 15.2B;
15.3C; 15.3D; 15.4A;
15.4C)
8 May
Topic 9 Balance of Payment
Chapter 13
15 May
Topic 10 The Price Adjustment Mechanism
Chapter 16 (16.1; 16.2;
16.5 and 16.6)
22 May
Topic 11 The Income Adjustment Mechanism,
Monetary Adjustments and Adjustment Policies
Chapter 17 (except 17.4)
Topic 12 The International Monetary System:
Past and Present
Chapter 21 (21.1; 21.2;
21.3; 21.4; 21.5; 21.6A;
21.6B)
29 May
Hand In Essay
3 June
Revision
13 June
EXAM PERIOD COMMENCES
Chapter 18 (18.1)
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ASSESSMENT
There are three (3) assessment items for this subject.
Assessment Items
Value
Due Date
1. Mid-Term Examination
25%
3 April
2. Essay
25%
29 May
3. Final Examination
50%
During Final Exams Period
To gain a pass in this subject, students must:



Achieve a passing grade in the final examination ie. score a minimum of 50 marks
Attempt ALL assessment items and achieve a total result of 50% or better overall.
Hand in 10 written submissions (including the midterm exam) during the 13 lectures for the
subject.
There will be a written submission required for each lecture, which may be in the form of a quiz, a
worked exercise or problem or a response to a question. Some of these pieces will require work
outside of class, whereas others will not. Students are required to submit pieces from 10 out of the 13
lectures (including the midterm exam). Failure to submit at least 10 pieces will result in an automatic
Fail grade for the subject.
ASSESSMENT DETAIL
ITEM 1: Mid-Term Examination
25%
Rationale
This assessment item is designed to test your understanding of the theories and concepts covered to
date.
Assessment Task
A mid-term examination will be conducted in the second hour of class on April 3. The mid-term
examination will have 20 multiple choice questions and 1 problem-type question.
ITEM 2: Essay
25%
Rationale
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This assessment item is designed to test your mastery of the subject matter and your generic skills in
essay writing. There are 2 parts to this assignment and you must answer both.
Assessment Task
Part A:
Topic:
Essay: This part is worth 13 marks.
Critically examine the validity of the following statement in the
light of tariffs and non-tariff barriers:
Protectionist policies designed to promote importsubstitution reduce competitiveness and lead to
inefficiency in production.
Essential readings:
Salvatore, Chapters 8 and 9. You may also find some
relevant readings from your book of Readings.
Some instructions for the essay
1. You should not exceed the word limit of 2000 (excluding footnotes, references, and
bibliography).
2. Essays should be submitted by the due date. Essays submitted late, without approved
extension, will carry a penalty. (See the section on Extensions for Assignments and Late
Assignments.)
3. The essay must be written analytically and presented in a scholarly manner. It must contain a
synopsis, adequate footnoting and references and a bibliography. Keep the use of direct
quotations to a minimum and, where used, they must be clearly acknowledged.
4. The essay should be preferably typewritten. If this is not possible, you should write as legibly
and neatly as possible, keeping ‘double spacing’ between lines. Adequate margins must be
provided for marker’s comments.
5. Remember to acknowledge the sources of data and information by way of correct referencing
and footnoting. Evidence of direct copying without acknowledging the sources will result
in the essay being awarded a fail grade.
Part B:
a.
b.
Problems: This part is worth 13 marks.
(i)
What is meant by arbitrage?
(ii)
Assuming that $2 = 1 pound in Sydney, 270 yen = 1
pound in London and 130 yen = $1 in Tokyo,
indicate how profitable triangular arbitrage can take
place.
(i)
What is hedging?
(ii)
Suppose that Spot Rate = $2/1 pound and threemonth Forward Rate = $1.96/1 pound. Explain how
(2 marks)
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an importer who has to pay 10,000 pounds in three
months can hedge his/her foreign exchange risks in
the forward market.
c.
d.
(i)
Assume that the three-month Forward-Rate = $2/1
pound and that a speculator believes that the Spot
Rate in three months will be $2.05/1 pound. Explain
how this person speculates in the forward market.
How much will the speculator earn as profit if he is
correct?
(ii)
What happens if the Spot Rate in three months will
be $1.95/1 pound instead of $2.05/1 pound?
(i)
What are the objectives of International Monetary
Fund (IMF)?
(ii)
Has the International Monetary Fund (IMF) been
able to resolve the current economic crisis in the
world economy? Discuss.
ITEM 3:
(3 marks)
(2 marks)
(5 marks)
Final Examination
50%
Rationale
The final examination is designed to allow you to demonstrate your overall understanding of the
subject.
Assessment Task
The examination will be invigilated and will be of three (3) hours duration plus ten (10) minutes
reading time, covering the whole subject. The examination will be closed-book. The examination
will consist of:

20 compulsory multiple choice questions.
(This section is worth 20 marks)

6 problem-type questions (the structure of which is similar to those in the mid-term
examination) from which you must answer a choice of 3 questions.
(Each question is worth 20 marks)

2 essay questions from which you must answer a choice of 1 question.
(This requires a well-planned lengthy answer and is worth 20 marks).
Note:
A sample of the examination paper is enclosed at the end of the Subject
Outline for your reference.
EXTENSIONS AND LATE SUBMISSIONS
If you are having difficulty in completing work in time due to illness or unusual circumstances, you
may request an extension through your lecturer with supporting documentation eg. medical
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certificate. Applications for extensions on or after the due date of the assessment items will not be
considered. NO extensions will be given without documentary evidence of inability to meet
deadlines. A deduction of 10% of the marks awarded per day late applies if a piece of work is
submitted late without approved extension.
GRADES
Final grades for this subject are awarded by the CSU Faculty Assessment Committee in accordance
with the University’s Assessment Regulations (see current Academic Regulations via
www.csu.edu.au). Grades will be based on a student’s aggregate mark for all assessment
components, subject to the overriding conditions that a passing grade will not be awarded to any
student who fails to achieve a satisfactory performance in the final examination or in the final
assignment if the subject does not have an exam.
Aggregate marks may be scaled to produce a distribution of grades which conforms to the expected
norms specified in the University’s Assessment Regulations.
PREPARATION AND SUBMISSION OF ESSAYS
1.
Introduction
The rationale behind assigning essays is that written expression is an important part of organisational
life. Essay writing is a useful way to test the amount of reading and reading comprehension, students
are often required to undertake considerable reading to prepare their essays.
Answer the question set, keep to the topic and include all relevant issues. Be clear and concise in your
expression paying particular attention to sentence structure. Put yourself in the reader’s position and
ask ‘Is the meaning clear?’
Go beyond what other people have said on the topic. Express their ideas in your own words but add
your own ideas and opinions. To do this you need to analyse and criticise ideas where appropriate
and argue your point of view. Support your arguments and opinions with extensive referencing.
Use headings for sections of your essay where appropriate. (See recent journal articles or your
textbook for example.) Include an introduction in your opening paragraph and a conclusion in the
final one.
Essays should be approximately the suggested length but should be compact. This means that final
drafts should involve cutting back, rather than padding, an earlier draft. Brevity is also a virtue of
good managers.
At least one copy should be made of the final draft copy. Keep a copy of your assignment in case the
original is lost. The practice of making duplicate copies of submissions is a normal part of
organisational life.
Essay deadlines must be strictly adhered to. Students should expect marks to be lost for late
assignments. Punctuality is a virtue of good managers.
2.
Preparation
Multi drafts
Quality essays cannot be written on a ‘one draft only’ basis. At a minimum, the essay writer should:
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Start with a rough outline of topics that will be covered in the paper. Topics should be arranged in a
logical sequence. At this stage the paper will look something like a ‘rough’ table of contents.
Expand each topic into sentences and paragraphs that include all the thoughts the writer can find or
create related to the topic.
Pare down this rough draft eliminating unrequited statements, correcting errors in spelling and
grammar, and adding the bibliography.
In many cases one or more additional redrafts will still be required as new material is found or
thoughts are reorganised
3.
Layout
Paper
A4 size blank white paper should be used for typed essays.
Assignments should be word-processed using double spacing.
The front cover
The front cover of your assignment should include:
1.
2.
3.
Your name and student number.
Subject, assignment number and topic.
Your tutor’s name and class time.
Margins
The left-hand margin must be at least 5 cm wide to allow for marker’s comments. Unless you
specifically request otherwise the marker reserves the right to place ink comments in the margins.
Pages
All pages <except cover page if there is one> must be numbered. Use only one side of the paper.
Number each page. Fasten pages securely in the top left-hand corner with staples, do not use paper
clips.
Table of contents and precis
A ‘table of contents’ page is optional. Similarly a precis is optional. If a precis is written, however, it
should be concise.
4.
Referencing
The following are abstracts from CSU’s 2003 Referencing Guide 7th Edition which can be located at
http://www.csu.edu.au/division/library.
4.1
How to Reference
All statements, opinions, conclusions or other intellectual content taken from the work of someone
else must be acknowledged, whether their work or ideas are directly quoted, reproduced, summarised
or paraphrased.
The acknowledgment of someone else’s work, by means of an in-text citation, must occur at the point
in your writing where you use that information. The basic in-text citation, in the author-date system,
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consists of the last name of an author and the year of publication of the work, in round brackets. If a
direct quotation is being used, a page number is also included.
The in-text citation should be incorporated into your work in such a way as to cause the least
disruption to the reader. It must also be placed so that it is clear exactly which information is being
acknowledged. Where an author’s name appears naturally in a sentence, only the date needs to be
enclosed in brackets. Three possible ways of incorporating an in-text citation are:
Jain (1976) refutes the theory by…
The theory was refuted (Jain 1976) when it was proved…
The new proof enabled the theory to be refuted (Jain 1976).
There is normally a corresponding entry in the list of references at the end of your work containing all
the details of the cited work, enabling the reader to locate the source of the information you have
used. For the above examples, the reader should find an entry in your alphabetically arranged list of
references under Jain, PL 1976, giving the title and publication details of the work.
4.2
In-text citations
The basic in-text citation in the author-date system consists of the last name of an author and the year
of publication of the work, in round brackets. There are significant variations to this, depending on
the information available, the number and type of authors and the type of material being cited. The
following explanations and examples cover many of these variations.
In a recent study Morris (1997) determined that…
This suggestion was first mooted at the Cairo summit (Callan 1986).
4.3
Direct quotes and paraphrasing
Different disciplines have different conventions regarding the use of material directly quoted from
other sources. You should minimize the number of quotations included in a paper, only including
those required to support your arguments.
Paraphrasing, or expressing the meaning of a word, phrase or work in your own words (The Oxford
English dictionary 2000), in order to make sense of the material, is generally preferred to direct
quotes. Paraphrasing does not mean changing a couple of words in the original statement, rather, you
should be giving your interpretation of what the author was stating.
If you paraphrase an author you must acknowledge the source with an in-text citation. Page numbers
must be included in in-text citations if you directly quote an author’s words or paraphrased
statements, if they refer to a specific part of the work or are required to identify part of a longer work.
If you directly quote an author’s words, the quotation needs to be placed in single inverted commas (‘)
if it is contained within the text. The author, publication year and page number must be
acknowledged.
As Nimon (1981, p. 112) states, knowledge about the community ‘is not passively gathered
by some convenient form of psychic osmosis, but must be actively sought’.
Elliot (1999, p.25) claimed that ‘the directors were deliberately understating the companies’
losses’.
‘The report was well received by the community’ (Starr 1990, p.12).
4.4
Electronic material
Electronic material can take many forms but should be treated, as much as possible, in the same
manner as books or periodicals and other print based resources.
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Some Internet based resources may be transient in nature, being only available in that version for a
short space of time. It is therefore important to clearly indicate the version of the resource, its format,
the date it was accessed or viewed and the access details or location.
Readers may not be able to access material at later date, and it is a good practice to download or print
material cited from Internet based sources, in order to preserve a physical record of the information.
An Internet reference should, where possible, take readers directly to the information cited in the text,
rather than a home or index page.
The URL will typically consist of the following elements:
http://www.csu.edu.au/division/library/resource/procite.htm
protocol
host name
path to document
file name
Agrigate 2002, Agrigate: An agriculture information gateway for Australian researchers, last
updated 26 March 2002, University of Melbourne, viewed 8 November 2002,
http://www.agrigate.edu.au/
Bruckman, A. 1994, Approaches to managing deviant behaviour in virtual communities, also
available as txt, ps files, viewed 4 December 1994,
ftp://ftp.media.mit.edu/pub/asb/papers/deviance-chi94.rtf
4.5
Electronic reproductions of works:
-based on a print source
Use for works where you have seen an exact electronic reproduction of the original print version,
often in pdf format. The format of the citation will be the same as that for the print version, but
should also include:
(a)
‘electronic version’ in roman type, after the title of the work,
(b)
the URL.
The date viewed is not required as the work is not liable to change over time.
-newspapers and magazines
Articles from the electronic versions of some daily newspapers are retained in an archive that can be
later accessed from the publisher’s Web site using a search facility. The date that the document was
published as well as the date viewed should be indicated.
Goodstein, L 2002, ‘US bishops grapple with the morality of war with Iraq’, New York Times,
12 November, viewed 16 November 2002,
<http://www.nytimes.com/2002/11/12/national/12CND-BISH.html>.
4.6
Reference list formats
The list of references at the end of your essay, report, thesis or dissertation must include all of the
works that you have cited in the text. The only items which should not be listed are personal
communications, dictionaries, newspaper articles and encyclopedia entries that are not attributed to an
author, and Acts, Regulations and law reports that are not significant to an understanding of your
work.
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Only works cited by you may be included in the reference list. A direct quote or paraphrase from
these works reflect contributions to the intellectual content of your work.
Adam, P 1994, ‘Saltmarsh and mangrove’, in Australian vegetation, RH Groves (ed.),
Cambridge University Press, Cambridge, England.
Gilbert-Rolfe, J 1995, Beyond piety: Critical essays on the visual arts, 1986-1993, Cambridge
University Press, Cambridge, England.
A list of references is different from a bibliography which may also include items relevant to the topic
that are not cited in the text. The format of the entries in a bibliography should be the same as that
shown for reference.
5.
Appendix
Where an appendix is necessary it should be located as the last section of the essay (that is, after the
reference list). However, if there are a few (less than five) pages of tables or appendix-type material,
they should be located within the main body of the essay in appropriate places. Try to avoid an
appendix if possible.
6.
General
‘I’ or ‘the Writer’
Both the use of ‘I’ (too personal) and ‘the writer’ (too pompous) are not recommended. It is much
better to make the essay totally impersonal by avoiding both. This means that careful - and in some
cases, considerable thinking must be put into some sentences to achieve impersonality.
If a student regularly gets poor marks on essays, consult with the lecturer. Where students are having
difficulty the lecturer will make comments on a rough draft of an essay if a student makes such a
request and submits the rough draft a few weeks before the final draft is due.
Abbreviations, Non-English Phrases and Slang
If one can say it in English, one should do so. Latin phrases and other non-English colloquialisms
should be avoided if possible. Abbreviations (unless a translation is made with the initial use) and
slang, should be avoided.
7.
Plagiarism
A plagiarist is one who takes for his/her own unacknowledged use the thoughts or writings of another
person, claiming them as his/her own. Plagiarism is cheating, and is one of the most serious offences
any writer can make.
Lecturers will recognise plagiarism when it occurs as they have read much of the literature you will
use, and you will lose marks if it is detected.
The University expects its students to abide by accepted protocols in their studies and research which
are designed to ensure the academic integrity and reputation of the University. In particular students
are required to:
•
•
•
•
Acknowledge their use of another person’s work in essays and other written work;
Not allow others to use their work without acknowledgments;
Honestly report the findings of their study and research;
Use only approved information and materials in examinations.
Students who require advice on these matters should refer to Academic Regulation 5 in the University
Handbook or consult their lecturer. The University will impose penalties on students who breach
these protocols which may include suspension or exclusion from the University.
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ACADEMIC STANDARDS
As an undergraduate student in a university, you are expected to produce work to high academic standards.
Written material must be presented well, be thoroughly researched, contain appropriate references, and
demonstrate considerable thought and appreciation of the subject matter. It is expected that you will read the
text and other literature thoroughly, and think deeply and critically about what you read. You will be
expected to contribute to class discussion, with informed, intelligent insights. It is vital that you do not
confine your readings to the text only. Broad reading from various academic literature, as well as
management magazines and the business section of the quality newspapers will assist you in your studies.
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CRITERIA FOR GRADING AN ESSAY
Listed below are features of an average acceptable essay (C+/B-). Higher or lower grades will differ in some ways listed. Holistic grading may be based on the features listed
under scope of essay.
(45%
POOR FAILURE
-
-
(flawed)
-
Unreflective personal
comment, incoherent
argument.
Entirely copied.
Complete misinterpretation
Of topic.
Major presentation flaws.
45-50%
Failure/Pass
(acceptable)
-
-
-
Topic not fully covered.
Discussion too brief.
Overuse of quotations, with little
explanation.
Insufficient support from
literature.
Presentation errors.
(acceptable)
-
50-64%
65-74%
Pass (average, competent) (promising) Credit
(perceptive)
SCOPE OF ESSAY
+
A reasonably balanced summary of the
issues as reflected in the course study
materials.
Some explanation, illustration and support
is provided from the literature.
Presentation meets most of the main
protocols.
+
+
(flair)
+
+
75% +
Distinction/High D
(scholarly)
+
+
A fuller, more systematic
exploration of the topic which
may include an attempt at
critical comment or appraisal.
Regular support provided from
the literature.
Few presentation flaws.
Comprehensive exploration of
the topic, with sound critical
comment and a personal
synthesis of the issues shown.
Detailed support from literature
including extra references.
No presentation flaws.
Main points elaborated.
Critical evaluations.
Extra references included.
Extra references integrated into
argument.
Few flaws.
Virtually flawless presentation.
STRUCTURE
Structure confused, not
discernible, not explained.
Opening paragraph simply
restates the topic.
Some major points missed.
Main arguments and conclusions outlined
in opening paragraph.
Definitions provided in context.
Main points discussed in logically
sequential paragraphs.
Summary in final paragraph.
EVIDENCE OF READING
No evidence of reading in text of
essay.
Reading not well integrated into
text of essay.
No acknowledgments or
bibliography.
Limited acknowledgments and
light bibliography.
The text of the essay shows that the course
materials have been read and
acknowledged.
An accurate bibliography is attached.
PRESENTATION
Major flaws.
Minor flaws.
Most presentation details met, eg. front
page, margin, legibility, citations, A4
paper, due date.
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