International Economics
1. Course Description
a. Title of a Course
International Economics
b. Course Type (compulsory, elective, optional)
Elective
2. Abstract
The course is dedicated to the fundamentals of the theory of international trade,
capital flows and exchange rate determination. It emphasizes the problems of
countries’ policy coordination in regulation of the world financial system. Business
cycles, sustainable growth and economic crises are covered along with their impact
on world economy. The course is based on the CFA program section relating to
international economics
3. Learning Objectives
The main objective is to learn the state of the art of theoretical and empirical
analysis of world economy, peculiarities of international economic relations of
developed and developing countries. The most urgent problems that world
economy and international financial system face today are focused on.
4. Learning Outcomes
Students learn to
 explain comparative advantages of states and their potential gains from
international trade;
 compare tariff and nontariff measures of trade protection;
 recognize the difference between nominal and real exchange rate;
 determine the factors that influence the exchange rate on the foreign
exchange market;
 determine the purchasing power parity exchange rate;
 understand the nature of international parity relations;
 describe the balance of payments accounts;
 recognize the difference between currency regimes;
 determine the sources and factors of sustainable economic growth;
 calculate real exchange rates, forward exchange rates, cross-rates,
international parity relations.
5. Basic requirements:
Students should have some knowledge of basic microeconomics, macroeconomics,
financial markets, money, credit and banking.
6. Course Plan
№
Hours
Topics
Unsupervised
work
Total hours
Lectures Workshops
1.
International Trade
4
2.
Trade Policy
4
3.
Balance Of
Payments
6
4.
Exchange Rate
6
5.
International Parity
Relations
4
6.
Economic Growth
and Business Cycles
4
Exam (test)
Total
4
32
7.
7. Reading List
Required textbook:
Krugman P., and Obstfeld M. International Economics: Theory and Policy //
Addison-Wesley, 2003
Optional:
Lindert Р. Н. and Pugel T. A., International Economics // Irwin, 1996
Obstfeld M., Rogoff K. Foundations of International Macroeconomics // The MIT
Press, 1996
8. Grading System
Home assignment – 50%; final exam (test) – 50%
9. Contents
Topic 1. International Trade
Basic terminology. Exports and imports. Autarky and open economy. Trade
protection and free trade. World prices. The structure and development of
international trade. Gains from international trade and comparative advantages.
Ricardo and Hecksher-Olin international trade theory.
Reading:
1. Krugman P. and Obstfeld M., International Economics: Theory and Policy //
Addison-Wesley, 2003, P. 9 - 160.
2. Lindert Р. Н. and Pugel T. A., International Economics // Irwin, 1996, Chapter 3-4.
3. Obstfeld M., Rogoff K. Foundations of International Macroeconomics // The MIT
Press, 1996, Chapter 1, 4.
Topic 2. Trade Policy
Benefits and costs of international trade. Tariffs, quotas and its welfare effect.
Export subsidies and voluntary restrictions. Trade protection and liberalization of
international trade. Trading blocs, common markets, and economic unions.
Reading:
1. Krugman P. and Obstfeld M., International Economics: Theory and Policy //
Addison-Wesley, 2003, Chapter 9.
2. Lindert Р. Н. and Pugel T. A., International Economics // Irwin, 1996, Chapter 11.
Topic 3. Balance of Payments.
Capital Restrictions. Consequences of capital mobility. Purposes of capital controls.
Forms of capital restrictions. The balance of payments (BOP). BOP’s Debit and
Credit. Balance of Payments Components. Current Account. Capital Account.
Financial Account. Current Account Deficit. World Organizations.
Reading:
1. Krugman P. and Obstfeld M. Krugman International Economics: Theory and Policy
// Addison-Wesley, 2003, Chapter 12.
2. Raghuram G. Rajan, Fault Lines: How Hidden Fractures Still Threaten the World
Economy, Princeton University Press 2010
3. Cooper R. Global Imbalances: Globalization, Demography, and Sustainability //
Journal of Economic Perspectives, 2008, Issue 3, 93-112.
4. Obstfeld M., Rogoff K. "The Unsustainable US Current Account Position Revisited," in
Richard Clarida (ed.), G7 Current Account Imbalances: Sustainability and
Adjustment, University of Chicago Press, 2007. http://www.nber.org/books/clar062.
Topic 4. Exchange rate
Currency and exchange rate. Foreign exchange market. FX market participants,
market size and composition. Demand and supply on FX markets. Cross-rate.
Forward exchange rate. Currency regimes. Main FX pricing models. FX rate and
capital flows.
Reading:
1. Krugman P. and Obstfeld M. Krugman International Economics: Theory and Policy
// Addison-Wesley, 2003, Chapter 13-16.
2. Obstfeld M., Rogoff K. Foundations of International Macroeconomics // The MIT
Press, 1996, P. 513-546.
3. Rogoff K. Dornbusch's Overshooting Model After Twenty-Five Years // IMF Staff
Papers 49, 2002.
Topic 5. International parity relations.
Basic terminology. Interest rate parity. Purchasing power parity relation and
inflationary price difference. International Fisher relation. FX market expectations.
Covered and uncovered interest rate parity. Purchasing power parity FX rate.
Currency regimes.
Reading:
1. Krugman P. and Obstfeld M. Krugman International Economics: Theory and Policy
// Addison-Wesley, 2003, Chapter 15.
2. Rogoff K. The Purchasing Power Parity Puzzle // Journal of Economic Literature 34,
June 1996, 647-668.
3. Obstfeld M., Rogoff K. Foundations of International Macroeconomics // The MIT
Press, 1996, P. 199-225.
4. Taylor A., Taylor M. The purchasing power parity debate // Journal of Economic
Perspectives, 18(4): 135-158, 2003
Topic 6. Economic growth and business cycles
Economic growth in terms of aggregate demand and aggregate supply. Factors of
economic growth. Real GDP growth in world economy. Productivity growth effect.
Theoretical models of economic growth. Classical, neoclassical and new theory of
economic growth. External debt and default problem. Global financial instability.
World economic crisis. Bank crisis and sovereign debt crisis interconnection.
1.
2.
3.
4.
5.
6.
7.
Reading:
Romer D. Advanced Macroeconomics, 3d edition // McGraw Hill, 2006, Chapter 1.
Krugman P. and Obstfeld M. Krugman International Economics: Theory and Policy
// Addison-Wesley, 2003, P. 721 - 723.
Obstfeld M., Rogoff K. Foundations of International Macroeconomics // The MIT
Press, 1996, P.429 - 512
Krugman P. and Obstfeld M. International Economics: Theory and Policy //
Addison-Wesley, 2003, Главs 22.
Reinhart C., Rogoff K. Is the 2007 US Sub-Prime Financial Crisis So Different? An
International Historical Comparison // American Economic Review 98 (May 2008):
339-344.
Mishkin F. Global financial instability: framework, events, issues // Journal of
Economic Perspectives, 13(4):3-20, 1999.
Reinhart C., Rogoff K. The Aftermath of Financial Crises // American Economic
Review 99 (May 2009): 466-472.
8. Reinhart C., Rogoff K. This Time Is Different: Eight Centuries of Financial Folly //
Princeton University Press, 2009, (selected chapters).
9. Reinhart C., Rogoff K. From Financial Crash to Debt Crisis // NBER working paper
15795, March 2010.
10. Reinhart, Carmen and Kenneth Rogoff, "Growth in a Time of Debt," American
Economic Review 100 (2), May 2010, 573-578.
11. Diamond, Douglas and Raghuram Rajan, "Liquidity Shortages and Banking Crises,"
Journal of Finance, LX(2), April 2005, 615-647.
12. Bolton, Patrick, and Mathias Dewatripont, Contract Theory, Cambridge: MIT Press.
2005, pp. 397-418.