Office:
International Economics
Fall 2013
Yuanyuan Chen
School of Economics, Room 422
Tel:
65903121
Email:
yychen@shufe.edu.cn
Office Hours:
Thursday 1:00-2:30pm
TA：
高静
email: 155041048@qq.com
Text Book:
International Economics, Theory and Policy, 9th Edition, by Paul
Krugman and Maurice Obstfeld，Published by Addison Wesley.
References:
International Economics, by Robert C. Feenstra, Alan M. Taylor, Worth
Publishers; 2nd Edition.
Introduction to International Economics, by Dominick Salvatore, Wiley
Publisher; 10th edition
International Economics, by James Gerber, Prentice Hall Publisher; 6th
edition.
Prerequisites:
Basic Micro economics and Macro economics analytical framework are
required as this course will focus on graphic analysis.
Course Objective:
The purpose of the course is to help students acquire an analytical
framework to examine contemporary international economic issues,
such as the trade and income distribution, trade policies in developing
and developed countries, the international monetary system, exchange
rates, and open economy macroeconomics.
Grading:
There will be two closed book examinations and six problem sets. The
grading scheme is as follows:
Class Attendance 10%
Homework
10%
Middle Term
40%
Final Exam
40%
Policies
I don’t accept any excuse for the missing of exams and quizzes unless
you can provide proof of emergency such as serious illness. If you miss
the exam or quiz for any reason that does not qualify as a proven
emergency, you get zero. You can work with your classmates on the
homework assignments, but you are not allowed to copy someone else’s
work. TA has the right to do not grade the late homework assignment
turned in.
Academic Dishonesty
Academic dishonesty by the student code of conduct includes
cheating on the assignments or exams; plagiarizing; altering; forging,
or misusing a University academic record; taking, acquiring, or using
test materials without faculty permission; and acting alone or in
cooperation with another to enhance a grade, etc. A minimum penalty
for academic dishonesty is a grade of zero. Other penalties may
include a F in course and a complaint to university authorities so that
they act consequently with the corresponding university policy.
Course Online
I.
International Trade Theory
a) An Overview of World Trade
In particular, it discusses what we know about the quantities and
pattern of world trade today. The chapter uses the empirical
relationship known as the gravity model as a framework to describe
trade.
b) The Ricardian Model
This model addresses the issue of why two countries would want to
trade with each other. This model shows how mutually-beneficial
trade arises when there are two countries, each with one factor of
production which can be applied toward producing each of two goods.
Key concepts are introduced, such as the production possibilities
frontier, comparative advantage versus absolute advantage, gains
from trade, relative prices, and relative wages across countries.
c) The Heckscher-Ohlin Model
Using this framework, you can work through the effects of trade on
wages, prices and output. Many important and intuitive results are
derived in this chapter including: the Rybczynski Theorem, the
Stolper-Samuelson Theorem, and the Factor Price Equalization
Theorem.
d) The Economics o Scale, Imperfect Competition and Trade
The chapter begins by reviewing the concept of monopolistic
competition among firms, and then showing the gains from trade which
arise in such imperfectly competitive markets. Next, internal and
external economies of scale in production and comparative advantage
are discussed.
e) International Factor Movements
This departs from previous chapters which assumed that the factors
of production available for production within a country could not leave
a country’s borders. Reasons for and the effects of international
factor mobility are discussed in the context of a one-factor (labor)
production and trade model.
II.
International Trade Policy
a) Trade Policy Instrument
The chapter discusses various instruments of trade policy including
tariffs, quotas, voluntary export restraints, and local content
requirements. The effects of these policies on prices and trade
volumes are determined in the context of a partial equilibrium
framework.
b) Controversies in Trade Policy
These ideas enable you to understand why certain trade restrictions
exist, despite the force of general economic arguments which suggest
that they reduce aggregate welfare. Possible motivations for trade
restrictions are identified as those which increase national welfare.
While sometimes politically popular, these motivations for trade
restrictions ignore the possibility of retaliation and usually fail tests
based upon basic welfare analysis.
III. International Finance
a) Balance of Payments
This chapter begins with a discussion of the focus of international
finance. The discussion then proceeds to national income accounting in
an open economy.
b) Exchange Rates
The chapter presents a model in which the exchange rate adjusts to
equate expected returns on interest-bearing assets denominated in
different currencies given expectations about exchange rates, and
the domestic and foreign interest rate.
c) Price Levels, Output and the Exchange Rate
The chapter begins with a discussion of the determination of the
domestic interest rate. Interest parity links the domestic interest
rate to the exchange rate, a relationship captured in a two-quadrant
diagram.
IV.
Open Economy Macroeconomics
a) Macroeconomic Policy
This chapter discusses various international monetary arrangements.
These chapters describe the workings of different exchange rate
systems through the central theme of internal and external balance.
The model provides a general framework for analysis of gold standard,
reserve currency, managed floating, and floating exchange-rate
systems.
b) Optimum Currency Areas
Europe’s switch to a single currency, the euro, is the subject of this
chapter, and provides a particular example of a single currency system.
The chapter discusses the history of the European Monetary System
and its precursors.
c) The Global Capital Market, Performance and Policy Problems
This chapter draws an analogy between the gains from trade arising
from international portfolio diversification and international goods
trade. There is discussion of institutional structures that have arisen
to exploit these gains.
Course Outline（2013）:
Week
Date
Context
Discussion
Course
introduction
An Overview of
World Trade
Reference
Homework

9.4
1
9.6
9.11
2
9.13
9.18
3
9.20
An overview of
China’s Trade
Does China
export
sophisticated
products?
The Ricardian
Model:
Domestic Market
Equilibrium
The Ricardian
Model:
Trade and
comparative
Advantage
The HeckscherOhlin Model:
Domestic Market
Equilibrium
Why wage rate is
different across
countries?
The Heckscher-
Why USA does
not export capital
Chapter 1-2
PS1
Chapter 3
Chapter 4&5
PS2
Week
4
5
6
7
Date
Context
Discussion
Ohlin Model:
Trade and Factor
Endowment
The Economics o
Scale, Imperfect
9.25
Competition and
Trade
Imperfect
9.27 Competition and
Dumping
10.2 National Holiday
Trade and
10.4
Economic Growth
Outsourcing and
10.9 Multinational
Enterprises
International
Factor
movement: Labor
10.11
migration and
Capital
Moverment
intensive
products?
Trade Policy
10.16 Instrument
(Tariff)
What do you
know about the
tariff rate in
China?
Reference
Homework
Chapter 7
Does China
export involve
dumping?
Chapter 6
PS3
Does outsourcing
hurt the
employment rate?
Chapter4&
Chapter 8
How does factor
movement related
with trade?
Chapter 9
10.18 Midterm
Trade Policy
10.23 Instrument
(Quota)
8
9
Trade Policy
Instrument
10.25
(Other nontariff
barrier)
10.30 Political
Discuss what are
China’s local
content
requirement
examples in our
real life?
What are the
Chapter 9
PS4
Chapter 10
Week
Date
Context
Discussion
Reference
Homework
Economics in
Trade Policy
11.1
11.6
10
11.8
11.13
11
11.15
11.20
12
11.22
11.27
13
11.29
functions of
WTO? How does
China benefits
from WTO?
Debate for and
Trade in
against free trade,
Developing
students are
Countries and
organized in two
Controversies in
teams on the
Trade Policy
debate.
National Account What do you read
from China’s
and Balance of
balance of
Payments
Payment?
Foreign Exchange Foreign Currency
Options
Rate market
Interest Rate
Parity
Money Market
War and Iraq
and Exchange
Currency
Rate
Long Run model
on Exchange
Fisher Effect
Rate: Monetary
Approach
Long Run model
on Exchange
Does RMB
exchange rate fit
Rate: Real
with PPP theory?
Exchange Rate
Approach
Short Run Model
on Exchange
Does the recent
Rate: Current
RMB appreciation
decrease CA
Account Balance
balance in China?
and Exchange
Rate
Fixed and Float
Short Run Model
Exchange Rate
on Exchange
Regime and
Chapter 1112
Chapter 13
Chapter 14
Chapter 15
PS5
Chapter 16
Chapter 17
PS6
Week
Date
Context
Rate: Monetary
and Fiscal Policy
Text Book:
Discussion
Reference
Homework
Mundell Model
International Economics, Theory and Policy, 7th Edition, by
Paul Krugman and Maurice Obstfeld，Published by Addison
Wesley.