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INTERNATIONAL TRADE

INTERNATIONAL TRADE. Chapter 7 The Theory of Protective Trade. 经济学院 柳哲. Chapter 7 The Theory of Protective Trade. 7.1 The theory of protective tariff. Alexander Hamilton (1755-1804) 汉密尔顿. “Report on Manufactures”. - submitted to Congress 1791.

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INTERNATIONAL TRADE

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  1. INTERNATIONAL TRADE Chapter 7 The Theory of Protective Trade 经济学院 柳哲

  2. Chapter 7 The Theory of Protective Trade 7.1 The theory of protective tariff Alexander Hamilton (1755-1804) 汉密尔顿 “Report on Manufactures” - submitted to Congress 1791 He recommended specific policies to encourage manufactures: protective duties prohibitions on rival imports exemption of domestic manufactures from duties encouragement of "new inventions . . . particularly those, which relate to machinery."

  3. 7.2 The theory of protecting infant industry List, (Georg) Friedrich ( 1789 --- 1846) (李斯特） German-U.S. economist His best-known work was The National System of Political Economy (1841). Political Economy (1827) He first gained prominence as the founder of an association of German industrialists that favored abolishing tariff barriers between the German states He maintained that a national economy in an early stage of industrialization required tariff protection to stimulate development

  4. 7.3 The theory of foreign trade multiplier John Maynard Keynes (1883 – 1946) “The General Theory of Employment, Interest and Money” 《就业、利息和货币通论》 7.3.1 Determination of the equilibrium national income in a closed economy Gross National Product (GNP) Total final value of goods and services produced in a national economy over a particular period of time,usually one year. National income (Y) The sum of all payments made to sum factors of production.

  5. Equilibrium of National economy GNP = Y GNP = C + I C ---- Total consumption I ---- Total investment Y = C + S S ---- Total saving C + I = C + S I = S

  6. Y Y I Y I C Y = K x 1 K = = C Y - 1 - C Y 7.3.2 The Multiplier in a Closed Economy I = Y – C Y = C + S I = S Y = I + C = Marginal propensity to consume (MPC) 1 K = 1 - MPC

  7. C S Y Y I = K x = MPC = 1 K = + = 1 - S S C 1 Y Y Y K = 1 - MPC MPC = 0.9 K = 1 / 0.1 = 10 MPC = 0 K = 1 / 1 = 1 Marginal Propensity to Save (MPS) MPS = 1 - MPC K = 1 / MPS The closed economy Keynesian multiplier (K)

  8. 7.3.3 Equilibrium condition in an open economy GNP = C + I + X C --- domestic consumption I --- domestic investment X --- export S --- domestic saving Y = C + S + M M --- import GNP = Y C + I + X = C + S + M I + X = S + M S – I = X – M If S>I (domestic demand declines) X should be increased If S<I (higher domestic demand ) M should be increased

  9. I + X = S + M M M S S = MPS = MPM = (MPS) ( Y Y ) Y Y ) = (MPM) ( I + X = Y (MPS +MPM) 1 I + X ( ) Y = MPS + MPM 1 MPS + MPM 7.3.4 The foreign trade multiplier I + X = S + M …….(1) ….. (2) Marginal Propensity to Save ….. (3) Marginal Propensity to import Foreign trade multiplier (K’) is

  10. I + X = S + M I + X - M = S S Y Y = S Y = Y = Y = MPS = MPS [ [ [ 1 1 1 I + ( X - M )] I + ( X - M )] I + ( X - M )] 1-MPC 1-MPC MPS K

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