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International Economics

International Economics. Lecture 1 | Lucía Rodríguez| Introduction. Introduction. Introducing ourselves. What is interesting about international economics? Trends in international economics and international trade. Course overview. Course logistics. G lobalization.

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International Economics

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  1. International Economics Lecture 1 | Lucía Rodríguez| Introduction

  2. Introduction • Introducing ourselves. • What is interesting about international economics? • Trends in international economics and international trade. • Course overview. • Course logistics.

  3. Globalization • International Integration in commodity, capital and labor markets Not a new phenomenon! Figure 1. Globalization Waves in the 19th and 20th century Source: World Trade Organization • Rapid trade and output growth went together increased size and openess • It has not been a smooth process: waves

  4. GLOBALIZATION • After WWII:

  5. Globalization • Main Drivers of Global Integration • Technological innovations • Transportation and Communications improvements • Production methods • Political developments • Initial fragmentation: Cold War • Integrating forces: Marshall Plan, collapse of the Soviet Union • Economic Policy • Global Macroeconomics stability • Reduction of restrictions on trade and financial transactions

  6. Globalization • The World ex-ante the financial crisis: • Commodities, labor and capital were indeed integrated (in different degrees). • Rising Global Imbalances Figure 2. Current Account Balances of Selected Economies. (Billion dollars) Source: World Trade Organization

  7. Globalization • Was this pattern sustainable? The World ex-post the financial crisis: Figure 3. Real GDP and Trade growth of OECD countries, 2007-08 (% change) Source: OECD

  8. GLOBALIZATION • Figure 4. Growth in volume of world merchandise trade and GDP, 2000-11 aAnnual % change a.  Figures for 2011 are projectionsSource: WTO Secretariat.

  9. Globalization • Reasons for Trade Contraction: • Widespread fall-off in demand • Increasing presence of global supply chains in total trade • Shortage of trade finance • Increase in protectionism • Current International Economic Problems • In 2010, the volume of exports rebounded: 14.5% rise was the largest annual figure in the present data series. • For 2011, forecast is more modest (6.5%), with uncertainty. • Trade Protectionism in a rapidly globalizing world • Excessive Fluctuations and Misalignement in Exchange Rates • Structural Imbalances • International inequalities in standards of living • Resource Scarcity, Environmental Degradation, Climate Change and Sustainable Development.

  10. GLOBALIZATION • From bubble to crisis and recovery: 2011 World Trade in perspective. http://www.youtube.com/watch?v=uE5O9sta2Bs By Hubert Escaith, WTO Chief Statistician.

  11. International Economics • International Trade: focuses on the real transactions • Physical movement of goods • Tangible commitment of economic resources • Micro side: individual nations treated as single units, relative price issues. • International Trade Theory: basis and gains from trade • International Trade Policy: reasons for and effect of trade restrictions • International Finance: focuses on the monetary side • Financial transactions • Macro side: deals with aggregate variables, such as output and the general price index. • Balance of Payments: summary statement of all the international transactions of the residents of a nation with the rest of the world, during a particular period of time. • Foreign Exchange Markets: Framework for the exchange of one national currency for another.

  12. International trade • International Trade Theory: Why do countries trade? A. Classical Theory  • Adam Smith • David Ricardo • John Stuart Mill • Gottfried Haberler B. Neoclassical Theory  • Factor Endowments Model • Extensions of the Hecksher-Ohlin model • Empirical evidence and fallacies C. New Trade Theory  • Inter and intra industry trade. • Imperfect competition, economies of scale, and product diversification. • Geography and Trade.

  13. International TRADE • International Trade Policy A. The Instruments of Trade Policy.  • Tariffs: Costs/Benefits • Effective Protection theory. • Non-tariff Barriers. B. Policy options. • The case for Free-Trade. • Arguments for Protectionism. • The political Economy of Trade Policy. C. Regional Integration vs. Multilateral Liberalization.  • Preferential Trade Agreements (PTAs) • Rationale for Multilateral Trade • International Institutions • Current debates. D. Open Issues and Future prospects

  14. Course logistics • meeting times & locationTuesday, Thursday7pm to 8:30pmRoom 204 III • syllabus • articles for discussion and reading package • Questions for Thursday 8th: • Effects of the ban on the importing and exporting country • Peculiarities of international trade in oil • Effects of this commodity on macroeconomic stability • Other examples of trade sanctions. Effectiveness? • instructorLucía Rodríguez. lucia.rodriguez@meh.es http://econ2181.wordpress.com

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