NS3040 Fall Term 2018 Theory of Economic Integration Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar
Types of Integration Types of Economic Integration Free Trade Area (FTA) -- reduce barriers to trade Custom Union (CU) -- FTA + uniform tariffs Common Market (CM) CU + mobility of factors Monetary Union (MU) CM + common currency Fiscal Union (FU) MU + Common tax policy Political Union (FU) + common government
Static Theory of Unions
Dynamic Considerations Dynamic Advantages of Economic Integration Larger domestic markets – makes industrialization easier Conserve foreign exchange Stepping stone to globalization – economic geography Problems Larger trading partner may grant FTAs to other countries shifting trade away.