Chapter 1 Introduction Prepared by Iordanis Petsas To Accompany International Economics: Theory and Policy International Economics: Theory and Policy, Sixth Edition by Paul R. Krugman and Maurice Obstfeld

Copyright © 2003 Pearson Education, Inc.Slide 1-2 Chapter Organization  Introduction  What is International  Economics About?  International Economics: Trade and Money

Copyright © 2003 Pearson Education, Inc.Slide 1-3  The study of international economics has never been as important as it is now. At the beginning of the 21 st century, nations are more closely linked through trade in goods and services, through flows of money, and through investment in each others’ economies than ever before. Figure 1-1 shows that international trade for the United States has roughly tripled in importance compared with the U.S. economy as a whole. Introduction

Copyright © 2003 Pearson Education, Inc.Slide 1-4 Figure 1-1: Exports and Imports as a Percentage of U.S. National Income Introduction

Copyright © 2003 Pearson Education, Inc.Slide 1-5 Figure 1-2: Exports and Imports as Percentages of National Income in 1994 Introduction

Copyright © 2003 Pearson Education, Inc.Slide 1-6  International economics deals with economic interactions that occur between independent nations. The role of governments in regulating international trade and investment is substantial. Analytically, international markets allow governments to discriminate against a subgroup of companies. Governments also control the supply of currency.  There are several issues that recur throughout the study of international economics. What is International Economics About?

Copyright © 2003 Pearson Education, Inc.Slide 1-7  The Gains from Trade Many people are skeptical about importing goods that a country could produce for itself. When countries sell goods to one another, all countries benefit. Trade and income distribution –International trade might hurt some groups within nations. –Trade, technology, and wages of high and low-skilled workers. What is International Economics About?

Copyright © 2003 Pearson Education, Inc.Slide 1-8  The Pattern of Trade (who sells what to whom?) Climate and resources determine the trade pattern of several goods. In manufacturing and services the pattern of trade is more subtle. There are two types of trade: –Interindustry trade depends on differences across countries. –Intraindustry trade depends on market size and occurs among similar countries. What is International Economics About?

Copyright © 2003 Pearson Education, Inc.Slide 1-9  How Much Trade? Many governments are trying to shield certain industries from international competition. This has created the debate dealing with the costs and benefits of protection relative to free trade. –Advanced countries’ policies engage in industrial targeting. –Developing countries’ policies promote industrialization: –Import substitution versus export promotion industrialization. What is International Economics About?

Copyright © 2003 Pearson Education, Inc.Slide 1-10  The Balance of Payments Some countries run large trade surpluses. –For example, in 1998 both China and South Korea ran trade surpluses of about $40 billion each. Is it good to run a trade surplus and bad to run a trade deficit?  Exchange Rate Determination The role of changing exchange rates is at the center of international economics. What is International Economics About?

Copyright © 2003 Pearson Education, Inc.Slide 1-11 What is International Economics About?  International Policy Coordination A fundamental problem in international economics is how to produce an acceptable degree of harmony among the international trade and monetary policies of different countries without a world government that tells countries what to do.  The International Capital Market There are risks associated with international capital markets: –Currency depreciation –National default

Copyright © 2003 Pearson Education, Inc.Slide 1-12 International Economics: Trade and Money  International trade analysis focuses primarily on the real transactions in the international economy. These transactions involve a physical movement of goods or a tangible commitment of economic resources. – Example: The conflict between the United States and Europe over Europe’s subsidized exports of agricultural products

Copyright © 2003 Pearson Education, Inc.Slide 1-13  International monetary analysis focuses on the monetary side of the international economy. That is, financial transactions such as foreign purchases of U.S. dollars. –Example: The dispute over whether the foreign exchange value of the dollar should be allowed to float freely or be stabilized by government action International Economics: Trade and Money

Copyright © 2003 Pearson Education, Inc.Slide 1-14  International trade issues Part I: International Trade Theory Part II: International Trade Policy  International monetary issues Part III: Exchange Rates and Open-Economy Macroeconomics Part IV: International Macroeconomic Policy International Economics: Trade and Money

Copyright © 2003 Pearson Education, Inc.Slide 1-15 中文参考文献  本书中译本， 2003 ，中国人民大学出版社  林德特，国际经济学， 1992 ，经济科学出版社  Dominick ，国际经济学， 1998 ，清华大学出版社  克鲁格曼等，战略性贸易政策与新国际经济学， 2000 ，中国人民大学出版社  Jagdish Bhagwati, 现代自由贸易，中信出版社 2003  Ralph E.Gomory and William J. Baumol, 全球贸易和国家利益冲突，中信出 版社 2003  威廉森，开放经济和世界经济， 1990 ，上海三联  殷德生, 唐海燕, 国际经济学, 立信会计出版社,2003  杂志：经济研究，经济研究，管理世界，世界经济，金融研究，国际金融研 究  世界经济，世界经济研究, 国际贸易问题，国际贸易，世界经济文汇等。  主要网址：