1. ECO 303 INTERNATIONAL ECONOMICS I LECTURE NOTES
PREPARED BY
DR. OLOGUNDUDU, MOJEED.M
MOUNTAIN TOP UNIVERSITY ECONMICS DEPARTMENT FIRST SEMESTER 2017/2018 ACADEMIC SESSION
AUGUST,2017.

2. Learning Objectives
•Scope of International Economics •International Trade •International Finance •Nigeria & International Economy.

3. 1.1 Introduction
•With revolutionary advances in transportation, communications coupled with disappearance of distances, all countries are economically interconnected.
•It is not certain whether even big countries like USA, India or China can survive if they were to close their borders.
•If countries were to decide to be self sufficient if would bring about drastic lowering of standard of living in the world.
•This economic interdependence of countries is indicated by continuous rise in volumes of:
I. Imports and Exports;
II. Capital Inflows;
III. Overseas travel; and
IV. Multinational companies etc.
The increasing economic interdependence of countries has serious implications on the domestic economy caused by international division of labour.

4. •Some countries are forming economic groups (like OPEC) to protect their common interests.
•These issues are addressed in international economics.
1.2 Scope of International Economics
• Analysis and study of theory of comparative costs.
• Modern Theory of International trade.
• Modern version of the above theory.
♦> The theory of comparative cost advantage is basically a static theory.
♦♦♦ Dynamics variables that affect the trade like Capital flows, new technology, population etc. are gradually introduced.
• International trade is unique since transactions are carried out in difference currencies.
• Steps taken by one country to improve its balance of trade or payment position has rebound effect on others.
• All these factors make "International Economics" as "Applied Economics" requiring study of Foreign Currencies, Commercial Policy, Quota Fixation, Price Stabilization, Formulation of regional groups & their trade policies.

5. 1.3 International Economics, a branch of General Economics
• General Economics has several branches like:
❖Theory of Consumption
❖Theory of value, exchange and distribution.
❖ Theory of money and banking
❖ Public Finance
❖ international Economics
•These branches are interlinked hence knowledge of "others" is essential for study of International Economics.
• All branches of general economics have some international aspects in their study, these form a part of International Economics.
• Even International trade cannot be considered in isolation without considering its effects on domestic trade and vice versa.

6. 1.4 The Subject of International Economics
• Main difference between domestic and international trade is caused by the fact that factors of production are perfectly mobile within the country but not so among these countries.
• Hence, when there is a movement of these factors from one country to another, it has many interesting implications both favourable and adverse.
• The International Economics, therefore, attempts to:
❖ Show benefits of International Economics policy to nation within itself and others;
❖ Identify areas of conflict of interest among nations; and
❖ Point out ways for their mutual resolution.

7. 1.5 Nature of International Economics
• International Economics studies how independence economics of the world interact with one another in the process of allocating scarce resources to satisfy human wants.
• The subject matter can be studied in two parts:
❖ International trade; and
❖ International Finance.
(A) International trade
I. Definations and concept
❖ It deals with the long-run static equilibrium theory of barter
❖ It relies heavily on concepts of demand, supply, indifference curves, opportunities costs from microeconomics to explain why nations trade, how do they gain, and why do they resort to protectionism in which form etc.
II. The gains from trade
❖ It is a known fact that if two nations trade with each other, it is for the mutual benefit.
❖ International trade theory explain circumstances under which these gains are maximized.
III. The pattern of trade
❖ International trade theory explains how climate, availability of resources and
other such factors decide items that are traded among nations

8. III. The pattern of trade
❖ International trade theory explains how climate, availability of resources and other such factors decide items that are traded among nations.
IV. Protectionism
❖ Countries, especially developing countries are worried about possible ill effects of International Competition on domestic growth and try to restrict free competition through economic barriers.
❖ International trade theory studies Pros and Cons of such protectionist mechanisms and explores means of minimizing their effects to enhance gains from international trade.
V. Commercial Policy
❖ International Economics analyses all aspects of the policy to examine how it can assist domestic growth and encourage free trade.
(B) International Finance
• It is a macroeconomic theory that studies monetary aspects of International Economic relations
• It deals with International Monetary System that permits smooth working of International economy operating on different currencies.
• One major issues it has to handle is that of balance of payments.

9. 1.6 Nigeria in the International Economy
In their International Operations, each nation has either surplus or deficit in foreign exchange payments.
One method to manage this balance of payments is through determination of optimum exchange rate for it currency.
1.6 Nigeria in the International Economy
•Until 1990's issues discussed under International economics were affecting Nigerian economy on a conservative basis.
• But with economic reforms implemented by the Central government, Nigerian economy is closely aligned with global economic activities.
• International boundaries have opened up as seen by reduction in % of import duties to total imports.
• There is no field in Nigerian economy that is not touched by international economics.