1. NS3040 Fall Term 2018 Theory of Economic Integration
Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

2. 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

3. Static Theory of Unions

4. 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.