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Department of Economics

International economics 1

Course Code:
15PECC018
Unit value:
0.4
Taught in:
Term 1

The objective of this option course is to provide: i) an analytical training in the critical use of theories of international trade and finance; and ii) an opportunity for students to develop critical understanding of the current policy debate on international trade and development, foreign direct investment and multinational corporations, international migration and labour market issues, regional integration and globalisation, management of open developing economies with large external shocks, dynamics of currency and financial crises, management of exchange rates and capital accounts, international monetary and financial architecture, and other global economic issues. Throughout the course, emphasis is placed on understanding theories as well as on testing and evaluating these theoretical propositions in the light of empirical evidence and real world issues.

The course in International Economics consists of two modules I & II. The first module (International Economics I, delivered in the autumn term) covers issues related to international trade and investment. It includes topics such as pure theories of international trade (classical, neo-classical, new theories of trade); political economy of protection; welfare analysis of trade policies; trade, growth and development; economics of regional integration and multilateral arrangements (GATT and WTO); international migration and labour markets; multinational corporations and foreign direct investments; the characteristics and effects of globalisation, including the globalisation-growth-income inequality – poverty nexus.

The second module (International Economics II) deals with international finance and monetary issues. It covers topics such as foreign aid, economic development and the gap model; theories of international capital flows; growth-cum-debt model and debt sustainability; foreign exchange markets and exchange rate policies; macroeconomic models with capital flows; currency crisis models; theory of optimal currency area and monetary union; management of capital flows; dynamics of global financial crisis, issues of international governance and cooperation in managing financial flows.

Though these two modules are interrelated and form an integrated course, each module can be taken separately on its own entity.

The course is structured with two hours lectures, one hour seminar on policy topics and one hour technical tutorial class per week. The purpose of lectures is to introduce theoretical models and propositions and to relate these to `real world’ issues. The seminars are organised with presentation by a few students of selected papers or book chapters on specific topics each week, followed by class discussion.

One essay per module, which will account for 30 percent of the module assessment, is required to submit at the beginning of the spring term and the summer term respectively. There will be a revision class for each module separately in the first weeks of the summer term.

Objectives and learning outcomes of the course

On successful completion of the course, students will be able to:
1. Identify and analyse different theoretical models of international economics in light of ‘real world’ situations
2. Assess the impact of the economies of regional integration and multilateral arrangements
3. Critically evaluate the character and effect of globalisation, including the globalisation-growth-income poverty nexus

Method of assessment

Assessment weighting: Exam 70% / Coursework 30% (1 essay). All coursework is resubmittable.

Suggested reading

While the comprehensive reading list would be provided for each topic covered in the course below and separately for each tutorial seminar week by week, a basic exposition of standard theories can be found in a number of text books popularly used in International Economics courses such as (technical tutorial classes are organized to help students to acquire these analytical skills in detail):

Textbooks
  • International Trade: Theory and Evidence by Markusen James R. et al (1995), McGrow-Hill Inc.— covers aspects of international trade only - M&MKM
  • Foundations of International Macroeconomics by Obstfeld Murice and Kenneth Rogoff (1998), MIT Press - covers aspects of international finance and open macroeconomics only - O&R

In addition, you may find it useful to consult the following reference books for specific topics:

Reference Books
  • Jones Ronald W. and Peter B. Kenen eds (1984), Handbook of International Economics, North-Holland, 2 volumes
  • Grossman Gene and Kenneth Rogoff eds (1995), Handbook of International Economics, Volume 3, North-Holland
  • Handbook of Development Economics I, II and III, North-Holland
  • Greenaway David and Alan Winters eds (1994), Surveys in International Trade, Basil Blackwell, Oxford
Annual Reports
  • UNCTAD: Trade and Development Report: Recent Issues
  • UNCTAD: World Investment Report
  • UNCTAD: The Least Development Countries Report
  • World Bank: Global Financial Development
  • IMF: World Economic Outlook

Those who have not previously followed an undergraduate course in International Economics may find the following introductory textbooks useful.

Introductory Textbooks
  • World Trade and Payments: An Introduction, Seventh Edition, by Richard E. Caves, Jefferey A. Frankel and Ronald W. Jones, Addison Wesley Longman (1999), a good all round undergraduate textbook - C&FJ
  • International Economics: Theory and Policy, Fourth Edition, by Paul R. Krugman and Maurice Obstfeld, Addison Wesley Longman — a popular undergraduate textbook in North America on the subject - K&O;
  • The World Economy: A Textbook in International Economics, by John Williamson and Chris Milner: Harvester/Wheatsheaf (1991) — a non-technical textbook focused on development issues - W&M
  • Development Macroeconomics by Pierre-Ricard Agenor and Peter J. Montiel, Princeton University Press