International Economics

3 Credits · Level: Undergraduate

The course studies the economic relationships among countries. The first part of the course will focus on International trade and some of the popular trade theories. We will explore how trade can be explained by differences in absolute and comparative advantage as seen in the well-known Ricardian model and analyze the effects of trade on income distribution as well as see different sources of gains that arise when countries trade with each other. In addition, we will also study how trade takes place when two countries differ in resources or factor endowments as seen in the Heckscher-Ohlin model. We will also cover certain important issues in trade policy - such as the benefits and costs of tariffs, subsidies and trade quotas, that accrue to countries using these instruments. The second part of the course will cover some key concepts and issues in international macroeconomics, such as exchange rates, balance of payments, trade and financial accounts, exchange rate regimes. In particular, we will focus on some pertinent questions such as what causes countries to run trade surpluses or deficits with their trading partners? How are such imbalances resolved over time? What causes banking and currency crises in open economies? What factors are responsible for financial contagion between economies, and how can governments handle international financial instability? We also spend time looking at the role played by exchange rates in the financial crises, and how adopting different exchange rate regimes can fulfill different policy objectives of the countries.