Int'l Econ: ToolsApplications

0-3 Credits · Level: Graduate, Undergraduate

The course studies different aspects of economic relationships among countries. The first part of the course will focus on international trade. We will explore how trade can be explained by differences in 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. We will also study how trade takes place when two countries differ in resources or factor endowments as seen in the Heckscher-Ohlin model. This will be followed by a discussion on trade policy - the use of tariffs, subsidies and trade quotas by countries and the costs and benefits of using these trade instruments, an analysis of regional trade agreements, as well as a few applications of trade wars. The second part of the course will cover some key concepts and issues in international finance, such as national accounts, balance of payments, exchange rates, fiscal and monetary policies, exchange rate regimes, challenges and crises in countries. Here, we will focus on some pertinent questions such as what causes countries to run trade surpluses or deficits with their trading partners? What are the implications of these imbalances on exchange rates? 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? In answering all this, we will discuss the role played by exchange rates, and how adopting different exchange rate regimes can fulfil different policy objectives of the countries.