金融学院

浙江工商大学 金融学院课程讲义

International EconomicsInternational Economics

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Chapter 1 IntroductionChapter 1 Introduction

IntroductionWhat is International Economics About?International Economics: Trade and Money

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The study of international economics has never been as important as it is now.– At the beginning of the 21st century, nations are more

closely linked through trade in goods and services, through flows of money, and through investment in each others’ economies than ever before.

– Figure 1-1 shows that international trade for the United States has roughly tripled in importance compared with the U.S. economy as a whole.

IntroductionIntroduction

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Figure 1-1: Exports and Imports as a Percentage of U.S. National Income

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Figure 1-2: Exports and Imports as Percentages of National Income in 1994

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International trade for the WorldInternational trade for the World

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1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998

商品

服务

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International trade for ChinaInternational trade for China

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1, 000

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1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998

进出口额出口额进口额

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International economics deals with economic interactions that occur between independent nations.– The role of governments in regulating international trade and

investment is substantial. – Analytically, international markets allow governments to

discriminate against a subgroup of companies.– Governments also control the supply of currency.

There are several issues that recur throughout the study of international economics.

1-1 What is International 1-1 What is International

Economics AboutEconomics About??

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The Gains from Trade– Many people are skeptical about importing goods that a

country could produce for itself.– When countries sell goods to one another, all countries

benefit.– Trade and income distribution

International trade might hurt some groups within nations. Trade, technology, and wages of high and low-skilled workers.

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The Pattern of Trade (who sells what to whom?)– Climate and resources determine the trade pattern of

several goods.– In manufacturing and services the pattern of trade is

more subtle.– There are two types of trade:

Inter-industry trade depends on differences across countries.

Intra industry trade depends on market size and occurs among similar countries.

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How Much Trade?– Many governments are trying to shield certain

industries from international competition.– This has created the debate dealing with the costs and

benefits of protection relative to free trade. Advanced countries’ policies engage in industrial targeting. Developing countries’ policies promote industrialization:

– Import substitution versus export promotion industrialization.

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The Balance of Payments– Some countries run large trade surpluses.

For example, in 1998 both China and South Korea ran trade surpluses of about $40 billion each.

– Is it good to run a trade surplus and bad to run a trade deficit?

Exchange Rate Determination– The role of changing exchange rates is at the

center of international economics.

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International Policy Coordination– A fundamental problem in international economics is

how to produce an acceptable degree of harmony among the international trade and monetary policies of different countries without a world government that tells countries what to do.

The International Capital Market– There are risks associated with international capital

markets: Currency depreciation National default

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13-2 International Economics:13-2 International Economics: Trade and Money Trade and Money

International trade analysis focuses primarily on the real transactions in the international economy.• These transactions involve a physical movement of

goods or a tangible commitment of economic resources.– Example: The conflict between the United States and

Europe over Europe’s subsidized exports of agricultural products

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International monetary analysis focuses on the monetary side of the international economy. • That is, financial transactions such as foreign

purchases of U.S. dollars.– Example: The dispute over whether the foreign

exchange value of the dollar should be allowed to float freely or be stabilized by government action

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International trade issues– Part I: International Trade Theory– Part II: International Trade Policy

International monetary issues– Part III: Exchange Rates and Open-Economy

Macroeconomics– Part IV: International Macroeconomic Policy