- ISBN: 9781269206655 | 1269206656
- Cover: Hardcover
- Copyright: 6/26/2013
International Economics: A Policy Approach, 2E provides a simplified yet comprehensive analysis of international economic relations, with the objective of extracting maximum policy insight from a minimum number of theoretical constructs.
Written for students with only one or two previous courses in the principles of economics, it is designed primarily as a basic text for a one- or two-term undergraduate sequence in international economics. However, the material is also arranged so that the theoretical sections may be omitted and the main text used as supplementary reading in policy-oriented non-economics courses, such as international relations or business administration. As domestic and global economies become ever more closely intertwined, world markets are an increasingly appropriate focus of study. International Economics: A Policy Approach gives students the conceptual tools they need to understand global economic relations.
CHAPTER 1 WORLD TRADE AND THE NATIONAL ECONOMY 1
DEFINITION 1
WHAT IS UNIQUE ABOUT INTERNATIONAL ECONOMICS? 1
INTERNATIONAL TRANSACTIONS—AN EMPIRICAL GLIMPSE 4
FOREIGN TRADE IN THE NATIONAL ECONOMY 6
Aggregate Measures 6
Disaggregation 7
Qualitative Considerations 9
Summary 9
FORUMS FOR TRADE AND MONETARY ISSUES 10
Summary 11
Important Concepts 11
Review Questions 11
ORGANIZATION OF THIS BOOK 12
PART I INTERNATIONAL TRADE RELATIONS 14
INTRODUCTION 15
Review Question 16
CHAPTER 2 WHY NATIONS TRADE 17
THE PRINCIPLE OF COMPARATIVE ADVANTAGE 17
The Gains from Trade 17
Demand Considerations 21
COMPARATIVE OPPORTUNITY COST 24
Who ExportsWhat? 24
The Limits to Mutually Beneficial Exchange 26
Examples from U.S. Trade 29
ABSOLUTE ADVANTAGE AND WAGE RATES 30
SUMMARY OF POLICY IMPLICATIONS 32
DYNAMIC GAINS FROM INTERNATIONAL TRADE 33
Summary 36
Important Concepts 36
Review Questions 37
APPENDIX 2–1 39
More Advanced Analysis of the
Static Gains from Trade 39
CHAPTER 3 THE COMMODITY COMPOSITION OF TRADE 49
THE FACTOR PROPORTIONS THEORY 49
Empirical Testing 54
ALTERNATIVE THEORIES 56
AN EMERGING CONSENSUS? 61
ECONOMIC ADJUSTMENT TO CHANGING
CIRCUMSTANCES 62
Summary 65
Important Concepts 65
Review Questions 66
APPENDIX 3–1 67
Formal Presentation of the Ricardian Model—
The Case of a One-Factor Economy 67
APPENDIX 3–2 71
The Factor Proportions Theory 71
APPENDIX 3–3 74
The Mobile Factor in a Sector-Specific Model 74
CHAPTER 4 PROTECTION OF DOMESTIC INDUSTRIES:
THE TARIFF 76
SOME INSTITUTIONAL CONSIDERATIONS 76
Export versus Import Duty 76
Protection versus Revenue 77
Types of Tariff 77
ECONOMIC EFFECTS OF THE TARIFF 79
Who Pays the Tariff? 79
Graphic Exposition 80
Domestic Effects 83
Effect on Real Income 87
Other Effects 89
Some Empirical Estimates 89
HOW PROTECTIVE IS THE TARIFF? 91
Ad Valorem and Specific Duty 91
Nominal versus Effective Tariff Rates 91
Aggregation Problems 97
ARGUMENTS FOR PROTECTION 98
APPROACHES TO FREE TRADE 102
The International Approach 103
The Regional Approach 103
Summary 108
Important Concepts 109
Review Questions 110
APPENDIX 4–1 112
Effect of the Tariff in the Large Country Case 112
APPENDIX 4–2 115
Economic Cost of the Tariff 115
APPENDIX 4–3 116
Static Effects of a Customs Union on
World’sWelfare 116
CHAPTER 5 NONTARIFF BARRIERS (NTBS) TO TRADE 119
IMPORT QUOTAS 119
How Common Are Import Quotas 119
Economic Effects of Quotas 120
VOLUNTARY EXPORT RESTRAINTS 125
INTERNATIONAL COMMODITY AGREEMENTS 127
INTERNATIONAL CARTELS 130
LOCAL CONTENT REQUIREMENT 131
BORDER TAX ADJUSTMENTS 131
DUMPING 133
EXPORT SUBSIDIES 136
TIME COSTS AND SUPPLY CHANGE UNCERTAINTY 138
NTBS VERSUS TARIFFS 140
STRATEGIC TRADE POLICY? 140
Summary 143
Important Concepts 145
Review Questions 146
APPENDIX 5–1 147
A Domestic Monopolist Under a Tariff and a Quota 147
CHAPTER 6 U.S. COMMERCIAL POLICY 149
THE RECIPROCAL TRADE AGREEMENTS LEGISLATION 149
The 1958 Extension and the Safeguard Provisions 150
Trade-Adjustment Assistance 151
THE TRADE EXPANSION ACT OF 1962 151
THE TRADE REFORM ACT OF 1974 152
THE TRADE AND COMPETITIVENESS ACT OF 1988 153
REGIONAL AND BILATERAL RELATIONS 153
Trade Promotion Authority 154
THE POLITICAL ECONOMY OF PROTECTIONISM 154
INDUSTRIAL POLICY? 155
Summary 156
Important Concepts 157
Review Questions 157
CHAPTER 7 INTERNATIONAL AND REGIONAL TRADE
ORGANIZATIONS AMONG DEVELOPED
COUNTRIES 158
Regionalism 159
THE EUROPEAN UNION 159
Forerunners 160
Internal Restrictions 160
Agricultural Policy 161
Political Institutions 162
Special Trading Arrangements between the EU and
Developing Countries 163
THE U.S.–CANADA FREE TRADE AGREEMENT 164
NAFTA 165
KORUS FTA 165
TRANSATLANTIC TRADE AND INVESTMENT PARTNERSHIP 166
THE WORLD TRADE ORGANIZATION (WTO) 167
Fundamental Principles 168
The Uruguay Round 169
THE WTO AND THE ENVIRONMENT 171
ECONOMIC REFORMS IN EASTERN EUROPE (TRANSITION
ECONOMIES) 173
Summary 175
Important Concepts 175
Review Questions 176
CHAPTER 8 TRADE AND DEVELOPMENT 177
ALTERNATIVE TRADE APPROACHES TO DEVELOPMENT 177
China and India 179
THE U.N. CONFERENCE ON TRADE
AND DEVELOPMENT 180
Demands Concerning Primary Products 180
Manufactured Products 182
THE GENERALIZED SYSTEM OF PREFERENCES 183
The U.S. Scheme 184
The EU Scheme 185
The Japanese Scheme 185
Effect of the Tokyo and Uruguay Rounds on the GSP 186
REGIONAL INTEGRATION AMONG
DEVELOPING NATIONS 186
Summary 187
Important Concepts 188
Review Questions 188
CHAPTER 9 INTERNATIONAL MOBILITY
OF PRODUCTIVE FACTORS 189
MOTIVES FOR DIRECT INVESTMENTS ABROAD 191
Cost Considerations 192
Marketing Considerations 194
FOREIGN INVESTMENT AND ECONOMIC WELFARE
(REAL INCOME) 194
WorldWelfare 194
Host Country 194
Source (Investing) Country 196
INTERNATIONAL TRADE THEORY AND THE MULTINATIONAL
CORPORATION 198
The Phenomenon of Transfer Pricing 198
The Commodity Composition of Trade 199
INTERNATIONAL MIGRATION OF LABOR 200
GLOBALIZATION AND THE
OUTSOURCING CONTROVERSY 201
Summary 205
Important Concepts 206
Review Questions 206
PART II INTERNATIONAL FINANCIAL RELATIONS 208
THE NATURE OF FINANCIAL RELATIONS 209
Review Questions 210
CHAPTER 10 STATEMENT OF INTERNATIONAL
TRANSACTIONS 211
MAIN ITEMS IN THE STATEMENT OF INTERNATIONAL
TRANSACTIONS 211
The Current Account 211
The Financial Account 215
Autonomous and Accommodating Items 216
Changes in Official Reserves 217
The Balance of Payments in the National Economy 218
USES AND MISUSES OF INTERNATIONAL TRANSACTIONS
STATISTICS 219
Long-Run Shifts in the Balance onMerchandise Trade 220
Placing Balance-of-Payments Considerations
in Proper Perspective 220
Limitations of Balance-of-Payments Information 221
Value-Added Effect 222
A Nation versus a State 223
Summary 224
Important Concepts 226
Review Questions 226
CHAPTER 11 MARKET-DETERMINED EXCHANGE RATES 228
DEMAND AND SUPPLY OF FOREIGN CURRENCIES 229
SHIFTS IN THE DEMAND AND SUPPLY CURVES 232
Relative Interest Rates 233
Relative Price Change 234
Expectations 239
Other Factors 239
Summary 239
THE FOREIGN EXCHANGE MARKET 241
Market Organization 241
The Forward Exchange Market 243
Speculation 246
Summary 247
Important Concepts 248
Review Questions 49
APPENDIX 11–1 251
Exchange Rates for March 14, 2013 251
APPENDIX 11–2 252
The Relationship Between Demand for a Foreign
Currency (Dollar) and Supply for Domestic
Currency (Euro) 252
APPENDIX 11–3 253
Exchange Rate Determination 253
CHAPTER 12 THE INTERNATIONAL CURRENCY SYSTEM 254
FIXED EXCHANGE RATES 254
History of Fixed Exchange Rates 258
THE CONTEMPORARY INTERNATIONAL
CURRENCY SYSTEM 259
Fluctuating Currencies 259
The Euro—A Currency of 17 Countries 261
Fixed Exchange Rates 262
Summary of Exchange Regimes 263
The Role of the U.S. Dollar 263
THE INCOMPATIBLE TRINITY 265
INDICES OF TRADE-WEIGHTED (EFFECTIVE)
EXCHANGE RATES 266
THE INTERNATIONAL MONETARY FUND (IMF) 268
Regular International Monetary Fund Procedures 268
Special Drawing Rights 269
Special Facilities 269
International Reserves 270
Summary 271
Important Concepts 272
Review Questions 273
CHAPTER 13 DOMESTIC POLICIES TO ADJUST THE BALANCE
OF PAYMENTS 275
“AUTOMATIC” PROCESSES 275
The Monetary Mechanism 275
Direct Effect on Private Expenditures 279
SUMMARY OF THE “AUTOMATIC” BALANCE-OF-PAYMENTS
ADJUSTMENT 285
GOVERNMENT POLICY 286
Domestic Policy Measures and the Current Account 286
Effect on Direct Investment Capital 288
Effect on Other Capital Movements 289
FOREIGN REPERCUSSIONS 290
THE BALANCE OF PAYMENTS IN THE CONTEXT OF GENERAL
POLICY OBJECTIVES 292
SOME UNANSWERED QUESTIONS 294
The Degree of Impact 294
Time Lags 295
Summary 296
Important Concepts 297
Review Questions 298
APPENDIX 13–1 300
The Foreign Trade Multiplier in a Small Country 300
APPENDIX 13–2 307
Foreign-Trade Multiplier with Foreign Repercussions 307
CHAPTER 14 EFFECTS OF EXCHANGE-RATE ADJUSTMENTS
ON THE CURRENT ACCOUNT AND THE DOMESTIC
ECONOMY 310
RELATIVE PRICE EFFECT 311
Effect on Dollar Outpayments 315
Effect on Dollar Inpayments 318
Outpayments and Inpayments Combined 322
Domestic Income Effect 323
Domestic Price Effect 324
Redistribution of Domestic Resources 325
Cost of Depreciation 326
ANOTHER VIEW OF DEPRECIATION: THE ABSORPTION
APPROACH 327
SUMMARY OF POLICY ANALYSIS 329
The Need for Policy Mixes 329
Effectiveness of Policy 330
Foreign Retaliation 331
What Governs Exchange Variations? 332
The Role of Fluctuating Exchange Rates 333
SOME UNANSWERED QUESTIONS 336
The Degree of Impact 337
Time Path 340
Summary 342
Important Concepts 344
Review Questions 344
APPENDIX 14–1 346
Stability of the Foreign-Exchange Market 346
APPENDIX 14–2 349
Equilibrium Exchange Rate and Output 349
APPENDIX 14–3 352
Policies to Attain Internal and External Balance 352
APPENDIX 14–4 355
On the Relative Effectiveness (for Domestic Purposes)
of Fiscal and Monetary Policy under Alternative
Exchange-Rate Regimes 355
CHAPTER 15 THE MONETARY APPROACH TO THE BALANCE
OF PAYMENTS (OPTIONAL) 358
THE UNDERLYING CAUSE OF EXTERNAL IMBALANCES
(UNDER FIXED EXCHANGE RATES) 359
Demand and Supply of Money 359
External Surplus 360
External Deficit 361
Role of Money 362
Monetary Policy 362
POLICY IMPLICATIONS 363
Devaluation 363
Tariffs, Quotas, and Exchange Control 364
Economic Growth 364
Change in the Rate of Interest 364
FLUCTUATING EXCHANGE RATES 365
EVALUATION 366
Summary 367
Important Concepts 368
Review Questions 368
CHAPTER 16 ALTERNATIVE EXCHANGE-RATE REGIMENS 370
FIXED VERSUS FLOATING EXCHANGE RATES 370
The Record of 1973–2008 374
Wider Bands and Crawling Pegs 375
Target Zones 376
Optimum Currency Areas 376
THE EURO—A CURRENCY OF 17 COUNTRIES 378
EXCHANGE CONTROL 380
BILATERAL CLEARING AGREEMENTS 385
Summary 386
Important Concepts 388
Review Questions 388
CHAPTER 17 HISTORICAL SURVEY 389
THE GOLD STANDARD (1870–1914) 389
FLUCTUATING EXCHANGE RATES AND
CURRENCY STABILIZATION 389
THE DEVALUATION CYCLE (1930–1939) 390
BRETTON WOODS (JULY 1944) 390
EUROPEAN RECONSTRUCTION (1945–1958) 391
THE DOLLAR GLUT (1959–1970) 391
THE SMITHSONIAN AGREEMENT 392
MARCH 1973—THE COLLAPSE OF BRETTON WOODS 393
THE 1974–1975 WORLD RECESSION AND
ITS AFTERMATH 393
THE RISE OF THE DOLLAR EXCHANGE RATE,
1981–1985 394
THE DOLLAR’S DECLINE, 1985–1989 396
THE 1990S 397
THE LDC DEBT PROBLEM OF THE 1980S 397
THE MEXICAN CURRENCY CRISIS OF DECEMBER 1994 399
THE ASIAN FINANCIAL CRISIS OF 1997–1999 400
THE NEW CENTURY 402
THE GLOBAL RECESSION OF 2008–2009 404
THE EURO AREA SOVEREIGN DEBT CRISIS 408
Summary 411
Important Concepts 412
Review Questions 412
BIBLIOGRAPHY 415
INDEX 419
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