| Signe Krogstrup
|
Course Homepage for International Economics, Autumn 2003
University of Copenhagen
Time and Place:
Time: 4 hour lectures a week. Tuesdays from 10 to 12 and Thursdays from 14 to 16. The first lecture will take place on Tuesday 2 September, 10 a.m.
Place: RO9, Rosenborgannekset, Rosenborggade 15-17
Purpose and Contents
The purpose of the course is to introduce the student to theories, policies and empirical evidence
relevant for the study of international economics. The course will focus on two
overall areas within the study of economic interactions between nations: international trade and open economy
macroeconomics. The trade part first introduces traditional (classical) trade models, which
explain trade from the basic notion of international differences and
comparative advantage. Classical trade models are characterized by
constant returns to scale in production and perfect competition. Secondly, new
trade theory models re introduced. These models show how trade allows nations to take advantage of
economies of scale in production, and are thus based on the
assumption of scale economies and imperfect competition. Open economy macroeconomics focuses on the financial transactions between nations which run
alongside the interactions of the real economy, i.e. trade and real cross border
investment. The macro part thus gives an overview of foreign exchange markets, theories of exchange rate
determination, analysis of exchange rate
policies such as fixed and flexible exchange rates and in-betweens, analysis of
capital flows and different types of balance of payments and currency crises, global capital markets etc..
Download a detailed list of the curriculum hereExam: Four hour closed book written exam, to be held on 11/12 2003 and 02/01 2004. You choose one of the two dates. The examination requirements on both dates include the entire curriculum (fuldt pensum). Note that according to the lecture plan below, we will in any case treat the last topic on the 11th December, so almost all of the syllabus will have been covered at the date of the first exam. The exam will be given in English with a Danish translation, and can be answered in English or Danish.
See current and previous years exams and answer keys here.
Here are some comments on the exam and a list of the topics that we have treated in class, which are relevant for the exam.
Course Outline and Preliminary Schedule
|
|
Lecture no. (week no.) |
Date |
Topic |
Required |
Comments to the lectures and
suggestions for additional (not required) readings. |
|
1 (36) |
2/9 |
Introduction and Ricardian model of
international trade |
K&O Chapter 1 and 2 |
|
|
|
Part I.1: Perfect Competition
and International Trade |
2 (36) |
4/9 |
Ricardian model continued |
K&O Chapter 2 |
Appendix to Chapter 10 in Krugman, P. 1995. Peddling Prosperity: Economic Sense and Nonsense in an Age of Diminished Expectations. W.W. Norton & Company (TJ) |
|
|
3 (37) |
9/9 |
Specific Factor Model |
K&O Ch 3 |
Mussa, M. 1974. Tariffs
and the Distribution of Income: The Importance of Factor Specificity,
Substitutability and Intensity in the Short and Long Run. Journal of Political
Economy, vol 82 (6). Link
to article through JSTOR. (links the specific
factor to the HO model). (T) |
|
|
4 (37) |
11/9 |
Heckscher-Ohlin Model |
K&O Ch 4 |
Jones, Ronald. 1965. The Structure of Simple General Equilibrium Models. Journal of Political Economy, vol. 73, p.557-572. Link to article through JSTOR. (The “Jones Algebra” for the HO model). (T) |
|
|
5 (38) |
16/9 |
The Standard Trade Model |
K&O Ch 5 |
Bhagwati, J. 1958. Immiserizing Growth: A Geometrical Note. The Review of Economic Studies, Vol. 25, No. 3. pp. 201-205. Link to article through JSTOR. (T) Keynes, 1929, The German Transfer Problem, Economic Journal 39. Link through JSTOR Ohlin, 1929, The German Transfer Problem: A Discussion. Economic Journal 39. Link through JSTOR A great interactive page for understanding how to use offer curves in trade theory and analysis |
|
Part 1.2: Scale Economies,
Imperfect Competition and Factor Movements |
6 (38) |
18/9 |
Finish up last points on export subsidies from previous lecture. New Trade Theory: Economies of Scale and Imperfect Competition |
K&O Ch 6 |
Krugman, P. 1979. Increasing
returns, monopolistic competition and international trade. Journal of
International Economics, vol 9. p. 469-479.
Link
to article through Science Direct. (T) Collie, D. 1993. Profit Shifting Export Subsidies and the Sustainability of Free Trade. Scottish Journal of Political Economy, vol. 40, p. 408-419 (not available online). (T) Brander, J.A. and P. Krugman. 1983. A Reciprocal Dumping Model of International Trade. Journal of International Economics, vol 15. p. 313-321 (not yet available online). (T) Baldwin et. al, 2003. Economic Geography and Public Policy. Princeton University Press, 2003. Free downloads of manuscript here. The first chapters of this book introduce the main models incorporating external - or agglomeration - economies of the New Economic Geography literature (T) |
|
|
7 (39) |
23/9 |
New Trade Theory Continued… |
|
Alan Deardorf: Introduction to External Economies of Scale. Handout (T). |
|
|
8 (39) |
25/9 |
International Factor movements |
K&O Chapter 7 |
Markusen, James R., 1995. The Boundaries of Multinational Enterprises and the Theory of International Trade. Journal of Economic Perspectives, Vol 9 (2). Link through JSTOR. (T) Distribution of FDI across developing and developed countries (UN Stats on FDI) |
|
|
9 (40) |
30/9 |
Repetition of Trade Theories and Review Exercises |
|
|
|
Part I.3: International Trade
Policy |
10 (40) |
2/10 |
The Instruments of Trade Policy |
K&O Chapter 8 |
|
|
|
11 (41) |
7/10 |
Continued… |
K&O Chapter 8 |
Slides from Lecture 11 (second part of chapter 8) |
|
|
12 (41) |
9/10 |
The Political Economy of Trade Policy |
K&O Chapter 9 |
Slides from Lecture 12 (first part of chapter 9) |
|
|
(42) |
14/10 |
Autumn Vacation |
|
|
|
|
(42) |
16/10 |
Autumn Vacation |
|
|
|
|
13 (43) |
21/10 |
Continued… |
K&O Chapter 9 |
Slides from Lecture 13 (second part of chapter 9) Answers to K&O Chapter 9 problems Alan Deardorf and Robert Stern, 2001. What You Should Know about Globalization and the WTO. Working Paper, University of Michigan. (J) Economist.Com Special Report:The WTO under fire - The Doha round (J). Article on the breakdown of the Cancun trade negotiations |
|
|
14 (43) |
23/10 |
Trade Policy in Developing Countries & Controversies in Trade
Policy |
K&O Chapter 10 & 11 |
Slides from Lecture 14 (continued next lecture) Answers to K&O Chapter 10 problems. Answers to K&O Chapter 11 problems. In Danish: Kronik i Politiken: "Frihandel og hvad så?" af C.F. Back, N. Kærgaard, A. Larsen, P. Pinstrup-Andersen og F. Tarp (J) Brander, James A, 1995, Strategic Trade Policy. NBER Working Paper #5020 (T). A comprehensive review of literature on strategic trade policy “Sweatshops and Globalization”. Overview article by Radley Balko for AWorldConnected.Com, summarizing the pro- and anti-globalizationists’ views and arguments concerning labor-seeking FDI in developing countries and “sweatshops”. (J) Examples of globalization-critical organization: Global Trade Watch (formed by Ralph Nader, US), and A World Connected. Deardorff, Alan, 2003. What Might Globalization's Critics Believe?. The World Economy, Vol. 26, pp. 639-658, May 2003. Download through university library here. (J) |
|
Part I.4: Conclusion of Part
I. |
15 (44) |
28/10 |
Repetition and exercises for Trade Part |
|
Rest of slides from Lecture 14 Summary Slides of trade policy part of the course Review Problems (bring also the review problems started on in Lecture 9) |
|
16 (44) |
30/10 |
Intro to the macro part, national accounts, the balance of payments |
K&O Ch. 12 |
Introductory Slides for the macro part Answers to K&O Chapter 12 problems. Click here for a great currency site (thanks Sébastien!). "Don't Look Down". Column by Krugman on the current US twin deficits (J) Nouriel
Roubini's Website on Global Macroeconomic and Financial Policy |
|
|
II. 1. Exchange Rate Determination |
17 (45) |
4/11 |
Exchange rates, FOREX markets and interest parity |
K&O Ch. 13 |
Slides from Lecture 17 (ch13 and 14) |
|
|
18 (45) |
6/11 |
Money, interest rates and exchange rates |
K&O Ch. 14 |
Answers to K&O Chapter 14 problems. Kenneth Rogoff, 2002, Dornbusch’s Overshooting Model After
25 Years. IMF Working Paper 02/39. (T) Download
here. |
|
|
19 (46) |
11/11 |
Price levels and exchanges rates in the long run: PPP |
K&O Ch. 15 |
Answers to K&O Chapter 15 problems. |
|
II. 2. Economic Policy in an Open Economy |
20 (46) |
13/11 |
PPP continued. Economic Policy in an open Economy: The Mundell-Fleming
Model |
Rest of Ch. 15 on PPP K&O Ch. 16 |
Read up on the open economy IS-LM model from 1st and 2nd year macroeconomics. |
|
|
21 (47) |
18/11 |
Continued: Economic Policy in an open Economy |
|
NB! We will have a brief guest lecture on the conduct of monetary policy and the Danish exchange rate peg in practice by Louise Mogensen, Nationalbanken. |
|
22 (47) |
20/11 |
Continued: Economic Policy in an open Economy |
Mundell Fleming on the Web: Check out this interactive
Mundell Fleming Model which allows familiarization
with the policy implications of the model. |
||
|
II. 3. Capital Markets and Balance of Payments Crises |
23 (48) |
25/11 |
Currency Crises and Global Capital Markets |
K&O Ch. 17 (pages 502-505 plus appendix III) + Ch. 21+ handout on currency crises models |
Slides for the Currency Crises lectures Answers to K&O Chapter 21 problems. Eichengreen, Wyplosz: The Unstable EMS. Brrokings Papers on Economic Activity, 1993 0(1). (T). Download here through JSTOR. Flood and Marion: Perspectives on the recent currency crisis literature. International Journal of Finance and Economics, 4. 1999. (T). Download through library here. Aghion, Bacchetta and Banerjee: A Corporate Balance Sheet Approach to Currency Crises. Manuscript, HEC, Lausanne. 2003. (T). Download here. Krugman's cartoon model of balance sheet effects and currency crises (T) |
|
24 (48) |
27/11 |
Continued: Currency Crises and Global Capital Markets |
|
||
|
|
25 (49) |
2/12 |
Continued: Currency Crises and Global Capital Markets |
|
|
|
II. 4. International Macroeconomic History and Policy |
26 (49) |
4/12 |
The International Macroeconomic History and Policy |
K&O Ch. 18-20 |
Answers to K&O Chapter 19 problems. |
|
|
27 (50) |
9/12 |
|
||
|
|
28 (50) |
11/12 |
Developing Countries: Growth, Crisis and Reform |
K&O Ch. 22 + case study on the |
Slides
for Issues for Emerging Markets and
the Argentina Case Study
The paper on the Argentina crisis is not straightforward to read. Here are some indications on how to best read it for those of you who need to read it before the December exam. Timeline of events, Argentinean Crisis What is a currency board, where are they employed, and where should they be employed? (J) Gabrielli, F.; McCandless, G.; Rouillet, M. J., 2003, Determining the causes of bank runs in Argentina. Banco Central de la Republica Argentina (BCRA), Argentina (T) Example of current anti-IMF/WorldBank sentiments: 50 years is enough |
|
|
29 (51) |
16/12 |
|
|
|
|
Conclusion of Part II. |
30 (51) |
18/12 |
Overview of Part II and Exercises |
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