International Economics

Steven Husted Professor of Economics, University of Pittsburgh. Ph.D., Michigan State University.  Past experience includes Senior Staff Economist: Council of Economic Advisers; Visiting Scholar: International Monetary Fund; and Visiting Professor: Department of Economics and Research School of the Social Sciences, Australian National University; and Departments of Economics, the University of Glasgow and the University of Strathclyde. Professor Husted’s research interests are in international trade policy and international finance, and he has published scholarly articles in Journal of Political Economy, Review of Economics and Statistics, and other major journals.     Michael Melvin Head of Currency Research, Barclays Global Investers and Co-editor, Journal of International Money and Finance. Former Professor of Economics and Dean’s Council Distinguished Scholar, Arizona State University. Ph.D., UCLA. Past experience includes Visiting Scholar: Federal Reserve Board and International Monetary Fund; and Visiting Professor: Kellogg Graduate School of Management, Northwestern University; Anderson Graduate School of Management, UCLA; Department of Economics, U.C. San Diego, and Pacific Asian Management Institute, University of Hawaii. Professor Melvin’s research interests are in international finance, and he has published scholarly articles in American Economic Review, Journal of Finance, and other major journals.

Chapter 1: An Introduction to International Trade

Introduction

Characteristics of National Economies

            Economic Growth

            International Trade

The Direction of International Trade

What Goods Do Countries Trade?
Summary

Exercises

 

Chapter 2:Tools of Analysis for International Trade Models

Introduction

Some Methodological Preliminaries

The Basic Model: Assumptions

The Basic Model: Solutions

Measuring National Welfare

National Supply and Demand

Summary

Exercises

Appendix 2.1: Derivation of National Supply and Demand Curves

           

Chapter 3: The Classical Model of International Trade

Introduction

Absolute Advantage as a Basis for Trade: Adam Smith’s Model

Comparative Advantage as a Basis for Trade: David Ricardo’s Model.

The General Equilibrium Solution of the Classical Model

The Gains from International Trade

The Relationship Between Trade and Wages

An Evaluation of the Classical Model

Summary

Exercises

Appendix 3.1

Appendix 3.2

 

Chapter 4: Budgets and Balance Sheets — Your Personal Financial Statements

Introduction

The HO Model: Basic Assumptions

The HO Theorem

Equilibrium in the HO Model

Some New HO Theorems

Some Final Observations.

Summary

Exercises

Appendix 4.1

Appendix 4.2

 

Chapter 5: Tests of Trade Models: The Leontief Paradox and Its Aftermath

Introduction

Tests of the Classical Model

Tests of the HO Model

Attempted Reconciliations of Leontief’s Findings

Other Tests of the HO Model

Summary

Exercises

 

Chapter 6: Tariffs

Introduction

The Gains from Free Trade

Tariffs: An Introduction

Tariffs: An Economic Analysis

The Gains From Free Trade: One More Time

The Welfare Cost of Tariffs

Tariffs: Some Extensions

            Export Tariff

            The Optimal Tariff

            How High are Tariffs

Summary

Exercises

References

 

Chapter 7: Nontariff Barriers and Arguments for Protection

Introduction

Quotas

The Welfare Effects of Quotas

The Equivalence of Nonequivalence of Tarrifs and Quotas

Other Nontariff Barriers

            Customs Valuation Practices

            Government Procurement Policies

            Technical Barriers to Trade

            Health and Safety Standards

Failure to Protect Intellectual Property Rights

            Export Subsidies

Arguments for Protection

            Invalid Arguments

                        Patriotism

                        Employment

                        Fallacy of Composition

                        Fair Play for Domestic Industry

                        Preservation of the Home Market

            Valid Arguments

                        Government Revenue

                        Income Redistribution

                        Noneconomic Goals

                        Infant Industry Protection

                        Domestic Distortions

                        Protecting the Environment

                        Strategic Trade Policies

Summary

Exercises

References

 

Chapter 8: Commercial Policy: History and Practice

Introduction

History of U.S. Commercial Policy

The Uruguay Round and the Creation of the WTO

The DOHA Round

The Conduct of U.S. Commercial Policy

            Unfair Foreign Practices: Section 301

            The Escape Clause: Section 201

            Other Measures

            Comparisons with Policies in Other Countries

Summary

Exercises

References

 

Chapter 9: Preferential Trade Arrangements

Introduction

Preferential Trade Arrangements: Economic Analysis

North American Free Trade Agreement

Other U.S. Free Trade Area Agreements

European Union

            The EU Government

            The Single Market Initiative

Regionalism Versus Multilateralism

Summary

Exercises

References

 

Chapter 10: International Trade and Economic Growth

Introduction

Trade and Development

            Primary-Export-Led Development Policies

            Import-Substitution Development Policies

            Outward-Looking Development Policies

Trade and Growth

Trade and Growth: Some Additional Comments

            Growth, Prices, and Welfare

International Flows of Factors

            Labor

            Capital

            Economic Analysis

Summary

Exercises

References

 

Chapter 11: An Introduction to International Finance

Introduction

The Balance of Payments

Exchange Rates

Prices and Exchange Rates

Interest Rates and Exchange Rates

Additional Major Topics

Summary

Exercises

References

 

Chapter 12: The Balance of Payments

Introduction

Current Account

            Financing the Current Account: The Financial Account

            National Saving, Investment, and the Current Account

Additional Summary Measures

Transactions Classification

Balance-of-Payments Equilibrium and Adjustment

Summary

Exercises

References

 

Chapter 13: The Foreign-Exchange Market

Introduction

Spot Rates

Arbitrage

Forward Rates

Swaps

Foreign-Currency Options

Exchange Rate Supply and Demand and Central-Bank Intervention

Black Markets and Parallel Markets

Summary

Exercises

References

 

Chapter 14: Prices and Exchange Rates: Purchasing Power Parity

Introduction

Absolute Purchasing Power Parity

Relative Purchasing Power Parity

Time, Inflation, and PPP

Deviations from PPP

“Overvalued” and “Undervalued” Currencies

Real Exchange Rates

Summary

Exercises

References

 

Chapter 15: Exchange Rates, Interest Rates, and Interest Parity

Introduction

Interest Parity

Interest Rates and Inflation

Exchange Rates, Interest Rates, and Inflation

Expected Exchange Rates and the Term Structure of Interest Rates

Summary

Exercises

References

 

Chapter 16: Foreign-Exchange Risk, Forecasting, and International Investment

Introduction

Types of Foreign-Exchange Risk

Foreign-Exchange risk Premium

Market Efficiency

Foreign-Exchange Forecasting

International Investment and Portfolio Diversification

Direct Foreign Investment

Capital Flight

Capital Inflow Issues

International Lending and Crises

Summary

Exercises

References

 

Chapter 17: Basic Theories of the Balance of Payments

Introduction

The Elasticities Approach to the Balance of Trade

Elasticities and J Curves

            The Currency-Contract Period/

            The Pass-Through Period

                        Section IV — The U.S. balance of trade decreases

                        Section III — The U.S. balance of trade is constant

                        Section II — Balance of trade may increase or decrease

                        Section I — Balance of trade increases

The Evidence from Devaluations

The Absorption Approach

The Monetary Approach to the Balance of Payments

Summary

Exercises

References

 

Chapter 18: Exchange Rate Theories

Introduction

The Asset Approach

The Monetary Approach

The Portfolio-Balance Approach

Sterilization

Currency Substitution

The Role of News

Foreign-Exchange Market Microstructure

Exchange Rates and the Trade Balance

Overshooting Exchange Rates

Summary

Exercises

References

 

Chapter 19: Alternative International Monetary Standards

Introduction

The Gold Standard: 1880-1914

The Interwar Period: 1918-1939

The Gold Exchange Standard: 1944-1970

The Transition Years: 1971-1973

Floating Exchange Rates: Since 1973

The Choice of an Exchange Rate System

Optimum Currency Areas

The European Monetary System and the Euro

Target Zones

Currency Boards

International Reserve Currencies

Multiple Exchange Rates

Summary

Exercises

References

 

Chapter 20: International Banking, Debt, and Risk

Introduction

The Origins of Offshore Banking

International Banking Facilities

Offshore Banking Practices

International Debt

IMF Conditionality

The Role of Corruption

Country-Risk Analysis

Summary

Exercises

References

 

Chapter 21: Open-Economy Macroeconomic Policy and Adjustment

Introduction

Internal and External Macroeconomic Equilibrium

The IS Curve

The LM Curve

The BP Curve

Equilibrium

Monetary Policy under Fixed Exchange Rates

Fiscal Policy under Fixed Exchange Rates

Monetary Policy under Floating Exchange Rates

Fiscal Policy under Floating Exchange Rates

The New Open-Economy Macroeconomics

International Policy Coordination

Global Financial Crisis and Macroeconomic Effects

The Open-Economy Multiplier

Summary

Exercises

References