69966 - International Economics (in Buenos Aires)

Learning outcomes

At the end of the course students are able to analyze several issues related to macroeconomic policy in open economies and to the evolution of foreign exchange markets. Specifically, students are exsposed to the determination and dynamics of exchange rates, on the choice between flexible and fixed exchange rates, with special attention to the European Monetary Union, on the international role of the euro and its relationship with the dollar and, finally, on speculative attacks on currencies and the design of a new international financial architecture.

Course contents

Introduction: content, work methodology, bibliography, evaluation.

Introduction to international trade: theory, current debates. Overview of international trade in goods and services. Trade in gross and value added.

Classical theory:

• Adam Smith and the absolute advantage.

• Technological differences and trade specialization explained by David Ricardo's comparative advantages. Ricardian model with two and N goods

Neoclassical theory:

• Heckscher-Ohlin model. Factor endowment and intensity. Production with and without trade. HO theorem. Stolper-Samuelson theorem, factor price equalization and income distribution.

• Specific Factors Model (Samuelson-Jones). International trade and income distribution.

• Neoclassical /standard model of international trade. Trade between countries with different production structures / preferences.

• Offer curves and terms of trade.

• Trade and growth: Origin of growth. Neutral and biased growth. Economic growth and international trade. Rybzynski's theorem.

Trade indicators: revealed comparative advantage index, trade intensity index, trade complementarity index and intra-industry trade index.

New theories of international trade:

• Differences with neoclassical theory. Intra-industrial trade.

• Supply-based approaches. Delays in technology transfer (Posner, Vernon), economies of scale and international trade: intra-industrial trade in competitive and uncompetitive markets. Dynamic external economies and international trade (Krugman). Unfair practices and trade (dumping, reciprocal dumping).

• Demand based approaches (Linder, Grubel).

• New economic geography: introduction to gravity models, Krugman, Venables.

International factor movement: International labor mobility and migrations. International capital mobility and foreign direct investment. Types of internationalization. FDI and multinational companies.

Trade policy:

• Definition and objectives. Main instruments: definition, characteristics, impact and distributional effects.

• Tariffs (ad valorem, specific and compound; effective protection).

• Quotas and tariff rate quotas

• Export subsidies, export taxes, voluntary export restrictions.

• Other trade policy measures (sanitary and phytosanitary measures, technical barriers to trade, trade-related intellectual property rights, labor and environmental standards, etc.).

• Other relevant trade policy issues: public procurement, regulation of trade in services, investment-related policies.

• The political economy of trade policy. Arguments for and against free trade.

• Trade policy in developed and developing countries.

• Latin America's trade policy during the last decades

International negotiations and integration:

• Regional integration: static and dynamic effects of regional integration. Types of regional trade agreements. EU, MERCOSUR. Recent trends in regionalism. Old regionalism, new regionalism and mega regionalism.

• The World Trade Organization (WTO) and multilateral trade negotiations. Objectives. The Uruguay Round, its results and consequences for Argentina. Agriculture, NAMA, services, public procurement, e-commerce. Current situation and prospects.

Other issues related to international trade:

• Trade and technological change.

• Trade and poverty, economic development, gender gap and the environment.

• Challenges for international trade

National and international accounts:

• National Accounts in an Open Economy.

• National and international accounts. Balance of payments: concepts. Balance of payments in BPM5 and BPM6.

Exchange rate:

• Definition, nominal, real and effective exchange rate

• The foreign exchange market

Determination of exchange rates:

• Exchange Rates and the Foreign Exchange Market: An Asset Approach. Covered and uncovered parity of interest. Expectations. Money market and exchange rate in the short term. Money, prices and exchange rate in the long term. Exchange rate overshooting model.

• Law of One Price and Purchasing Power Parity (PPA)

• Monetary approach of the exchange rate.

• Exchange rate global model in the long-term.

Output and the Exchange Rate

• Equilibrium in the goods market: DD curve. Equilibrium in the asset market: AA curve. Effects of monetary and fiscal policies.

• The Marshall-Lerner condition.

Fixed exchange rate regime:

• Fixed exchange rate: intervention by the Central Bank. Sterilization. Monetary and fiscal policies with a fixed exchange rate.

• Effects of devaluation. Balance of Payments Crisis with a fixed exchange rate. Imperfect asset substitution. Monetary approach of the balance of payments.

Flexible exchange rate regime:

• Flexible exchange rate. Arguments for and against a floating exchange rate.

• Macroeconomic interdependence with a flexible exchange rate. Internal and external balances: economic policy dilemmas.

Monetary integration:

• Optimal Currency Areas. Coordination of international economic policy.

• Theory of optimal monetary areas.

• The European experience.

Latin America in the international financial scenario

• Financial globalization, reforms, growth and crisis. The financial insertion of Latin America during the last half century. Stop and go, financial globalization, debt crisis in the 80s, segmented integration in the 90s, divergent experiences in the 21st century.

Readings/Bibliography

General:

• KRUGMAN, Paul R y OBSTFELD, Maurice. (2001).Economía internacional: teoría y política.5a ed. Addison Weasley, Madrid. 784 p. ISBN: 84-7829-043-5.
• APPLEYARD, Dennis R. y FIELD, Alfred J. (1997).Economía internacional.4a ed. McGraw Hill, Madrid, 857 p. ISBN: 0-256-06701-4.
• FEENSTRA, Robert C. y TAYLOR, Alan MMacroeconomía internacional.Barcelona: Reverté, c2012. xvii, 508 p. ISBN: 978-84-291-2649-5

  Específica:

• BACCHETTA, M., BEVERELLI, C., CADOT, O., FUGAZZA, M., GRETHER, J. M., HELBLE, M. & PIERMARTINI, R. (2012). A Practical Guide to Trade Policy Analysis. United Nations and World Trade Organization. Chapter 1: “Analyzing Trade Flows” https://vi.unctad.org/tpa/web/docs/vol1/ch1.pdf and Chapter 2: “Quantifying Trade Policy”. https://vi.unctad.org/tpa/web/docs/vol1/ch2.pdf
• DE GRAUWE, P (1997). Economics of Monetary Union. Oxford University Press.
• FONDO MONETARIO INTERNACIONAL (FMI) (2020). Actualización de las perspectivas de la economía mundial. Washington: IMF.

  https://www.imf.org/~/media/Files/Publications/WEO/2020/January/Spanish/texts.ashx?la=es

• FRENKEL, R. “Globalización y crisis financieras en América Latina”. Revista de la CEPAL No. 80: CEPAL: Santiago, 2003. http://www.cepal.org/es/publicaciones/10894-globalizacion-y-crisis-financieras-en-america-latina
• GAYÁ, R. (2015). “El sistema multilateral de comercio y las nuevas tecnologías” en Integración y Comercio Nº39. BID-INTAL: Buenos Aires. http://www19.iadb.org/intal/icom/data/El%20sistema%20multilateral%20de%20comercio%20y%20las%20nuevas%20tecnolog%C3%ADas.pdf
• GAYÁ, R. y ROZEMBERG, R. (2019). El MERCOSUR en tiempos de cambio. Implicaciones para la negociación con la Unión Europea. Documento de trabajo 9/2019. Fundación Carolina: Madrid. https://www.fundacioncarolina.es/wp-content/uploads/2019/06/DT_FC_09.pdf
• GIORDANO, P. and LIN K. (2012). An Updated Assessment of the Trade and Poverty Nexus in Latin America. IDB Working paper series No. IDB-WP-383. IDB Inter-American Development Bank. Trade and Integration Sector: Washington DC. http://www.iadb.org/intal/intalcdi/PE/2013/10877.pdf
• INTERNATIONAL MONETARY FOUND (IMF) (2019). 2019 External Sector Report: The Dynamics of External Adjustment. Chapter 2. Washington: IMF. https://www.imf.org/en/Publications/ESR/Issues/2019/07/03/2019-external-sector-report
• KRUGMAN, P. (1998). What's new about the new economic geography?Oxford review of economic policy, vol. 14, no 2, p. 7-17. https://www.uzh.ch/cmsssl/suz/dam/jcr:00000000-15fd-7ade-0000-000030986b62/29.9.Krugman_-_Economic_geography.pdf
• LANZ, R., & MAURER, A. (2015). Services and global value chains - Some evidence on servicification of manufacturing and services networks. Geneva: World Trade Organization. 2015. https://www.wto.org/english/res_e/reser_e/ersd201503_e.pdf
• LUND, S. et al. (2019). Globalization in transition: the future of trade and global value chains. McKinsey Global Institute. https://www.mckinsey.com/featured-insights/innovation-and-growth/globalization-in-transition-the-future-of-trade-and-value-chains
• KRUGMAN, P. (2019). “How goes the trade war?” The New York Times, 3/3/2019. https://www.nytimes.com/2019/03/03/opinion/how-goes-the-trade-war.html
• OMC (2012a). Informe sobre el comercio mundial 2012: Comercio y políticas públicas: Análisis de las medidas no arancelarias en el siglo XXI Capítulo 2. WTO: Geneva. ISBN 978-92-870-3817-3.http://www.wto.org/spanish/res_s/publications_s/wtr12_s.htm
• OMC (2012b). 10 things the WTO can do. WTO: Geneva, December. ISBN: 978-92-870-3831-9. https://www.wto.org/english/res_e/publications_e/wtocan_e.pdf
• OMC (2015). Entender la OMC. 5ta edición. Ginebra. ISBN: 978-92-870-3750-3.https://www.wto.org/spanish/thewto_s/whatis_s/tif_s/understanding_s.pdf
• PIERMARTINI, R. (2004). The Role of Export Taxes in the Field of Primary Commodities. World Trade Organization Discussion Paper.

  https://www.wto.org/english/res_e/booksp_e/discussion_papers4_e.pdf

• SKULLY, D. W., et al. (2001).Economics of tariff-rate quota administration. US Department of Agriculture, Economic Research Service. https://www.ers.usda.gov/webdocs/publications/47379/31994_tb1893d_002.pdf?v=42487
• UNCTAD (2010). UNCTAD VI Teaching Material on Trade and Poverty Module 1 & 2. Approaches to the Trade and Poverty Debate, Concepts and Definitions. UNCTAD: Geneva. http://vi.unctad.org/images/files/vitm/tap/m1.pdfy
  http://vi.unctad.org/images/files/vitm/tap/m2.pdf
• UNCTAD (2015). UNCTAD VI Teaching Material on Trade and Gender. Volume 1. UNCTAD: Geneva. http://vi.unctad.org/resources-mainmenu-64/teaching-materials-mainmenu-65/754-vitmtag
• UNCTAD (2016). UNCTAD VI Teaching Material on Trade, the Environment and Sustainable Development: Transition to a Low-Carbon Economy. UNCTAD: Geneva, 2016.http://vi.unctad.org/resources-mainmenu-64/teaching-materials-mainmenu-65/909-vi-teaching-material-on-trade-the-environment-and-sustainable-development-transition-to-a-low-carbon-economy
• UNCTAD (2020). World Investment Report 2020. International production beyond the pandemic. UNCTAD: News York and Geneva, 2020 https://unctad.org/en/PublicationsLibrary/wir2020_en.pdf
• VENABLES, A. J. (1999). Regional Integration Agreements: a force for convergence or divergence?World Bank policy research working paper, 1999, no 2260. http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2000/01/15/000094946_99122905343030/additional/105505322_20041117140510.pdf

Videos

• Edwards, Haley (2017). What global trade deals are really about (hint: it's not trade). TEDxMidAtlantic: Washington DC (Video): https://www.youtube.com/watch?v=-v3uqD1hWGE
• Evans, Harold. How containerization shaped the modern world. TED-Ed. https://ed.ted.com/lessons/how-containerization-shaped-the-modern-world#watch
• González, Arancha (2019). The future of trade. Fundación Rafael Del Pino. https://www.youtube.com/watch?v=mtW2WcBU1Ao
• Peterson Institute for International Economics (PIIE) (2017). Why, After 200 Years, Can’t Economists Sell Free Trade? PIIE: Washington (Video):

  https://www.youtube.com/watch?time_continue=135&v=_9VHWjDg4lw

• Peterson Institute for International Economics (PIIE) (2018). How Trade Helps Each Side. PIIE: Washington (Video):

  https://www.youtube.com/watch?time_continue=111&v=6TeNgOGHEFc

  Podcasts

• Keynes, S.; Bown, C. (2021) “What’s in the new EU-UK trade deal? Brexperts explain”. Trade Talks Episode 147. Peterson Institute for International Economics. January 3, 2021.

  https://www.tradetalkspodcast.com/podcast/147-whats-in-the-new-eu-uk-trade-deal-brexperts-explain/

• Keynes, S.; Bown, C. (2020) “RCEP – Separating fact from friction”. Trade Talks Episode 143. Peterson Institute for International Economics. November 18, 2020.

  https://www.tradetalkspodcast.com/podcast/143-rcep-separating-fact-from-friction/

• Keynes, S.; Bown, C. (2019) “Richard Baldwin on Disruption, Technology and Trade”. Trade Talks Episode 72. Peterson Institute for International Economics. February 14, 2019.

  https://piie.com/experts/peterson-perspectives/trade-talks-episode-72-richard-baldwin-disruption-technology-and-trade

• Keynes, S.; Bown, C. (2018) “Paul Krugman talks trade”. Trade Talks Episode 66. Peterson Institute for International Economics. December 16, 2018.
  https://www.piie.com/experts/peterson-perspectives/trade-talks-episode-66-paul-krugman-talks-trade

Teaching methods

Lesson activities and exercises.

Assessment methods

The grading process includes written exams as follows:

1. one intemediate exam after the first half of the classes with open questions, of 60-180 minutes.

2. one final exam (at the end of the classes) with open questions, of 60-180 minutes on the following contents:

2a) on the second part of the course, for students who have taken and passed the first intermediate exam,

2b) or on the whole course, for students who have not taken or passed the first intermediate exam

For the students who decide to take the intermediate exams: each of the intermediate exams will be evaluated from 0 to 30 (18 is pass grade). A student can take part in the second partial test only if he/she has passed the 1st, that is to say with an evaluation of at least 18/30. In case of passing of the second partial test, with at least the score of 18/30, the final evaluation, published with reference to the list of members of the 2nd partial test, consists of the arithmetic mean of the evaluations obtained in the two partial tests and concludes the examination.

In the event that the student decides to be evaluated by participating in the single exam session including both parts of the program, the evaluation is 0 to 30 (18 is the pass grade).

The exam is carried out in writing and provides an evaluation 0 to 30 (18 is a passing grade). An oral examination could be carried out in exceptional circumstances (if decided by the University).

Teaching tools

Power Point presentations, exercises, videos and other teaching material.

Office hours

See the website of Romina Eliana Gayà