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.

International trade data: Main sources and indicators.

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 bibliography:

• 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
  

Specific bibliography:

• 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: Geneva.
  Chapter 1: “Analyzing Trade Flows” https://vi.unctad.org/tpa/web/docs/vol1/ch1.pdf
  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) (2021). Informe de perspectivas de la economía mundial. La recuperación en tiempos de pandemia. Washington: FMI.
  Capítulo 1. “Perspectivas y políticas mundiales”: https://www.imf.org/-/media/Files/Publications/WEO/2021/October/Spanish/ch1.ashx
• FRENKEL, R. (2003). “Globalización y crisis financieras en América Latina”. Revista de la CEPAL No. 80: CEPAL: Santiago. http://www.cepal.org/es/publicaciones/10894-globalizacion-y-crisis-financieras-en-america-latina
• GARCÍA, P.; LÓPEZ, A. & ONS, A. (2021). Las políticas hacia la inversión extranjera directa. BID-INTAL: Washington. Capítulo 1. “Inversión Extranjera Directa: motivaciones, estrategias, determinantes e impactos “ http://dx.doi.org/10.18235/0003016
• 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. https://publications.iadb.org/publications/english/document/An-Updated-Assessment-of-the-Trade-and-Poverty-Nexus-in-Latin-America.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
• 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. Approaches to the Trade and Poverty Debate, Concepts and Definitions. UNCTAD: Geneva.
  Module 1: http://vi.unctad.org/images/files/vitm/tap/m1.pdf
  Module 2: http://vi.unctad.org/images/files/vitm/tap/m2.pdf
• UNCTAD (2016). UNCTAD VI Teaching Material on Trade, the Environment and Sustainable Development: Transition to a Low-Carbon Economy. UNCTAD: Geneva.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 (2021). World Investment Report 2021. Investing in sustainable recovery. UNCTAD: News York and Geneva, 2021. https://unctad.org/es/node/33319
• 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
• 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. (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

• 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. (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. (2021a) “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. (2021b) “How trade can break up with paper (it involves blockchain)”. Trade Talks Episode 155. Peterson Institute for International Economics. June 27, 2021. https://www.tradetalkspodcast.com/podcast/155-how-trade-can-break-up-with-paper-it-involves-blockchain/
• Keynes, S.; Bown, C. (2021c) “Tackling climate change with a carbon border adjustment mechanism”. Trade Talks Episode 156. Peterson Institute for International Economics. July 25, 2021.

  https://www.tradetalkspodcast.com/podcast/156-tackling-climate-change-with-a-carbon-border-adjustment-mechanism/

• Keynes, S.; Bown, C. (2021d) “Europe’s trade policy and open strategy autonomy”. Trade Talks Episode 157. Peterson Institute for International Economics. September 27, 2021.
  https://www.tradetalkspodcast.com/podcast/157-europes-trade-policy-and-open-strategic-autonomy/

Teaching methods

Theoretical and practical activities.

Assessment methods

The assessment method includes individual written exams with open question (180 minutes for each exam). The tests are organized as follows:

1. One midterm exam after session 10, including contents of classes 1 to 10. 

2. One exam at the end of the course on the following topics:

2a) Contents from classes 11 to 20: This option is available for students who passed the first midterm exam. 

2b) Contents from classes 1 to 20: This option is available for students who did not sit for or pass the first midterm exam and for those who passed the first exam but wish to redo it.

Scores go from 0 to 30 and a minimum mark of 18/30 is required to pass every exam. 
The final mark is defined by the following conditions:

• Simple average of the midterm exams' marks in the case of students who passed both midterm exams (18/30 in exams 1 and 2a). If the student passed both midterms exams but decides to sit for the final exam, the final score will be the one obtained in 2b.
• Final exam score for those students who decide to sit for the final exam (2b) and for those who did not sit for / pass one of the midterm tests. 

An oral exam could be carried out in exceptional circumstances (if decided by the University).

Teaching tools

Power Point presentations, interactive activities, practical exercises, videos and other teaching material. 

Office hours

See the website of Romina Eliana Gayà