There are no reviews yet. Be the first one to write a review. Books for People with Print Disabilities. Internet Archive Books. Scanned in China. That gap has widened dramatically as the importance of international economic problems—and enrollments in international economics courses— have grown. This book is our attempt to provide an up-to-date and understandable analytical frame- work for illuminating current events and bringing the excitement of international econom- ics into the classroom.
In analyzing both the real and monetary sides of the subject, our approach has been to build up, step by step, a simple, unified framework for communicat- ing the grand traditional insights as well as the newest findings and approaches. To help the student grasp and retain the underlying logic of international economics, we motivate the theoretical development at each stage by pertinent data or policy questions.
The Place of This Book in the Economics Curriculum Students assimilate international economics most readily when it is presented as a method of analysis vitally linked to events in the world economy, rather than as a body of abstract theo- rems about abstract models.
Our goal has therefore been to stress concepts and their applica- tion rather than theoretical formalism. Accordingly, the book does not presuppose an extensive background in economics. Students who have had a course in economic principles will find the book accessible, but students who have taken further courses in microeconomics or macroeconomics will find an abundant supply of new material.
Specialized appendices and mathematical postscripts have been included to challenge the most advanced students. We follow the standard practice of dividing the book into two halves, devoted to trade and to monetary questions. Although the trade and monetary portions of international eco- nomics are often treated as unrelated subjects, even within one textbook, similar themes and methods recur in both subfields.
One example is the idea of gains from trade, which is important in understanding the effects of free trade in assets as well as free trade in goods.
International borrowing and lending provide another example. The process by which coun- tries trade present for future consumption is best understood in terms of comparative advan- tage which is why we introduce it in the book's first half , but the resulting insights deepen understanding of the external macroeconomic problems of developing and developed economies alike.
We have made it a point to illuminate connections between the trade and monetary areas when they arise. At the same time, we have made sure that the book's two halves are completely self- contained. Thus, a one-semester course on trade theory can be based on Chapters 2 through 11, and a one-semester course on international monetary economics can be based on Chap- ters 12 through If you adopt the book for a full-year course covering both subjects, how- ever, you will find a treatment that does not leave students wondering why the principles underlying their work on trade theory have been discarded over the winter break.
Some Distinctive Features of International Economics: Theory and Policy This book covers the most important recent developments in international economics with- out shortchanging the enduring theoretical and historical insights that have traditionally formed the core of the subject. We have achieved this comprehensiveness by stressing how recent theories have evolved from earlier findings in response to an evolving world econo- my.
Both the real trade portion of the book Chapters 2 through 11 and the monetary portion Chapters 12 through 22 are divided into a core of chapters focused on theory, followed by chapters applying the theory to major policy questions, past and current. In Chapter 1 we describe in some detail how this book addresses the major themes of international economics.
Here we emphasize several of the newer topics that previous authors failed to treat in a systematic way. The main ingredient of the macroeconomic model we develop is the interest parity relation augmented later by risk premiums.
Among the topics we address using the model are exchange rate "overshooting"; behavior of real exchange rates; balance- of-payments crises under fixed exchange rates; and the causes and effects of central bank intervention in the foreign exchange market. Increasing Returns and Market Structure After discussing the role of comparative advantage in promoting trade and gains from trade, we move to the frontier of research in Chapter 6 by explaining how increasing returns and product differentiation affect trade and welfare.
The models explored in this dis- cussion capture significant aspects of reality, such as intraindustry trade and shifts in trade patterns due to dynamic scale economies.
The models show, too, that mutually beneficial trade need not be based on comparative advantage. Politics and Theory of Trade Policy Starting in Chapter 3, we stress the effect of trade on income distribution as the key politi- cal factor behind restrictions on free trade.
This emphasis makes it clear to students why the prescriptions of the standard welfare analysis of trade policy seldom prevail in practice. Chapter 11 explores the popular notion that governments should adopt activist trade policies aimed at encouraging sectors of the economy seen as crucial.
The chapter includes a theo- retical discussion of such trade policy based on simple ideas from game theory. International Macroeconomic Policy Coordination Our discussion of international monetary experience Chapters 18, 19, 20, and 22 stresses the theme that different exchange rate systems have led to different policy coordination problems for their members.
Just as the competitive gold scramble of the interwar years showed how beggar-thy-neighbor policies can be self-defeating, the current float chal- lenges national policymakers to recognize their interdependence and formulate policies cooperatively. Chapter 19 presents a detailed discussion of this very topical problem of the current system. The World Capital Market and Developing Countries A broad discussion of the world capital market is given in Chapter 21, which takes up the welfare implications of international portfolio diversification as well as problems of pru- dential supervision of offshore financial institutions.
Chapter 22 is devoted to the long-term growth prospects and to the specific macroeconomic stabilization and liberalization prob- lems of industrializing and newly industrialized countries. The chapter reviews emerging market crises and places in historical perspective the interactions among developing coun- try borrowers, developed country lenders, and official financial institutions such as the International Monetary Fund.
International Factor Movements In Chapter 7 we emphasize the potential substitutability of international trade and interna- tional movements of factors of production. We draw on the results of this analysis in the book's second half to throw light on the macroeconomic implications of the current account. New to the Sixth Edition For this sixth edition of International Economics: Theory and Policy, we have extensively redesigned several chapters.
These changes respond both to users' suggestions and to some important developments on the theoretical and practical sides of international economics.
The most far-reaching changes are the following:. Chapter 9, The Political Economy of Trade Policy This chapter now includes the role of special-interest payments in influencing political decisions over trade policy. Coverage of the World Trade Organization is brought up to date. Chapter I I, Controversies in Trade Policy A new title signals that this chapter expands its coverage beyond its predecessor's focus on strategic trade policy.
In addition, Chapter 11 now covers the recent globalization debate—including the effects of trade on income distribution and the environment, as well as the role of international labor standards.
Chapter 12, National Income Accounting and the Balance of Payments The revised Chapter 12 reflects the new balance of payments accounting conventions adopted by the United States and other countries. Chapter 18, The International Monetary System, This chapter now pays more attention to the political economy of exchange rate regimes, using as an example the battle over the gold standard that dominated American politics in the late nineteenth century.
Chapter 19, Macroeconomic Policy and Coordination under Floating Exchange Rates We have replaced the detailed two-country model of earlier editions with a brief intuitive discussion of the major results on international policy repercussions.
That change allows the instructor to focus more on important policy issues and less on dry technical details. Chapter 20, Optimum Currency Areas and the European Experience As recently as the mids, Europe's vision of a single currency looked like a distant and possibly unreachable goal. As of , however, twelve European countries had replaced their national currencies with the euro, and others are poised to follow. Chapter 20 has been revised to cover the first years of experience with the euro.
Chapter 21,The Global Capital Market: Performance and Policy Problems To make room for more topical material elsewhere in the book, we have streamlined this chapter by removing the detailed exposition of Eurocurrency creation contained in earlier editions.
In addition to these structural changes, we have updated the book in other ways to main- tain current relevance. Thus we extend our coverage of the welfare effect of newly industri- alizing countries' exports on more advanced economies Chapter 5 ; we update the discus- sion of Japanese policy toward the semiconductor industry Chapter 11 ; we discuss Japan's liquidity trap Chapter 17 and evidence on the effect of currency unions on trade volume Chapter 20 ; and we recount the collapse of Argentina's currency in Chapter Learning Features This book incorporates a number of special learning features that will maintain students' interest in the presentation and help them master its lessons.
Case Studies Theoretical discussions are often accompanied by case studies that perform the threefold role of reinforcing material covered earlier, illustrating its applicability in the real world, and providing important historical information. Special Boxes Less central topics that nonetheless offer particularly vivid illustrations of points made in the text are treated in boxes.
Among these are the political backdrops of Ricardo's and Hume's theories pp. Captioned Diagrams More than diagrams are accompanied by descriptive captions that reinforce the dis- cussion in the text and help the student in reviewing the material.
Summary and Key Terms Each chapter closes with a summary recapitulating the major points. Key terms and phrases appear in boldface type when they are introduced in the chapter and are listed at the end of each chapter. To further aid student review of the material, key terms are italicized when they appear in the chapter summary. Problems Each chapter is followed by problems intended to test and solidify students' comprehension. The problems range from routine computational drills to "big picture" questions suitable for classroom discussion.
In many problems we ask students to apply what they have learned to real-world data or policy questions. Further Reading For instructors who prefer to supplement the textbook with outside readings, and for stu- dents who wish to probe more deeply on their own, each chapter has an annotated bibliog- raphy that includes established classics as well as up-to-date examinations of recent issues.
Preface xxvii. Klein of Tufts University, and Jay C. Shambaugh of Dartmouth College. The Study Guide aids students by providing a review of central concepts from the text, further illustrative examples, and additional practice problems.
An Instructor's Manual, also by Linda S. Goldberg, Michael W. Klein, and Jay C. Shambaugh, includes chapter overviews, answers to the end-of-chap- ter problems, and suggestions for classroom presentation of the book's contents. The Study Guide and Instructor's Manual have been updated to reflect the changes in the sixth edition.
We are also pleased to recommend the companion Web site to accompany International Economics, Sixth Edition, at www. The site offers students self-check quizzes for each chapter, links to sites of interest, and occasional updates on late- breaking developments.
All new to the site for this edition is an animated PowerPoint pro- gram of the text's figures and tables, prepared by Iordanis Petsas of the University of Florida under the direction of Professor Elias Dinopoulos. The Test Bank offers a rich array of multiple-choice and essay questions, plus mathematical and graphical problems, for each textbook chapter.
For those interested in course management, a Course Compass Web site is also available. Contact your Addison-Wesley sales representative for details. Acknowledgments Our primary debts are to Jane E. Tufts, the development editor, and to Sylvia Mallory and Denise Clinton, the economics editors in charge of the project.
Jane's judgment and skill have been reflected in all six editions of this book; we cannot thank her enough for her con- tributions. Heather Johnson's efforts as project editor are greatly appreciated. We thank the other editors who helped make the first five editions as good as they were. We owe a debt of gratitude to Galina Hale, who painstakingly updated data, checked proofs, and critiqued chapters.
Annie Wai-Kuen Shun provided sterling assistance. For constructive suggestions we thank Syed M. Taylor, Hans Visser, and Mickey Wu. We thank the following reviewers for their recommendations and insights:. Michael Arghyrou, Brunei University, U.
Lees, St. Johns University Rodney D. Mulder, Erasmus University, Rotterdam E. Although we have not been able to make each and every suggested change, we found reviewers' observations invaluable in revising the book.
Obviously, we bear sole responsi- bility for its remaining shortcomings. Y ou could say that the study of international trade and finance is where the discipline of economics as we know it began.
Historians of economic thought often describe the essay "Of the balance of trade" by the Scottish philosopher David Hume as the first real exposition of an economic model. Hume published his essay in , almost 20 years before his friend Adam Smith published The Wealth of Nations. And the debates over British trade policy in the early nineteenth century did much to convert economics from a discursive, informal field to the model-oriented subject it has been ever since.
Yet the study of international economics has never been as important as it is now. A t the beginning of the twenty-first century, nations are more closely linked through trade in goods and services, through flows of money, through investment in each other's economies than ever before. And the global economy created by these linkages is a turbulent place: both policymakers and business leaders in every country, including the United States, must now take account of what are sometimes rapidly changing economic fortunes halfway around the world.
A look at some basic trade statistics gives us a sense of the unprecedented importance of international economic relations. Figure I -1 shows the levels of U. The most obvious feature of the figure is the sharp upward trend in both shares: international trade has roughly tripled in importance compared with the economy as a whole. Almost as obvious is that while both exports and imports have increased, in the late s imports grew much faster, leading to a large excess of imports over exports. How was the United States able to pay for all those imported goods?
The answer is that the money was supplied by large inflows of capital, money invested by foreigners eager to buy a piece of the booming U. Inflows of capital on that scale would once have been inconceivable; now they are taken for granted. And so the gap between imports and exports is an indicator of another aspect of growing international linkages, in this case the growing linkages between national capital markets. If international economic relations have become crucial t o the United States, they are even more crucial to other nations.
Figure shows the shares of imports and exports in GDP for a sample of countries. The United States, by virtue of its size and the diversity of its resources, relies less on international trade than almost any other country.
From the s t o , both exports and imports rose steadily as shares of U. Since , exports have fluctuated sharply. International trade is Exports, imports percent of even more important national income to most other coun- 70 — tries than it is to the United States.
Source: Statistical 50 - Abstract of the United States 40 -. Help France. Exports H Canada. Consequently, for the rest of the world, international economics is even more important than it is for the United States. This book introduces the main concepts and methods of international economics and illustrates them with applications drawn from the real world.
Much of the book is devoted to old ideas that are still as valid as ever: the nineteenth-century trade theory of David Ricardo and even the eighteenth-century monetary analysis of David Hume remain highly relevant to the twenty-first-century world economy.
At the same time, we have made a special effort to bring the analysis up to date. The global economy of the s threw up many new challenges, from the backlash against globalization to an unprecedented series of financial crises. Economists were able to apply existing analyses to some of these chal- lenges, but they were also forced to rethink some important concepts.
Furthermore, new approaches have emerged to old questions, such as the impacts of changes in monetary and fiscal policy. We have attempted to convey the key ideas that have emerged in recent research while stressing the continuing usefulness of old ideas. International economics uses the same fundamental methods of analysis as other branches of economics, because the motives and behavior of individuals are the same in international trade as they are in domestic transactions.
Gourmet food shops in Florida sell coffee beans from both Mexico and Hawaii; the sequence of events that brought those beans to the shop is not very different, and the imported beans traveled a much shorter distance! Yet interna- tional economics involves new and different concerns, because international trade and investment occur between independent nations.
Mexico's coffee shipments to Florida could be disrupted if the U. Neither of those events can happen in commerce within the United States because the Constitution for- bids restraints on interstate trade and all U.
The subject matter of international economics, then, consists of issues raised by the spe- cial problems of economic interaction between sovereign states. Seven themes recur throughout the study of international economics: the gains from trade, the pattern of trade, protectionism, the balance of payments, exchange rate determination, international policy coordination, and the international capital market.
The Gains From Trade Everybody knows that some international trade is beneficial—nobody thinks that Norway should grow its own oranges. Many people are skeptical, however, about the benefits of trading for goods that a country could produce for itself. Shouldn't Americans buy Ameri- can goods whenever possible, to help create jobs in the United States? Probably the most important single insight in all of international economics is that there are gains from trade—that is, when countries sell goods and services to each other, this exchange is almost always to their mutual benefit.
The range of circumstances under which international trade is beneficial is much wider than most people imagine. It is a common misconception that trade is harmful if there are large disparities between countries in pro- ductivity or wages. On the other side, people in tech- nologically advanced nations where workers earn high wages often fear that trading with less advanced, lower-wage countries will drag their standard of living down—one presi- dential candidate memorably warned of a "giant sucking sound" if the United States were to conclude a free-trade agreement with Mexico.
Yet the first model of trade in this book Chapter 2 demonstrates that two countries can trade to their mutual benefit even when one of them is more efficient than the other at pro- ducing everything, and when producers in the less efficient country can compete only by paying lower wages. We'll also see that trade provides benefits by allowing countries to export goods whose production makes relatively heavy use of resources that are locally abundant while importing goods whose production makes heavy use of resources that are locally scarce Chapter 4.
International trade also allows countries to specialize in pro- ducing narrower ranges of goods, giving them greater efficiencies of large-scale production. Nor are the benefits of international trade limited to trade in tangible goods. International migration and international borrowing and lending are also forms of mutually beneficial trade—the first a trade of labor for goods and services, the second a trade of current goods for the promise of future goods Chapter 7.
Finally, international exchanges of risky assets such as stocks and bonds can benefit all countries by allowing each country to diversify its wealth and reduce the variability of its income Chapter These invisible forms of trade yield gains as real as the trade that puts fresh fruit from Latin America in Toronto markets in February.
While nations generally gain from international trade, however, it is quite possible that international trade may hurt particular groups within nations—in other words, that interna- tional trade will have strong effects on the distribution of income. The effects of trade on income distribution have long been a concern of international trade theorists, who have pointed out that:.
International trade can adversely affect the owners of resources that are "specific" to industries that compete with imports, that is, cannot find alternative employment in other industries Chapter 3.
Trade can also alter the distribution of income between broad groups, such as workers and the owners of capital Chapter 4. These concerns have moved from the classroom into the center of real-world policy debate, as it has become increasingly clear that the real wages of less-skilled workers in the United States have been declining even though the country as a whole is continuing to grow richer.
Many commentators attribute this development to growing international trade, espe- cially the rapidly growing exports of manufactured goods from low-wage countries.
Assess- ing this claim has become an important task for international economists and is a major theme of both Chapters 4 and 5. The Pattern of Trade Economists cannot discuss the effects of international trade or recommend changes in gov- ernment policies toward trade with any confidence unless they know their theory is good enough to explain the international trade that is actually observed.
Some aspects of the pattern of trade are easy to understand. Climate and resources clearly explain why Brazil exports coffee and Saudi Arabia exports oil. Much of the pattern of trade is more subtle, however. Why does Japan export automobiles, while the United States exports aircraft? In the early nineteenth century English economist David Ricardo offered an explanation of trade in terms of international differences in labor productivity, an explanation that remains a powerful insight Chapter 2.
In the twentieth century, however, alternative explanations have also been proposed. One of the most influential, but still con- troversial, links trade patterns to an interaction between the relative supplies of national resources such as capital, labor, and land on one side and the relative use of these factors in the production of different goods on the other. We present this theory in Chapter 4. Recent efforts to test the implications of this theory, however, appear to show that it is less valid than many had previously thought.
More recently still, some international economists have proposed theories that suggest a substantial random component in the pattern of interna- tional trade, theories that are developed in Chapter 6.
How Much Trade? If the idea of gains from trade is the most important theoretical concept in international eco- nomics, the seemingly eternal debate over how much trade to allow is its most important policy theme. Since the emergence of modern nation-states in the sixteenth century, gov- ernments have worried about the effect of international competition on the prosperity of domestic industries and have tried either to shield industries from foreign competition by placing limits on imports or to help them in world competition by subsidizing exports.
The single most consistent mission of international economics has been to analyze the effects of these so-called protectionist policies—and usually, though not always, to criticize protec- tionism and show the advantages of freer international trade. The debate over how much trade to allow took a new direction in the s. Since World War II the advanced democracies, led by the United States, have pursued a broad policy of removing barriers to international trade; this policy reflected the view that free trade was a force not only for prosperity but also for promoting world peace.
In the first half of the s several major free-trade agreements were negotiated. Since then, however, an international political movement opposing "globalization" has gained many adherents. The movement achieved notoriety in , when demonstrators representing a mix of traditional protectionists and new ideologies disrupted a major inter- national trade meeting in Seattle.
If nothing else, the anti-globalization movement has forced advocates of free trade to seek new ways to explain their views. As befits both the historical importance and the current relevance of the protectionist issue, roughly a quarter of this book is devoted to this subject. Over the years, internation- al economists have developed a simple yet powerful analytical framework for determining the effects of government policies that affect international trade.
This framework not only predicts the effects of trade policies, it also allows cost-benefit analysis and defines criteria for determining when government intervention is good for the economy. In the real world, however, governments do not necessarily do what the cost-benefit analysis of economists tells them they should.
This does not mean that analysis is useless. Economic analysis can help make sense of the politics of international trade policy, by showing who benefits and who loses from such government actions as quotas on imports and subsidies to exports. The key insight of this analysis is that conflicts of interest within nations are usually more important in determining trade policy than conflicts of interest between nations.
Chapters 3 and 4 show that trade usually has very strong effects on income distribution within countries, while Chapters 9, 10, and 11 reveal that the relative power of different interest groups within countries, rather than some measure of overall national inter- est, is often the main determining factor in government policies toward international trade.
In China's case the trade surplus was not out of the ordinary—the country had been running large surpluses for several years, prompting complaints from other countries, including the United States, that China was not playing by the rules. So is it good to run a trade surplus, and bad to run a trade deficit? EMBED for wordpress. Want more? Advanced embedding details, examples, and help!
World Trade: An Overview -- 3. Resources, Comparative Advantage, and Income Distribution -- 5. The Standard Trade Model -- 6. The Instruments of Trade Policy -- 9. C, program. He has also spoken to business, government, and academic audiences in Japan, Malaysia, the Philippines, China, and Mongolia as part of the U.
His research focuses on two areas: international trade policy and behavioral economics. With respect to behavior, he examines why people choose to do things that many observers view as irrational.
Examples include addiction to cigarettes, cyclical dieting, and anorexia. His research shows that dangerous behaviors can be explained as the outcome of a reasoned and rational optimization exercise.
With respect to trade policy, his research seeks to reveal the strengths and weaknesses of arguments supporting various policy options. The goal is to answer the question, what trade policies should a country implement? More generally, he applies the economic analytical method to identify the policies that can attract the most widespread support.
His research focuses on international trade policy, market ethics, behavioral economics and more recently, climate change policy. In it he offers a critique of current methods to evaluate and choose policies and suggests a principled and moderate alternative. Content Accuracy rating: 4 The book does not have enough current examples.
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