Download 1 International Trade

ECON 317
International Economics
D. Allen Dalton
Fall 2014
Information
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MBEB 3222 (Adjunct offices)
9:30 -11:00 am TuTh or by appointment
[email protected]
https://cobe.boisestate.edu/allendalton/
http://www.macmillanhighered.com/launchpad
/feenstrataylorintlecon3/561022
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Grading
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Problem Sets (Homework)
Learning Curve
Quarterly exams (mid- midterms!)
Mid-term (final over international trade)
Final (final over international
macroeconomics)
• Book review
• Classroom participation (experiments)
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Important Dates
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Every Monday @ midnight – Problem Set due
September 18 – 1st Quarterly Exam
September 25 – Submission of Book review title
October 16 – Mid-term Exam (In-class portion)
October 17 – Mid-term Exam (On-line portion); Midnight
November 13 – 2nd Quarterly Exam
November 20 – Book review due
December 16 – Final Exam (In-class portion); Noon – 2 pm
December 16 – Final Exam (On-line portion); Midnight
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Launchpad Intro
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No class on Thursday, August 28
Go Broncos!
No class on Thursday, August 28
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Trade in the Global Economy
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1. International Trade
2. Migration and Foreign Direct Investment
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
7
1 International Trade
The Basics of World Trade - Terminology
• export
• import
• trade balance
– trade surplus
– trade deficit
• bilateral trade balance
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
8
1 International Trade
Map of World Trade
FIGURE 1-2
World Trade in Goods, 2010 ($ billions) This figure shows trade in merchandise
goods between selected countries and regions of the world.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
9
APPLICATION
Is Trade Today Different from the Past?
FIGURE 1-1 (a)
The Changing Face of U.S. Import Industries, 1925–2010 The types of
goods imported by the United States has changed drastically over the past
84 years. Foods, feeds, and beverages, and industrial supplies were 90% of
imports in 1925, but represented only 40% in 2010.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
10
APPLICATION
Is Trade Today Different from the Past?
FIGURE 1-1 (b)
The Changing Face of U.S. Export Industries, 1925–2010 The types of
goods exported by the United States has also changed drastically over the
past 84 years. Capital plus consumer goods plus automobiles have
increased from 20% of exports in 1925 to 60% of exports in 2010.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
11
1 International Trade
Map of World Trade
TABLE 1-1
Shares of World Trade, Accounted for by Selected Regions, 2010
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
12
1 International Trade
Trade Compared with GDP
TABLE 1-2
Trade/GDP Ratio in
2010 This table shows
the ratio of total trade to
GDP for each country,
where trade is calculated
as (Imports +
Exports)/2, including
both merchandise goods
and services. Countries
with the highest ratios of
trade to GDP tend to be
small in economic size.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
13
1 International Trade
Barriers to Trade
FIGURE 1-3
Trade in Goods and Services Relative to GDP
This diagram shows total trade
in merchandise goods and
services for each country
divided by GDP.
There was a considerable
increase in the ratio of trade to
GDP between 1890 and 1913.
This trend was ended by World
War I and the Great
Depression.
Most of the industrial countries
shown did not reach the level
of trade prevailing in 1913 until
the 1970s.
The term trade barriers refers to all factors that influence the
amount of goods and services shipped across international borders.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
14
1 International Trade
“First Golden Age” of Trade
Interwar Period
FIGURE 1-4
Average Worldwide Tariffs, 1860–2010 This diagram shows the world average tariff
for 35 countries. The average tariff fluctuated around 15% from 1860 to 1913. After
World War I, however, the average tariff rose sharply because of the Smoot-Hawley
Tariff Act in the United States and the reaction by other countries, reaching 25% by
1933. Since the end of World War II, tariffs have fallen.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
15
2 Migration and Foreign Direct Investment
Map of Migration
FIGURE 1-5
Foreign-Born Migrants, 2005 (millions) This figure shows the number of
foreign-born migrants living in selected countries and regions of the world for
2005 in millions of people.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
16
2 Migration and Foreign Direct Investment
Map of Foreign Direct Investment
FIGURE 1-6
Stock of Foreign Direct Investment, 2010 ($ billions) This figure shows the stock of
foreign direct investment (FDI) between selected countries and regions of the world
for 2010 in billions of dollars. The largest stocks have the heaviest lines.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
17
2 Migration and Foreign Direct Investment
Map of Foreign Direct Investment
Horizontal FDI
The majority of foreign direct investment occurs between
industrial countries. These flows between industrial countries
are called horizontal FDI.
Vertical FDI
The other form of foreign direct investment occurs when a
firm from an industrial country owns a plant in a developing
country, which is called vertical FDI.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
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The Global Macroeconomy
1
1. Foreign Exchange: Currencies and Crises
2. Globalization of Finance: Debts and Deficits
3. Government and Institutions: Policies and
Performance
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
1
Introduction
• Unique features of international macroeconomics can be
reduced to three key elements:
1. The world has many monies (not one).
2. Countries are financially integrated (not isolated).
3. In this context economic policy choices are made
(but not always very well).
• This introductory chapter briefly explains the road ahead.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
20
1 Foreign Exchange: Currencies and Crises
Steve Stock/Alamy
How Exchange Rates Behave
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
John T. Fowler/Alamy
Based on observable differences in
exchange rate behavior, economists
divide the world into two groups of
countries: those with fixed (or
pegged) exchange rates and those
with floating (or flexible) exchange
rates.
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2 Globalization of Finance: Debts and Deficits
Financial globalization has taken hold around the world, starting
in the economically advanced countries and spreading to many
emerging market countries.
Deficits and Surpluses: The Balance of Payments
• At the national level, economic measurements such as
income, expenditure, deficit, and surplus, are important
barometers of economic performance, and the subject of
heated policy debate.
• The income measure is called gross national disposable
income; the expenditure measure is called gross national
expenditure. The difference between the two is a key
macroeconomic aggregate called the current account.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
22
2 Globalization of Finance: Debts and Deficits
FIGURE 1-3
Global Imbalances
For more than a
decade, the United
States current
account deficit has
accounted for
about half of all
deficits globally.
Major offsetting
surpluses have
been seen in Asia
(e.g., China and
Japan) and in oilexporting
countries.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
23
3 Government and Institutions:
Policies and Performance
Three important features of the broad macroeconomic
environment in the remainder of this book are:
• the rules that a government decides to apply to restrict or
allow capital mobility,
• the decision that a government makes between a fixed and a
floating exchange rate regime, and
• the institutional foundations of economic performance, such
as the quality of governance that prevails in a country.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
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3 Government and Institutions:
Policies and Performance
Independence and Monetary Policy:
The Choice of Exchange Rate Regimes
FIGURE 1-6
Exchange Rate
Regimes The pie
chart shows a
classification of
exchange rate
regimes around the
world using the most
recent data for the
year 2010.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
25
3 Government and Institutions:
Policies and Performance
FIGURE 1-7
Institutions and Economic Performance The scatterplots show how an index measuring the
quality of a country’s institutions is positively correlated with the level of income per capita
as shown in panel (a), and is inversely correlated with the volatility of income per capita as
shown in panel (b). In each case, the line of best fit is shown.
© 2014 Worth Publishers
International Economics, 3e | Feenstra/Taylor
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No class on Thursday, August 28
Go Broncos!
No class on Thursday, August 28
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