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浙江工商大学
金融学院课程讲义
International Economics
金融学院
Chapter 1 Introduction

Introduction
 What is International Economics About?
 International Economics: Trade and Money
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Introduction

The study of international economics has never
been as important as it is now.
– At the beginning of the 21st century, nations are more
closely linked through trade in goods and services,
through flows of money, and through investment in
each others’ economies than ever before.
– Figure 1-1 shows that international trade for the United
States has roughly tripled in importance compared with
the U.S. economy as a whole.
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Figure 1-1: Exports and Imports as a Percentage of U.S. National Income
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Figure 1-2: Exports and Imports as Percentages of National Income in 1994
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International trade for the World
7000
6000
商品
5000
服务
4000
3000
2000
1000
0
1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998
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International trade for China
6,000
5,000
4,000
进出口额
出口额
进口额
3,000
2,000
1,000
1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998
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1-1 What is International Economics
About?

International economics deals with economic
interactions that occur between independent nations.
– The role of governments in regulating international trade and
investment is substantial.
– Analytically, international markets allow governments to
discriminate against a subgroup of companies.
– Governments also control the supply of currency.

There are several issues that recur throughout the study
of international economics.
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
The Gains from Trade
– Many people are skeptical about importing goods that a
country could produce for itself.
– When countries sell goods to one another, all countries
benefit.
– Trade and income distribution


International trade might hurt some groups within nations.
Trade, technology, and wages of high and low-skilled workers.
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
The Pattern of Trade (who sells what to whom?)
– Climate and resources determine the trade pattern of
several goods.
– In manufacturing and services the pattern of trade is
more subtle.
– There are two types of trade:


Inter-industry trade depends on differences across
countries.
Intra industry trade depends on market size and occurs
among similar countries.
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
How Much Trade?
– Many governments are trying to shield certain
industries from international competition.
– This has created the debate dealing with the costs and
benefits of protection relative to free trade.


Advanced countries’ policies engage in industrial targeting.
Developing countries’ policies promote industrialization:
– Import substitution versus export promotion industrialization.
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
The Balance of Payments
– Some countries run large trade surpluses.
 For example, in 1998 both China and South Korea
ran trade surpluses of about $40 billion each.
– Is it good to run a trade surplus and bad to run a
trade deficit?

Exchange Rate Determination
– The role of changing exchange rates is at the
center of international economics.
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
International Policy Coordination
– A fundamental problem in international economics is
how to produce an acceptable degree of harmony
among the international trade and monetary policies of
different countries without a world government that
tells countries what to do.

The International Capital Market
– There are risks associated with international capital
markets:


Currency depreciation
National default
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13-2 International Economics:
Trade and Money
 International trade analysis focuses primarily on the
real transactions in the international economy.
• These transactions involve a physical movement of
goods or a tangible commitment of economic
resources.
– Example: The conflict between the United States and
Europe over Europe’s subsidized exports of agricultural
products
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
International monetary analysis focuses on
the monetary side of the international
economy.
• That is, financial transactions such as foreign
purchases of U.S. dollars.
–
Example: The dispute over whether the foreign
exchange value of the dollar should be allowed to
float freely or be stabilized by government action
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
International trade issues
– Part I: International Trade Theory
– Part II: International Trade Policy

International monetary issues
– Part III: Exchange Rates and Open-Economy
Macroeconomics
– Part IV: International Macroeconomic Policy
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