The International Economics
Study Center

GWU Econ 180
Survey of International Economics
Course Syllabus

Fall 2007

This course is a survey international trade and international finance theory and policy. It will consist of half the material from an international trade course (Econ 181) and half the material from an international finance class (Econ 182). Students should be comfortable with graphical techniques and the basics of Micro and Macro economics.

	Professor: Steve Suranovic
	Time & Location: Sept 5 - Dec 10, 2007 Mon 12:45 - 2 pm, Hall of GOV 102
	Office (for Office Hours only): GOV 323 Main Office: 1957 E St, Room 501M
	Office Hours: Mondays, 2 - 5 pm and by appt. in GOV 323
	Office Phone: 994-7579
	E-mail: smsuran@gwu.edu

*Evaluation*
	4 Quizzes	10% each
	1 Midterm Exam	30%
	1 Final Exam	30%

*Exam Schedule*
	Quiz #1	Sept 24
	Quiz #2	Oct 10
	Midterm Exam	Oct 24
	Quiz #3	Nov 19
	Quiz #4	Dec 5
	Final Exam	Dec 17

Note: Makeup quizzes or exams will be considered only for emergencies or conflicts outside the student's control and only with prior instructor approval.

Course Outline

Sept 5 - 12

Introduction to International Economics, Trade History, Trade Law and the WTO

In the first session we explore the topics and issues of international economics, both trade and finance. We will review highlights from history, describe notable current trade laws, and introduce the WTO.

Readings:

Introduction to International Finance

Chapter 5 - Introductory Issues
Sections 5-1 to 5-5F
(Note: There is no need to follow the links in this chapter)

Chapter 10 - Trade Policy Tools
Sections 10-0 to 10-7

Chapter 20 - Trade History and Trade Law
Sections 20-0 to 20-4

Supplementary Readings:

Think Again: International Trade
Article by Arvind Panagariya that highlights some important regularities about international trade.

Trade Policy Review: US (2006)
This is an overview of US trade policies conducted by the WTO.

US Tariff Schedule
Click here to find the most recent tariff schedule for all goods in the US. CLICK on these links for the tariffs schedules for vegetables and watches.

The WTO Agreements
A description of some of the details behind WTO rules on antidumping measures, subsidies and countervailing measures and safeguards.

Understanding US Antidumping & Countervailing Duty Investigations - Summary of Antidumping and Countervailing Duty Procedures from the US Intl. Trade Commission website.

Practice Problems:

Jeopardy 5-1
Jeopardy 10-1
Jeopardy 20-1
Internet Questions 20-1A
Internet Questions 20-1D
Problem Set 20 1-1
Problem Set 20 1-2

Week of

Sept 17

Competition, Efficiency and the Lessons of Comparative Advantage

This session we will discuss the Ricardian theory of comparative advantage, the gains from trade, and the workings of a competitive international market.

Readings:

Chapter 40 - The Ricardian Model of Comparative Advantage
Read sections 40-0 to 40-8

Practice Problems:

Jeopardy 40-2
Problem Set 40 1-1
Problem Set 40 1-2

Week of

Sept 24

Gains from Trade, Income Redistributions with Immobile Factors and Heckscher-Ohlin

This session will begin with an explanation of the most basic gains from trade and follow with a discussion reasons why trade can produce winners and losers. Along the way we'll describe the immobile factor and the Heckscher-Ohlin models.

Readings:

Chapter 30 - A Pure Exchange Model of Trade
Read sections 30-1 to 30-5

Chapter 60 - The Heckscher-Ohlin (Factor-Proportions) Model
Read sections 60-0

Chapter 70 - Factor Mobility and Trade
Read sections 70-0 to 70-2, and 70-30

Schumpeter's Creative Destruction
This is an except from Capitalism, Socialism and Democracy (1942) describing the process of creative destruction

Economic Turbulence

Practice Problems:

Problem Set 30 1-1
Jeopardy 70-1

Weeks of

Oct 1 - 8

The Effects of Trade Policies: Tariffs and Retaliation

This session will demonstrate the price and welfare effects of a tariff, quotas and export subsidies in large and small country cases. We will also consider simple examples of trade wars and use insights from this to help understand the motivations for the WTO.

Readings:

Chapter 90 - Trade Policy Effects with Perfectly Competitive Markets
Read sections 90-0 to 90-11

Section 110-1 - Retaliation and Trade Wars

Practice Problems:

Jeopardy 90-1
Problem Set 90 2-1
Problem Set 90 2-2, II
Problem Set 110 2-1

Week of

Oct 15

More about Trade Policies: Export Subsidies and Political Economy

Trade policy analysis is continued with a look at export subsidies. The similarities between the policies are noted. We will also consider the interaction between the economics and the politics of trade policy.

Readings:

Chapter 90 - Trade Policy Effects
Read sections 90-26, 90-27

Chapter 105 - Political Economy and International Trade
Read sections 105-0 to 105-7

Supplementary Readings:

Practice Problems:

Problem Set 90 2-3, I
Problem Set 90 2-5
Problem Set 90 2-6
Problem Set 90 2-7
Problem Set 90 2-8
Problem Set 105 2-1

Week of

Oct 22

Market Imperfections and Distortions, Evaluating the Controversy

This session will discuss market imperfections and distortions such as unemployment, infant industries and environmental concerns. This will raise some questions concerning the appropriateness of free trade. However, we will also consider counterarguments and conclude with the modern argument supporting free trade.

Readings:

Chapter 100 - Trade Policies with Market Imperfections and Distortions
Read sections 100-0 to 100-2, 100-4

Chapter 110 - Free Trade Areas
Read sections 110-2 and 110-2a

Chapter 120 - Evaluating the Controversy Between Free Trade and Protectionism
Read sections 120-1 to 120-6

Supplementary Readings:

The Fruits of Free Trade
A report about the advantages of free trade put out by the Dallas Federal Reserve Bank. A Great supplementary reading!!

Domestic Support Policies
A briefing paper by the Economic Research Service at the US Dept. of Agriculture

Week of

Oct 29

Introduction to International Finance Issues and the National Income Accounts

This session begins with an overview of recent and historical policy issues in international finance including exchange rate systems, FDI, the role of the IMF, currency crises and the growing importance of China. Next we'll do a brief review of national income accounts and discuss the significance of GDP.

Readings:

Chapter 5 - National Income and the Balance of Payments Accounts
Sections 5-1 to 5-4

Supplementary Readings:

US National Income and Product Accounts (NIPA)
the most recent US data is available here from the US Bureau of Economic Analysis. To access the data in non-HTML formats search on this page.

Practice Problems:

Problem Set 5 1-1
Problem Set 5 2-1

Week of

Nov 5

The Balance of Payments Accounts and the Twin-Deficit Identity

This session defines the balance of payments accounts and establishes the interconnection between the current account and the financial account. We also discuss the twin-deficit identity and a country's international investment position.

Readings:

Chapter 5 - National Income and the Balance of Payments Accounts
Sections 5-5 to 5-10

US, China Twin Deficits (1992-2002)

Supplementary Readings:

US International Accounts Data
the most recent US data from the US balance of payments accounts including the US international investment position available here from the US Bureau of Economic Analysis.

Practice Problems:

Jeopardy Answers 5-1
Problem Set 5 2-2
Problem Set 5 2-3

Week of

Nov 12

Evaluation of Trade Imbalances

This session dispels the popular notion that trade deficits are "bad" and trade surpluses are "good". The material highlights the intertemporal borrowing and lending associated with trade imbalances and notes situations in which each of these could be appropriate (or inappropriate) for both individuals and for nations. Key factors needed to determine the seriousness of a trade imbalance are discussed and a case study for the US is presented.

Readings:

Chapter 6 - The Whole Truth about Trade Imbalances
Sections 6-0 to 6-3

Supplementary Readings:

How to Evaluate Trade Imbalances
article that discusses conditions when trade imbalances may be either problematic or non-problematic.

A Multi-Country Evaluation of Trade Imbalances: China
an article by GW-Elliott School MA students which evaluates the trade imbalance experience of the United States.

A Multi-Country Evaluation of Trade Imbalances: The United States
an article by GW-Elliott School MA students which evaluates the trade imbalance experience of the United States.

America's Maligned and Misunderstood Trade Deficit
an article by Daniel Griswold at the Cato Institute offers some reasons why the US trade deficit is not a cause for great concern. Note especially the graph showing the relationship between the US trade deficit and the unemployment rate.

Practice Problems:

Problem Set 6 2-1
Problem Set 6 2-2
Problem Set 6 2-3

Weeks of

Nov 19 - 26

Exchange Rates, Interest Rates and Interest Parity

This session highlights the linkage between the exchange rate, and interest rates through the interest rate parity condition. It is shown how changes in economic variables can affect differential rates of returns which in turn can affect the value of the exchange rate.

Readings:

Chapter 10 - Foreign Exchange Markets
Sections 10-1 to 10-5

Chapter 20 - Exchange Rates, Interest Rates and Interest Parity
Sections 20-1 to 20-6

Practice Problems:

Problem Set 10 2-1
Problem Set 10 2-2
Problem Set 10 2-3
Problem Set 10 2-4
Jeopardy Answers 10-1

Problem Set 20 2-1

Week of Dec 3

Purchasing Power Parity

This session presents the theory of purchasing power parity. The logic of the theory as an explanation for exchange rate movements is provided. More importantly, the supplemental readings help teach the way PPP exchange rates are used to make international comparisons of economic data.

Readings:

Chapter 30 - Purchasing Power Parity
Sections 30-1 and 30-3 to 30-7

Supplementary Readings:

PPP FAQ
an excellent summary from the OECD.

The Economist's Big Mac Index
this 1999 article evaluates PPP based on Big Mac price comparisons across countries. The latest index appeared in the April 29, 2000 issue of the Economist.

Comparative Price Levels for OECD countries -December 2003
these numbers are the same as the real exchange rates.

Video: Economist's Big Mac Index
this video clip explains PPP by comparing Big Mac prices around the world.

Lattenomics from the Economist
a new theory percolating through FOREX markets.

Practice Problems:

Problem Set 30 2-1
Problem Set 30 2-2

Week of Dec 10

Fixed vs. Floating Exchange Rates

This session presents a brief overview of the differences between fixed and floating exchange rates.

Readings:

Chapter 80 - Fixed Exchange Rates
Sections 80-0 to 80-8

Chapter 110 - Fixed vs. Floating Exchange Rates
Sections 110-0 to 110-4

Supplementary Readings:

Fixed or Flexible? Getting the Exchange Rate Right in the 1990s
A 1998 article by Francesco Caramazza and Jahangir Aziz from the IMF describing the differences between fixed and floating exchange rates.
Fixed vs. Floating Exchange Rates
An article by Peter Kenen that provides a few of the arguments for and against fixed exchange rates.

Practice Problems:

Jeopardy Answers 80-1
Jeopardy Answers 110-1

Final Exam

Monday, December 17

12:40 - 2:40pm

GOV 102

Last Updated on 11/3/07

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Fall 2007

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GWU Econ 180
Survey of International Economics
Course Syllabus