30057 - INTERNATIONAL ECONOMICS

In order to successfully follow this course, students should be familiar with basic microeconomic concepts such as budget sets, indifference curves, consumer and producer surplus, and marginal cost. They should also be at ease with simple mathematical tools such as derivatives and solution methods for linear equation systems.

International Economics dominates the public debate. Has globalization helped or hurt the citizens of developed and emerging nations? What will be the consequences of Brexit for Great Britain and for the EU? Will there be a "trade war" between the United States and China, and what would its consequences be? Is the Euro-Dollar exchange rate too low or too high, and what should the European Central Bank do about it? Getting the answers right is important for policymakers, for economic experts in government and in the private sector, and also for any interested citizen. International Economics gives no ready-made answers to these questions, but it gives us important tools and orientations to think about them. The course aims to give students an overview of this framework and show them how it can help to better understand the world we live in.

• The world economy since the Industrial Revolution.
• The theory of comparative advantage.
• The role of resources for trade.
• The effects of trade and migration on the income distribution.
• Economies of scale and trade.
• Exporters, multinational firms, and offshoring.
• Trade Policy.
• The balance of payments and the true meaning of trade deficits.
• Exchange rates.
• International capital flows and international financial crises.

• Describe the evolution of international trade over time, and the current patterns of trade in the world.
• Explain why international trade is driven by comparative rather than absolute advantage.
• Summarize the theoretical arguments and the empirical evidence on the effect of trade on income inequality.
• Explain why the trade deficit is not a measure of economic success.
• Identify the main reasons why some firms become multinationals.
• Discuss the pros and cons of tariffs and other trade policies.

• Solve simple models of international trade with two goods and two countries.
• Illustrate the consequences of an import tariff using verbal and graphical analysis.
• Critically evaluate statements about international trade made in the media.
• Calculate the equilibrium value of exchange rates using simple financial models.
• Demonstrate claims using rigorous mathematical analysis.

• Face-to-face lectures
• Exercises (exercises, database, software etc.)

Problem sets are assigned after blocks of lessons, to evaluate individual preparation.

The assessment for this course is the same for attending and non-attending students. It is based on three elements.

1. Problem Sets (25% of the grade). Six Problem Sets, which can be completed in groups of up to three students.
2. Partial exam (25% of the grade). The partial exam consists of a series of multiple choice questions, and an exercise similar in spirit to the problem sets.
3. Final exam (50% of the grade). The final exam has the same format as the partial exam. It covers topics from the entire class (not only the second part), and is the same for all students, irrespective of whether they took the partial exam.

Two important rules apply:

• First, problem sets and the partial only count if their grade is higher than the final exam.
• Second, a student who withdraws from the final exam loses her credit from the problem sets and partial exam.

The partial and final exams consist of two parts. The first part is a series of multiple choice questions, testing whether the students have assimilated the most important knowledge transmitted in the class. The second part is a mathematical exercise which requires formal and quantitative reasoning. The exercise evaluates whether the students are able to use the methods taught in the class, and apply them to a new problem.

• The textbook for this class is: P. KRUGMAN, M. OBSTFELD, M. MELITZ, International Economics, 2017, 11th Global Edition.
• Furthermore, slides for all lectures and additional readings are posted online.