Course 2017-2018 a.y.

Classes: 31 (II sem.)

Instructors:
Class 31: TOM GEORGES SCHMITZ

International Economics dominates the public debate. Has globalization been good or bad for Europe? And for the Third World countries? Should the EU and Usa sign the TTIP free trade agreement? Is the Euro-Dollar rate too low, or too high, and what should the ECB do about it?
Getting the answers to these questions right is important for policymakers, for economic experts in international organization and in multinational firms, and also for any interested citizen. International Economics often provides no simple answer, but does give us a very useful framework 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 course is divided in two parts. The first part (roughly two thirds of the course) deals with the theory of international trade: why do countries exchange goods and services? What consequences does trade have for a country's GDP, and for the income distribution? What impact do multinational firms and their decisions have on the global economy? The second part deals introduces some basic elements of international finance, including the balance of payments, exchange rates and international capital flows.

Introduction and background knowledge

• Introduction.
• Patterns of World Trade in the 21st century (KOM, ch.2).
• History of International Trade.

Classical trade theory

• Trade, Productivity and Comparative Advantage (KOM, ch.3).
• Resources and Trade (KOM, ch.5).
• Trade and the Income Distribution (KOM, ch.4 and 5).
• Economies of Scale and Trade (KOM, ch7 and 8).

The role of firms and governments

• Firm heterogeneity and Trade (KOM, ch.8).
• Multinational Firms and Offshoring (KOM, ch.8).
• Trade Policy (KOM, ch. 9 and 10).

International Finance

• The balance of payments (KOM, ch.13).
• Exchange rates (KOM, ch.14 and 15).
• International Capital Flows and International Financial.

The final grade is based on 3 elements

• 5 problem sets, in groups of up to four students, graded on a pass/fail basis and count for 20% of the final grade (only if the PS grade is higher that the one of the final exam).
• The partial exam (30% of the grade, counts only if it is better than the final exam).
• The final exam (between 50% and 100% of the grade, depending on problem set and partial grades).

Thus, doing the problem sets and the midterm can only improve your final grade, and never worsen it.

Some simple examples to illustrate how this works

• Case 1: PS 0/30, MT 18/30, Final exam 22/30: final grade is 22/30.
• Case 2: PS 0/30, MT 28/30, Final exam 22/30: final grade is 0.3x28+0.7x22=23.8 rounded up to 24/30.
• Case 3: PS 30/30, MT 28/30, Final exam 22/30: final grade is 0.2x30+0.3x28+0.5x22=25.4 rounded down to 25/30.