Introduction to International Economics

Introduction to International Trade and Finance is written for a one semester course in international economics found in undergraduate business programs. The author, Dominick Salvatore, is very well known and respected in this segment of the market. He presents the material using a real--world perspective in order to help readers gain a better understanding of critical concepts. 

1. Introduction.1.1 Importance of International Economics.Case Study 1-1 The Dell PC Is All But American!Case Study 1-2 What Is an "American" Car?1.2 International Trade and the Nation's Standard of Living.Case Study 1-3 Rising Importance of International Trade to the United States.1.3 The Subject Matter of International Economics.1.4 Current International Economic Problems.1.5 The Globalization Challenge.1.6 Organization of the Text.Summary.Review Questions and Problems.Appendix: International Trade Data and Sources of Additional Information.A1.1 International Trade Data.A1.2 Sources of Additional International Data and Information.Selected Bibliography.INTERnet.PART ONE: INTERNATIONAL TRADE THEORY.2. Comparative Advantage.2.1 Introduction.2.2 Mercantilists' Views on Trade.2.3 Trade Based on Absolute Advantage: Adam Smith.Case Study 2-1 Mercantilism Is Alive and Well in the Twenty-First Century.2.4 Trade Based on Comparative Advantage: David Ricardo.2.5 Gains from Trade with Comparative Advantage.2.6 Comparative Advantage with Money.Case Study 2-2 The Petition of the Candlemakers.2.7 Comparative Advantage and Opportunity Costs.Case Study 2-3 Labor Productivities and Comparative Advantage.2.8 Production Possibility Frontier with Constant Costs.2.9 Opportunity Costs and Relative Commodity Prices.2.10 Basis for and Gains from Trade Under Constant Costs.Summary.Review Questions and Problems.Appendix: Comparative Advantage with More than Two Commoditiesand Nations.A2.1 Comparative Advantage with More than Two Commodities.A2.2 Comparative Advantage with More than Two Nations.Selected Bibliography.INTERNet.3. The Standard Trade Model.3.1 Introduction.3.2 The Production Frontier with Increasing Costs.3.3 The Marginal Rate of Transformation.3.4 Community Indifference Curves.3.5 Equilibrium in Isolation.3.6 The Basis and the Gains from Trade with Increasing Costs.Case Study 3-1 Comparative Advantage of the United States, the European Union, and Japan.3.7 Equilibrium Relative Commodity Prices with Trade.3.8 Terms of Trade.Case Study 3-2 Specialization and Export Concentration in Selected Countries.Case Study 3-3 The Terms of Trade of the G-7 Countries.3.9 Specialization, Trade, and Deindustrialization.Case Study 3-4 The Terms of Trade of Industrial and DevelopingCountries.Case Study 3-5 Job Losses in High U.S. Import-Competing Industries 70Case Study 3-6 International Trade and Deindustrialization in the United States, the European Union, and Japan.Summary.Review Questions and Problems.Appendix: Offer Curves and the Terms of Trade.Selected Bibliography.INTERNet.4. The Heckscher-Ohlin and Other Trade Theories.Introduction.Factor Endowments and the Heckscher-Ohlin Theory.The Formal Heckscher-Ohlin Model.4.4 Factor-Price Equalization and Income Distribution.Case Study 4-1 The Revealed Comparative Advantage of Various Countries and Regions.Case Study 4-2 Has International Trade Increased U.S. Wage Inequalities?4.5 Empirical Tests of the Heckscher-Ohlin Theory.4.6 Economies of Scale and International Trade.Case Study 4-3 The New International Economies of Scale.4.7 Trade Based on Product Differentiation.Case Study 4-4 Growth of Intra-Industry Trade.4.8 Technological Gap and Product Cycle Models.4.9 Transportation Costs and International Trade.Case Study 4-5: The United States as the Most Competitive Economy in the World.4.10 Environmental Standards and International Trade.Summary.Review Questions and Problems.Appendix : The Specific-Factors and Intra-Industry Trade Models.A4.1 The Specific-Factors Model.A4.2 A Model of Intra-Industry Trade.Selected Bibliography.INTERNet.PART TWO: INTERNATIONAL TRADE POLICY.5. Trade Restrictions: Tariffs.5.1 Introduction.5.2 Types of Tariffs.Case Study 5-1 Average Tariff on Industrial Products in Major Developed Countries.Case Study 5-2 Average Tariff on Industrial Products in Some Major Developing Countries.5.3 Effects of a Tariff in a Small Nation.5.4 Effect of a Tariff on Consumer and Producer Surplus.5.5 Costs and Benefits of a Tariff in a Small Nation.5.6 Costs and Benefits of a Tariff in a Large Nation.Case Study 5-3 The Welfare Effects of Liberalizing Trade in Some U.S. Products.Case Study 5-4 The Welfare Effects of Liberalizing Trade in Some EU Products.5.7 The Optimum Tariff and Retaliation.5.8 Theory of Tariff Structure.Case Study 5-5 Rising Tariff Rates with the Degree of Domestic Processing.Case Study 5-6 Structure of Tariffs on Industrial Products in the United States, EU, Japan and Canada.Summary.Review Questions and Problems.Appendix: Optimum Tariff and Retaliation with Offer Curves.Selected Bibliography.INTERNet .6. Nontariff Trade Barriers and the Political Economy of Protectionism.6.1 Introduction.6.2 Import Quotas.6.3 Other Nontariff Trade Barriers.Case Study 6-1 Voluntary Export Restraints on Japanese Automobiles to the United States.6.4 Dumping and Export Subsidies.Case Study 6-2 Antidumping Measures in Force in 2002.6.5 The Political Economy of Protectionism.Case Study 6-3 Agricultural Subsidies in Developed Nations.Case Study 6-4 Pervasiveness of Nontariff Barriers.6.6 Strategic Trade and Industrial Policies.6.7 History of U.S. Commercial Policy.Case Study 6-5 Economic Effects on the U.S. Economy of Removing all Import Restraints.6.8 The Uruguay Round.6.9 Outstanding Trade Problems and the Doha Round.Case Study 6-6 The Multilateral Round of Trade Negotiations.Summary.Review Questions and Problems.Appendix: Strategic Trade and Industrial Policies with Game Theory.Selected Bibliography.INTERNet.PART THREE: INTERNATIONAL TRADE AND INVESTMENT RELATIONS.7. Economic Integration.7.1 Introduction.7.2 Forms of Economic Integration.7.3 Trade Creation and Trade Diversion in Customs Unions.7.4 Dynamic Benefits from Customs Unions.7.5 The European Union.Case Study 7-1 Economic Profile of EU, NAFTA, and Japan.Case Study 7-2 Gains from the Single EU Market in 1992.7.6 The European Free Trade Association.7.7 U.S. Free Trade Agreements andThe North American Free Trade Agreement.7.8 Attempts at Economic Integration Among Developing Countries.7.9 Economic Integration in Central and Eastern Europe and in the Former Soviet Republics.Case 7-3 Economic Profile of Mercosur.Case 7-4 Changes in Trade Pattern with Economic Integration.Summary.Case Study 7-5 Per Capita Income in Transition Economies.Review Questions and Problems.INTERNet.8. Growth and Development with International Trade.8.1 Introduction.8.2 Growth and Development Over Time.8.3 Trade Theory and Economic Development.8.4 The Contributions of Trade to Development.8.5 The Terms of Trade and Economic Development.Case Study 8-1 The East Asian Miracle of Growth and Trade.Case Study 8-2 Changes in Commodity Prices over Time.8.6 Immiserizing Growth.8.7 Export Instability and Economic Development.8.8 Import Substitution Versus Export Orientation.Case Study 8-3 The Growth of Rich Countries, Globalizers and Nonglobalizers.8.9 Trade Liberalization and Growth in Developing Countries.8.10 Current Problems Facing Developing Countries.Case Study 8-4 Manufactures in Total Exports of Selected Developing Countries.Case Study 8-5 The Foreign Debt Problem of Developing Countries.Summary.Review Questions and Problems.Appendix: Income Inequalities by Traditional and Purchasing-Power Parity (PPP) Measures.Selected Bibliography.INTERNet.9. International Resource Movements and Multinational Corporations.9.1 Introduction.9.2 Types of Foreign Investments.9.3 Data on International Capital Flows.9.4 Motives for International Portfolio Investments.Case Study 9-1 Fluctuations in Foreign Direct Investment to the United States.9.5 Motives for Direct Foreign Investments.9.6 Effects of International Capital Flows on Investing and Host Countries.Case Study 9-2 The Stock of Foreign Direct Investments Around the World.9.7 Reasons for the Existence of Multinational Corporations.Case Study 9-3 The World's Largest Multinational Industrial Corporations.9.8 Problems Created by Multinational Corporations in the Home Country.Case Study 9-4 Employment of U.S. MNCs Abroad.9.9 Problems Created by Multinational Corporations in the Host Country.9.10 Motives and Welfare Effects of International Labor Migration.Summary.Case Study 9-5 U.S. Immigration and Debate over Immigration Policy.Review Questions and Problems.Appendix : Analysis of Effects of International Capital Flows and Migration.A9.1 Analysis of Effects of International Capital Flows on Investing and Host Countries.A9.2 Analysis of Effects of International Labor Migration.Selected Bibliography.INTERNet.PART FOUR: THE BALANCE OF PAYMENTS, FOREIGN EXCHANGE MARKETS, AND EXCHANGE RATES.10. Balance of Payments.10.1 Introduction.10.2 The Balance of Payments: Definition and Use.10.3 Balance-of-Payments Accounting Principles: Credits and Debits.10.4 Double-Entry Bookkeeping.10.5 The International Transactions of the United States.Case Study 10-1 The Major Goods Exports and Imports of the United States.10.6 Accounting Balances and Disequilibrium in International Transactions.10.7 Measuring Deficits or Surpluses in the Balance of Payments.10.8 The Postwar Balance of Payments of the United States.Case Study 10-2 The Major Trade Partners of the United States.Case Study 10-3 The U.S. Trade Deficit with Japan.Case Study 10-4 The Exploding U.S. Trade Deficit with China.10.9 The International Investment Position of the United States.Case Study 10-5 The United States as a Debtor Nation.Summary.Review Questions and Problems.Selected Bibliography.INTERNet.11. The Foreign Exchange Market and Exchange Rates.11.1 Introduction.11.2 Functions of the Foreign Exchange Market.11.3 Equilibrium Exchange Rates.Case Study 11-1 The U.S. Dollar as the Dominant International Currency.Case Study 11-2 The Birth of a New Currency: The Euro.11.4 Cross Exchange Rates, Effective Exchange Rates, and Arbitrage.Case Study 11-3 Foreign Exchange Quotations.Case Study 11-4 The Effective Exchange Rate of the Dollar.11.5 The Exchange Rate and the Balance of Payments.11.6 Spot and Forward Exchange Rates.11.7 Foreign Exchange Futures and Options.Case Study 11-5 Quotations on Foreign Currency Futures and Options.11.8 Foreign Exchange Risks.11.9 Hedging.11.10 Speculation.11.11 Interest Arbitrage.Case Study 11-6 Eurocurrency or Offshore Financial Market.Summary.Review Questions and Problems.Selected Bibliography.INTERNet.12. Exchange Rate Determination.12.1 Introduction.12.2 Overview of Exchange Rate Determination.12.3 Trade or Elasticity Approach.12.4 Purchasing-Power Parity Theory.12.5 The Monetary Model to Exchange Rates.Case Study 12-1 Absolute Purchasing Power in the Real World.Case Study 12-2 Big MacCurrencies.Case Study 12-3 Relative Purchasing Power in the Real World.12.6 Asset or Portfolio Model of Exchange Rates.Case Study 12-4 Nominal and Real Exchange Rates, and the Monetary Model.12.7 Exchange Rate Dynamics.Case Study 12-5 Exchange Rate Overshooting of the U.S. Dollar.12.8 Exchange Rate Forecasting.Case Study 12-6 The Euro Exchange Rate Defies Forecasting.Summary.Review Questions and Problems.Selected Bibliography.INTERNet.PART FIVE: OPEN-ECONOMY MACROECONOMICS.13. Automatic Adjustments with Flexible and Fixed Exchange Rates.13.1 Introduction.13.2 Adjustment with Flexible Exchange Rates.13.3 Stability of the Foreign Exchange Market.Case Study 13-1 Price Elasticities in International Trade.13.4 Adjustment with Fixed Exchange Rates: The Gold Standard.Case Study 13-2 Effective Exchange Rate of the Dollar and the U.S. Current Account Balance.13.5 Income Determination in a Closed Economy.13.6 Income Determination in an Open Economy.Case Study 13-3 Income Elasticity of Imports.Case Study 13-4 Savings, Investments, and Current Account Balance in the Leading Industrial Nations.13.7 Foreign Repercussions.13.8 Absorption Approach.13.9 Synthesis of Automatic Adjustments with Flexible and Fixed Exchange Rates.Summary.Case Study 13-5 Interdependence in the World Economy.Review Questions and Problems.Appendix: Adjustment Under the Gold Standard: The Price-Specie-Flow Mechanism.Selected Bibliography.INTERNet.14. Adjustment Policies.14.1 Introduction.14.2 National Objectives and Policies.14.3 Policies to Achieve Internal and External Balance with Fixed but Changeable Exchange Rates.14.4 Effect of Monetary Policy on Internal and External Balance Under Fixed Exchange Rates.14.5 Effect of Fiscal Policy on Internal and External Balance UnderFixed Exchange Rates.14.6 Policy Mix for Internal and External Balance Under Fixed Exchange Rates.14.7 Effect of Monetary and Fiscal Policies on Internal Balance Under Flexible Exchange Rates.Case Study 14-1 Relationship Between U.S. Current Account and Budget Deficits.14.8 Correcting Unemployment with Inflation.14.9 Policy Mix in the Real World.Case Study 14-2 Effect of U.S. Monetary Policy.Case Study 14-3 U.S. Monetary and Fiscal Policies During the Past Decade.Case Study 14-4 Booms and Busts in the U.S. Economy.14.10 Direct Controls.Case Study 14-5 Direct Controls on International Transactions Around the World.Summary.Review Questions and Problems.Selected Bibliography.INTERNet.PART SIX: THE INTERNATIONAL MONETARY SYSTEM: PAST, PRESENT, AND FUTURE.15. Flexible versus Fixed Exchange Rates, European Monetary System, and Macroeconomic Policy Coordination.15.1 Introduction .15.2 Fixed Versus Flexible Rates: An Overview.15.3 The Case for Flexible Exchange Rates.15.4 The Case for Fixed Exchange Rates.Case Study 15-1 Macroeconomic Performance under Fixed and Flexible Exchange Rate Regimes.15.5 Optimum Currency Areas.15.6 European Monetary System and Transition to Monetary Union.15.7 The Creation of the Euro, the European Central Bank, and the Common Monetary Policy.Case Study 15-2 Maastricht Convergence Indicators.Case Study 15-3 Benefits and Costs of the Euro.15.8 Currency Board Arrangements and Dollarization.Case Study 15-4 Argentina's Currency Board Arrangements and Crisis.15.9 Adjustable Pegs, Crawling Pegs, and Managed Floating.15.10 International Macroeconomic Policy Coordination.Case Study 15-5 Exchange Rate Arrangements of IMF Members.Summary.Review Questions and Problems.Selected Bibliography.INTERNet.16. The International Monetary System: Past, Present, and Future.16.1 Introduction.16.2 Meaning of International Monetary System.16.3 The Gold Standard and the Interwar Experience.16.4 The Bretton Woods System.16.5 Operation and Evolution of the Bretton Woods System.16.6 U.S. Balance-of-Payments Deficits and Collapse of the Bretton Woods System.Case Study 16-1 Macroeconomic Performance Under Different Exchange Rate Regimes.16.7 Operation of the Present International Monetary System.16.8 Problems with the Present International Monetary System and Proposals for Reforms.Case Study 16-2 Exchange Rate Volatility and Misalignments.16.9 Financial Crises in Emerging Market Economies.Case Study 16-3 The Anatomy of a Currency Crisis: The Collapse of the Mexican Peso.Case Study 16.4 Chronology of Economic Crises in Emerging Markets: From Thailand to Argentina.16.10 Other Current International Economic Problems.Case Study 16-5 Trade Imbalances of the Leading Industrial Nations.Summary.Review Questions and Problems.Selected Bibliography.INTERNet.Glossary.Name Index.Subject Index.