Fall 1998
Prof. Thomas A. Pugel
Prof. Ingo Walter

Course Outline:
 

DATE                         INSTRUCTOR            TOPICS

Fri 23 Oct P.M.         Pugel                           Trade Theory I

            1.  trade analyzed using supply and demand
                    a.  producer surplus and consumer surplus
                    b.  national gains from trade
            2.  the  classical (Ricardian) theory
                    a.  comparative advantage
                    b.  national gains from trade
            3.  the Heckscher-Ohlin (H-0) theory
                    a.  factor endowments and factor intensities
                    b.  increasing costs and incomplete specialization
                    c.  national gains from trade

            Readings: Lindert and Pugel, Chapters 1-3

 
Sat 24 Oct P.M.        Pugel                         Trade Theory II

            1.  implications for factor incomes
                    a.  Stolper-Samuelson theorem
                    b.   factor price equalization
            2.   trade and economic growth
                    a.  factor endowment growth and the Rybczynski theorem
                    b.  technological progress
                    c.  effects of growth on trade and international prices
                    d.  the possibility of immiserizing growth
            3.  empirical tests of H-0 theory
            4.  alternative theories of trade
                    a.  intraindustry trade
                    b.  product differentiation and monopolistic competition
                    c.  international oligopoly

            Readings: Lindert and Pugel, Chapters 4-6.

 
 Fri 30 Oct A.M.         Pugel                      Trade Policy I: Government Policies
                                                                      Towards Imports

            1.  effects of tariffs, quotas, VERs and production subsidies: partial
                 equilibrium
            2.  terms of trade and the optimum tariff
            3.  retaliation
            4.  income distribution effects
            5.  arguments for tariffs
            6.  specificity rule
            7.  effective rate of protection
            8.  nontariff barriers
            9.  coping with burdens of structural adjustment

            Readings: Lindert and Pugel, Chapters 7-9, and pp. 276-281.
 

Sat 7 Nov A.M.             Walter                     Trade Policy II: Export Policies,
                                                                          Economic Integration and
                                                                          International Competition
                                                                    
            1.  dumping and anti-dumping duties
            2.  export subsidies and countervailing duties
            3.  strategic trade policy
            4.  market access and Section 301
            5.  free trade areas, customs unions, etc.
            6.  trade creation and trade diversion
            7.  dynamic gains in regional integration
            8.  World Trade Organization and the GATT
            9.  global integration and trade liberalization

            Readings: Lindert and Pugel, Chapter10 and pp. 201-214 (relevant
                                Questions and Problems on p. 222 are 1-6 and 9)

            CASE: Semiconductors: a Case for Strategic Trade?

Fri 13 Nov A.M.             Pugel                     International Payments & Forex

        1.  The balance of payments: accounting and analysis
                    a.  current transactions and unilateral transfers
                    b.  capital account
                    c.  official reserves
                    d.  official settlements balance
                    e.  international investment position
        2.  The foreign exchange market, exchange rates, and international financial
              investment
                    a.  the foreign exchange market
                    b.  spot exchange rates
                    c.  elements of demand and supply in exchange rate determination
                    d.  the forward market, futures and options
                    e.  exchange rate risk and hedging
                    f.   speculation
                    g.  covered international financial investment and covered interest
                         parity
                    h.  uncovered international financial investment

                    Readings:  Lindert and Pugel, Chapters 15-17
 

Fri 13 Nov PM             Paul Volcker            SPECIAL SESSION
 

Sat 21 Nov A.M.            Walter                       Exchange Rate
                                                                             Determination

1.  purchasing power parity (PPP)
2.  the monetary approach to exchange rates
3.  interest rates, expectations, and exchange rates in the short run
4.  exchange rate overshooting
5.  government policies toward the foreign exchange markets
            a.  floating exchange rates and managing the float
            b.  fixed exchange rates
            c.  defending the exchange rate: intervention
            d.  defending the exchange rate: exchange control
 6.  a macroeconomic model of the open economy
            a.  external balance and internal balance
            b.  equilibrium in the product sector: IS curve
            c.  equilibrium in the money sector: LM curve
            d.  equilibrium in the balance of payments: FE curve

Fri 4 Dec A.M.             Walter                     Payments Adjustment and Macro
                                                                        Performance

            1.  internal and external balance with fixed exchange rates
                    a.  intervention, the money supply, and monetary policy
                    b.  fiscal policy and the degree of capital mobility
                    c.  shocks and adjustment mechanisms
                    d.  policy mix: monetary and fiscal policy
                    e.  exchange rate changes and the J-curve
            2.  internal and external balance with floating exchange rates
                    a.  monetary policy
                    b.  fiscal policy and the degree of capital mobility
                    c.  shocks and adjustment mechanisms

            Readings: Lindert and Pugel, Chapters 22 and 23
 

Sat 12 Dec A.M.         Walter                     Reserves, Debt & Adjustment

            1.  international liquidity, reserve-adequacy and external debt
                    a.  international, personal, and business reserves
                    b.  international liquidity
                    c.  the supply of liquidity
                    d.  the supply of liquidity: foreign currencies
                    e.  international monetary cooperation
                    f.   economic policy coordination
                    g.  liquidity and economic development
                    h.  liquidity under managed floating
                    i.   external debt and IMF stabilization programs
            2.  financial reform and international monetary integration
                    a.  the options
                    b.  decision rules for managed flexibility
                    c.  EMS, ERM, and the Maastricht accords
                    d.  monetary aspects of NAFTA

            Readings: Lindert and Pugel, Chapters 24 and 26

            CASE:   Acme de Mexico, S.A. de C.V.: Recuerdos Tristes de un
                            Pasado Alegre