| Econ 135: Economics of Gender in the Developing World |
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Prof.
Michael Kevane email: mkevane@scu.edu
Office Hours: before and after class, esp. by appointment
website:
http://lsb.scu.edu/~mkevane/
Tel. 554-6888
300-P Kenna Hall
International Economics
Economics 432: MW 8:30-9:45
Spring 2004
Purpose: International trade is widely touted as being the single most important factor behind economic change since World War II. Yet the driving forces behind trade remain poorly understood by the public and by many policymakers. This class is intended to be a rigorous introduction to the essential debates and conclusions of international trade and finance theory. The concept of protection, in the form of tariffs and other trade barriers, will be analyzed in terms of short and long run effects on an industry and economy. That will be supplemented by a discussion of comparative advantage and other sources of gains from trade. We will see what trade theorists have to say about the industrial policy and the income distribution effects of trade, and whether the theories are empirically sound. The second half of the course will look at international financial relations, especially the determinants of the exchange rate among developed countries, and the determination and processes of balance of payments crises among developing countries.
Text: Paul Krugman
and Maurice Obstfeld, International Economics, 6th edition, Addison-Wesley.
Plus supplemental readings that will be available on class website, as noted
below. All readings should be done before class in which reading topic will
be discussed, according to the syllabus.
Requirements: Class
attendance and participation are required. Final grades will be determined on
the basis of the following:
55% Final (cumulative but emphasis on material since midterm)
35% Midterm
10% Score on frequent problem sets
Short problem sets
(9 or so, more be added as desirable) - often multiple choice, to be filled
out on Scantron. These will count for 10% of the grade. Scantrons are due at
the beginning of each class - late entries will not be accepted. I will grade
only the answers, and hand out answer sheets where I "show" the work
or reasoning needed. These are primarily intended to help YOU. They are a discipline
device that will keep you up on the material and engaged with the class. Obviously
if you copy your answers from someone else, you do two things. One, you hurt
yourself, because you will be less prepared than you should be for the midterm
and final, which will closely mirror problem set questions. Two, you hurt your
'friend' (your enabler, really) because the class is graded on a curve, and
so your friend might get a lower grade because you will get a higher grade.
I am, however, totally in favor of responsible, shared group work, and encourage
you to get together with a regular group to work on the problems and study for
the exams. Even if you end up being 'better' at the problems, so it is a little
one-sided, there is still no better way to learn something than to have to teach
it to someone who doesn't get it! If you feel that your group is really just
a way for someone to copy, though, then abandon ship- just say you're too busy!
Schedule and readings
1. M March 29 Introduction
to course and logistics and definitions (For a useful site on definitions of
international economics terms, see http://www-personal.umich.edu/~alandear/glossary/)
a. definitions of tariffs and quotas
b. description of anti-dumping process
c. non-tariff forms of protection
d. definition of balance of payments, trade deficit, current account, capital
account
e. definition of exchange rates and description of movements
f. intervention in foreign exchange markets
g. agendas of Doha Round and G-8 meetings
lecture notes to introductory class
2. W March 31 Model
of comparative advantage (KO Chapter 2)
a. PS 1 due - definitions, - solving supply and demand
b. Explain assumptions of comparative advantage model
c. Explain PPF and labor market equilibrium
d. Derive relative supply curve for each country
e. Show equilibrium when open to trade
f. prove gains from trade in simple model
lecture notes to comparative advantage class
3. M April 5 Specific
factors model (KO Chapter 3)
a. PS 2 due - solving comparative advantage
b. Assumptions of model
c. Explain PPF and labor market equilibrium
d. Explain tangency condition in equilibrium
e. Show how relative supply curves differ
f. Show that in equilibrium price changes
g. Show how price changes induce reallocations of mobile factor
h. Examine changes in distribution of income
lecture notes on specific factors
4. W April 7 Specific
factors model (KO Chapter 3)
a. PS 3 due - solving comparative advantage and specific factors
5. M April 12 Simple
effects of protection? (KO Chapter 8)
a. PS 4 due - solving specific factors model
b. Simple model of one industry with protection
c. Simple model with two countries - difference between small and large country,
idea of optimal tariff
d. Protection produces loss of consumer surplus, gain for producers, deadweight
efficiency losses, and losses to rest of world. Redistribution effects greatly
outweigh efficiency effects in short-run
e. Empirical estimates of welfare losses from protection
lecture notes on basic tariff analysis
6. W April 14 What
is the WTO? (managing and resolving trade disputes) (KO Chapter 9, pp. 234-48;
Various readings posted to class website)
a. PS 5 due - simple effects of protection
b. Understand basic issues in five trade disputes
i. Gasoline quality
ii. Shrimp
iii. Growth hormones
iv. Steel
v. Bananas
7. M April 19 Review
of models of trade: What do they tell us? (Trade and protection induce changes
in allocation of resources and in distribution of income and in consumption)
a. Two stories of trade
i. the petition of the candle-makers
ii. the miracle lumber in– computer out machine
b. Troublesome sayings
i. "They can out-compete us in everything because of their low wages"
ii. "Their economy is too productive; we will be unable to produce anything"
iii. "When we buy from them, they earn the profit and can develop their
economy"
iv. "The rich countries protected their industries, so we should also"
v. "Rich countries unfairly subsidize their industries, so we should protect
ours"
W April 21 1st Midterm (Comparative advantage and sector specific trade models, trade institutions, arguments for protection)
8. M April 26 The
market-failures case for protection: growth of the economy over time (KO Chapters
9 (pp. 224-8), 10 (all), and 11(276-83))
a. Rationales for protection
i. small country bargaining
ii. import-substitution industrialization
(1) learning-by-doing
(2) externalities positive and negative
(3) capital and labor market imperfections
iii. response to predatory pricing - anti-dumping
b. Go over midterm
9. W April 28 Aspects
of protectionism
a. Trade crimes: The positive political economy analysis of protection and government
intervention (taxes and subsidies, lobbying, corruption, foreign direct investment)
(Various readings posted to class website) (KO Chapter 9, pp. 218-34)
b. The normative case for protection (Chapter 11, pp. 283-90; Various readings
posted to class website: Kevane paper, Kevane trade dialog, Rodrik website,
Tom Tomorrow article)
10. M May 3 Balance of payments accounting (KO Chapter 12, pp. 307-20) and introduction to exchange rates (KO Chapter 13, pp. 324-34)
11. W May 5 Determinants
of floating exchange rates (solve interest arbitrage equation) (KO Chapter 13,
14)
a. PS 6 due - BoP accounts
12. M May 10 Determinants
of floating exchange rates (KO Chapter 14, KO Chapter 15, pp. 389-92, 400-4)
a. PS 7 due - interest arbitrage equations and cross-exchange rates, determinant
of exchange rate following change in money supply
b. understand the overshooting model
13. W May 12 Monetary and fiscal policy under floating exchange rates (KO Chapter 16)
14. M May 17 Fixed
exchange rates (KO Chapter 17)
a. PS 8 due - monetary and fiscal policy effects under floating, solving overshooting
exchange rate model
15. W May 19 Monetary
and fiscal policy under fixed exchange rate (KO Chapter 17)
a. The case for intervention in foreign exchange markets
i. Are foreign exchange markets 'efficient'?
ii. What is excess speculation? What are bubbles?
iii. imperfect asset substitutability and sterilization
16. M May 24 Internal
and external balance and balance of payments crisis (KO Chapter 18, esp. 551-6)
a. be able to use the XX II graph
17. W May 26 Balance
of payments crises (KO Chapter 22)
a. PS 9 due - monetary and fiscal policy effects under fixed
May 31 Memorial Day no class
18. June 2 Current
events: How forcefully should the U.S. push China to revalue the yuan?
a. How does the fixed exchange rate regime in China actually work in practice?
b. What would happen to bank balance sheets with a revaluation?
c. What trading partners would be helped/hurt?
d. What would happen to U.S. interest rates and how should monetary policy respond?
19. June 4 Current
events: Case study of trade: Mexico twenty years after liberalization, NAFTA
and peso crisis. How close is the country to having doubled standards of living?
a. what would be your general indicators of well-being under NAFTA, and what
happened to that measure from 1983-2003 (use WDI statistics to make Excel graph)
b. focus on two sectors/products in Mexico- what has been their experience?
c. focus on two cities in Mexico outside of D.F.- what has been their experience?
d. focus on two companies in Mexico- - what has been their experience?
Econ 432 final Tuesday, June 8, 2004 ( MW 8:30pm classes---exam 8:00-10:00pm)