ECONOMICS 141 COURSE OUTLINE

2^ND Semester 2003 – 2004 Prof. Art Boquiren

I. OBJECTIVES

1. Understand the basics of international economics.

2. Understand select problems in international economics: focusing on international trade and the exchange rate

3. Engaged students in research related to issues in international economics

II. COURSE OUTLINE

1. Introduction

2. Law of Comparative Advantage: Salvatore Ch 2, Krugman Ch 2

3. Standard Theory of International Trade: Salvatore Ch 3, Krugman Ch 5

4. Demand and Supply, Offer Curves, and the Terms of Trade: Salvatore Ch 4, Krugman Ch 5 Appendix

5. Factor Endowment and Heckscher-Ohlin: Salvatore Ch 5, Krugman Ch 4

6. Economies of Scale, Imperfect Competition, and New International Trade Theories: Salvatore Ch 6, Krugman Ch 6

7. A Digression: “Abstraction” or Analytic Methods in Economics

8. Economic Growth and International Trade: Salvatore Ch 7, Krugman Ch 8

9. Tariffs Restrictions Through Tariffs: Salvatore Ch 8, Krugman Ch 9, 10

10. Nontariff Barriers and New Protectionism: Salvatore Ch 9, Krugman Ch 9, 10

11. Financing Foreign Trade and the Forex Market

12. Forex Regimes: Fixed Versus Fluctuating Foreign Exchange Rate

13. Protectionism Through the Exchange Rate: TBA

14. Asian Crisis and Relevance of Exchange Rate Protectionism: TBA

15. The BOP Statement: TBA

16. IS, LM, and the BOP (Open Macro Equilibrium) : TBA

III. REQUIREMENTS

2 Long Exam (50%): 26 January 2004, 12 March 2004

Quizzes (20%)

1 Paper (30%)

Perfect attendance and class participation can move grade by one to two steps provided the student got at least 60% in the long exams.

IV. REFERENCES

International Economics by Dominick Salvatore 6^th Edition (1995)

International Economics Theory and Policy by Paul Krugman & Maurice Obsfeld 4^th Edition (1997)

Other materials to use will be identified later.

PAPER FOR SUBMISSION BEFORE 1^ST Day of Final Examination

OPTION 1 (individual paper):

THEORY AND HISTORY ON THE ROLE OF TRADE LIBERALIZATION

IN THE DEVELOPMENT OF _______________________ (country)

I. INTRODUCTION (includes a review of literature)

II. STATEMENT OF THE PROBLEM

· To what extent did the country practiced trade liberalization? Is it true that the country practiced protectionism early in their history? Is the country a genuine or good practitioner of trade liberalization today or do they impose nontariff trade barriers and export subsidies?

III. REVIEW OF THEORY

IV. METHODOLOGY TO ADDRESS RESEARCH PROBLEM

V. RESULTS AND DISCUSSION

VI. CONCLUSION

Source of Data: HISTORY, INTERNET, LIBRARY BOOKS

OPTION 2 (max of 4 persons group work):

IMPACT STUDY OF TRADE LIBERALIZATION ON A RANDOM SAMPLE

OF 40 FARMERS IN BARANGAY ______________ (CHOOSE YOUR DESIRED BARANGAY)

I. INTRODUCTION

II. STATEMENT OF THE PROBLEM

· Several years after the country’s membership in the World Trade Organization, it is now feasible to study the impact of trade liberalization on vegetable and cutflower farmers of Benguet. Did their quality of life improved during the trade liberalization? What was the trend in the quality of life (the writer must define “quality of life” or must adopt indicators for this) before the trade liberalization? What is the trend in their quality of life during the years of trade liberalization? Are prices for their products improving with the trade liberalization? Is there a change in the usual crops they plant given the trade liberalization? What are the changes? Are the changes expressed in the allocation of their land for certain crops? How?

III. METHODOLOGY

· Analytical framework

· Sample of 40 farmers randomly chosen in a particular barangay plus a simple questionnaire

· Indicate the methodology you adopted in selecting respondents

· Adoption of indicators or measures re quality of life (e.g. , farmers’ own perception whether his or her life improved)

IV. RESULTS AND DISCUSSIONS

V. CONCLUSIONS

OPTION 3 (individual paper):

____________________’S NON-TARIFF TRADE BARRIERS

(options: United States, Canada, Any European Country, Britain, Australia,

Japan, Taiwan, South Korea, Thailand, Malaysia, China)

I. INTRODUCTION

To include STATEMENT OF THE PROBLEM AND RELEVANCE

II. METHODOLOGY: RESEARCH PROBLEM, ANALYTICAL FRAMEWORK, SOURCES OF DATA, GATHERING OF DATA, AND ANALYSIS OF DATA

III. COUNTRY TRADE HISTORY

IV. NON-TARIFF TRADE BARRIERS

V. COMPARISON WITH THE PHILIPPINES

VI. PHILIPPINE TRADE WITH THE COUNTRY

VII. RECOMMENDATIONS

NAME	ID NUMBER	ABSENCES
ARJONA, CHERRY	02-65286
BRIONES, MA. KATHLEEN	02-59339
CAMBRI, DANTE	99-31635
CAMPO, JENIROSE	00-50362
CASIGNIA, MICHAEL DAVID	02-65277
FELIPE, MARIAN JOI	01-57461
GIL, RICA	01-56694
GUTIERREZ, AURORA	01-49037
NAIFE, JERINA	01-46872
NATIIVIDAD, MARIFE	00-67238
PABRO, REMELYN	01-47234
PREPOSE, ANNE LOVELLE	02-63583
QUIJADA, ACE LESTER	02-73926
REMELYN, PABRO	01-47234
SAWATE, LURIETA	02-37895
TORRES, KIMBERLY	02-47868
VERANA, MARY FE	99-60314
VILLAMOR, JUNEL	01-47021
VISTA, ANNE MARGARETTE	01-42050

Model Number	Page	Title or Topic in Salvatore
Table 2-1	30	Trade based on absolute advantage
Table 2-2	32	Trade based on comparative advantage
Table 2-3	34	Comparative advantage with money
Fig. 2-4	44	Empirical test of comparative advantage
Table 2-6	49	Comparative advantage with more than two commodities
Table 2-7	51	Comparative advantage with more than two nations
Fig. 3-3	59	Equilibrium in isolation
Fig. 3-4, Fig. 3-5	62/66	Basis for and gains from trade with increasing costs/ Gains from exchange and from specialization
	73-75	Production functions, isoquants, isocosts, and equilibrium
Fig. 3-8	75	Production with 2 nations, 2 commodities, and 2 factors
Fig. 4-3 & 4-4	88/89	Concept of and derivation of offer curves (defined in page 85)
Fig. 4-4	91	Illustration of general equilibrium through offer curves
	93	Definition and measurement of the terms of trade
Fig. 4-12	107	Stable and unstable equilibria
Fig. 5-1	113	Factor intensities, abundance, and relative abundance
	114-116	Factor abundance and shape of the production frontier
	119-	Heckscher-Ohlin Theory, Theorem
Fig. 5-4	121	Illustration of the Heckscher-Ohlin Theory
Fig. 5-7 & 5-8	142-143	Relative Factor Price Equalization
	145	Absolute factor-price equalization
	127	Effect of trade on the distribution of income
	133-135	Explanations of the Leontief Paradox (optional)
Fig. 5-9	147	Specific Factors Model (effect of trade on income distribution)
Fig. 5-10	148	Factor Intensity Reversal
Fig. 6-1	158	Trade based on economies of scale
Eq. 6-1	163	Measuring Intra Industry Trade
Fig. 6-3	167	Monopolistic Competition and Intra-Industry Trade
Fig. 6-4	170	Product Cycle
	171	Synthesis of Trade Models
Fig. 7-4	196	Factor Growth and Trade: Small Country Case
Fig. 7-5	200	Growth and Trade: Large Country Case
Fig. 7-6	201	Immiserizing Growth
Fig. 7-7	203	Growth that improves a nation’s terms of trade and welfare
Fig. 7-9	212	Graphical Proof of the Rybczynki Theorem
Fig 7-10	214	Specific Factors Model and Growth
Fig. 8-1	224-227	Partial equilibrium effects of a tariff, small country
Fig. 8-8	245	Partial equilibrium effects of a tariff, large country
Fig. 8-5	235	General equilibrium effects of a tariff, small country
Fig. 8-6	238	General equilibrium effects of a tariff, large country
Fig, 8-7	240	Optimum Tariff and Retaliation
Fig. 8-9	249	Stopler-Samuelson Theorem
Fig. 8-10	251	Metzler Paradox
Fig. 8-11	252	Short-run effect of tariff on a factors’ income
Fig. 8-12	254	Measurement of the optimum tariff
Chapter 9	257-297	Nontariff trade barriers and new protectionism
Fig. 9-1	258	Partial equilibrium effects of an import quota
Fig. 9-2	269	Partial equilibrium effect of an export subsidy
Fig. 10-1	301	Trade-creating customs union
Fig. 10-2	303	Trade-diverting customs union
	304-306	Theory of the second best and other static welfare effects of customs union
Fig. 10-3	322	General equilibrium analysis of trade-diverting customs union
Chap 11	329-360	International trade and economic development
Fig. 12-2	374	Output and welfare effects of international capital transfers
Fig. 12-3	384	Output and welfare effects of international labor migration
	400-402	Double-entry bookkeeping (e.g., Table 13-1 page 403)
Fig. 14-1	428	Flexible exchange rate system (also Fig. 14-2 page 433)
	434-439	Spot and forward rates, currency swaps, futures, and options
	439-446	Foreign exchange risks, hedging, and speculation
	466-472	Purchasing power parity theory and models
	472-475	Monetary approach under fixed exchange rates cf. 499- 501 formal
	475-477	Monetary approach under flexible exchange rates cf. 499- 501 formal
	477-478	Monetary approach to exchange rate determination cf. 499- 501 formal
	478-482	Expectations, interest differentials, and exchange rates
	482-489	Asset market model and exchange rate
	489--492	Exchange rate dynamics
Fig. 16-1	511	Balance of payments adjustments with exchange rate changes
Fig. 16-2	512	Derivation of demand and supply curves for foreign exchange
Fig. 16-3	517	Stable and unstable foreign exchange markets
	521-522	The J-Curve p. 522-523
Fig. 16-8	534	Effect of a depreciation or devaluation on domestic prices
	535-537	Mathematical derivation of the Marshall-Lerner condition
Fig. 16-9	538, 537-538	Unstable foreign exchange market becomes stable for large exchange rate changes
	554-556	Foreign trade multiplier
	567-569	Mathematical derivation of foreign trade multiplier with foreign repercussions
Fig. 18-7	588	Fiscal and monetary policies with perfect capital mobility
Fig. 18-8	589	IS-LM-BP model with flexible exchange rate
Fig. 18-9	591	Adjustment policies with perfect capital flows and flexible exchange rates
Fig. 18-10	593, 592-597	Effective Market Classification and the Policy Mix
	806-812	Derivation of the IS, LM, and BP curve
	845-855, 667-668	Flexible versus fixed exchange rates and macroeconomic policy coordination