Principles of International Economics - A European Perspective

This course covers both the (microeconomic) trade and the (macroeconomic) monetary aspects of international economics with European applications.

In the first part we examine standard trade theories (Ricardo, Heckscher-Ohlin, Krugman) and explain the gains from trade, the distributional impact of trade (internationally and among groups within countries), and the pattern of trade. The arguments for free trade and for trade restrictions are evaluated and different trade policies are discussed. EU trade policy serves as an example. We also discuss the conflicts between trade creation and trade diversion. Finally, we look into the economics of the internal market of the EU and the economic consequences of migration and factor movements.

The second part opens with a discussion of balance of payments accounting and analyses the determination of exchange rates and the development of international financial markets. Stabilization policies and their impact on output, employment, and prices in different exchange rate regimes are examined in the final part of the course.

Each session will include a workshop where students are invited to discuss current economic issues (like migration, the “beauty” of tariffs, or the problems of trade deficits), using the economic concepts and theories presented during the course. This will be done by analysing quotes from newspaper articles (mainly from “The Economist”).

Requirements: The final grade will primarily be based on two short written examinations (together 80%) at the end of each week. Participation in class and at least one presentation in the workshop (20%) are also required.