Introduction to International Economics

by Dominick Salvatore (Fordham University)

• ISBN13: 9780471202264
• ISBN10: 0471202266
• Edition: 1st
• Format: Paperback
• Copyright: 2004-11-01
• Publisher: WILEY

Summary

"With Dominick Salvatore's straightforward, brief, real-world introduction to international economics, you can learn the essential principles you need to understand how the world economy works." "The text features 81 cases from economics and business (three to six per chapter). These real-world case studies are generally short and to the point, and illustrate the most important topics presented in the chapter."--BOOK JACKET.

Table of Contents

Introduction	1	(24)
Importance of International Economics	2	(3)
Case Study 1-1 The Dell PC Is All But American!	3	(1)
Case Study 1-2 What Is an ``American'' Car?	4	(1)
International Trade and the Nation's Standard of Living	5	(4)
Case Study 1-3 Rising Importance of International Trade to the United States	8	(1)
The Subject Matter of International Economics	9	(1)
Current International Economic Problems	10	(3)
The Globalization Challenge	13	(1)
Organization of the Text	14	(11)
Summary	15	(1)
Review Questions and Problems	16	(1)
Appendix: International Trade Data and Sources of Additional Information	17	(1)
International Trade Data	17	(5)
Sources of Additional International Data and Information	22	(1)
Selected Bibliography	23	(1)
INTERnet	24	(1)
PART ONE: INTERNATIONAL TRADE THEORY	25	(88)
Comparative Advantage	27	(26)
Introduction	28	(1)
Mercantilists' Views on Trade	29	(1)
Trade Based on Absolute Advantage: Adam Smith	30	(3)
Case Study 2-1 Mercantilism Is Alive and Well in the Twenty-First Century	31	(2)
Trade Based on Comparative Advantage: David Ricardo	33	(1)
Gains from Trade with Comparative Advantage	34	(2)
Comparative Advantage with Money	36	(2)
Case Study 2-2 The Petition of the Candlemakers	38	(1)
Comparative Advantage and Opportunity Costs	38	(2)
Case Study 2-3 Labor Productivities and Comparative Advantage	40	(1)
Production Possibility Frontier with Constant Costs	40	(2)
Opportunity Costs and Relative Commodity Prices	42	(1)
Basis for and Gains from Trade Under Constant Costs	43	(10)
Summary	45	(1)
Review Questions and Problems	46	(2)
Appendix: Comparative Advantage with More than Two Commodities and Nations	48	(1)
Comparative Advantage with More than Two Commodities	48	(2)
Comparative Advantage with More than Two Nations	50	(1)
Selected Bibliography	51	(1)
INTERNet	51	(2)
The Standard Trade Model	53	(27)
Introduction	54	(1)
The Production Frontier with Increasing Costs	55	(1)
The Marginal Rate of Transformation	56	(1)
Community Indifference Curves	57	(2)
Equilibrium in Isolation	59	(2)
The Basis and the Gains from Trade with Increasing Costs	61	(3)
Case Study 3-1 Comparative Advantage of the United States, the European Union, and Japan	62	(2)
Equilibrium Relative Commodity Prices with Trade	64	(2)
Terms of Trade	66	(2)
Case Study 3-2 Specialization and Export Concentration in Selected Countries	67	(1)
Case Study 3-3 The Terms of Trade of the G-7 Countries	68	(1)
Specialization, Trade, and Deindustrialization	68	(12)
Case Study 3-4 The Terms of Trade of Industrial and Developing Countries	69	(1)
Case Study 3-5 Job Losses in High U.S. Import-Competing Industries	70	(1)
Case Study 3-6 International Trade and Deindustrialization in the United States, the European Union, and Japan	71	(1)
Summary	72	(1)
Review Questions and Problems	73	(2)
Appendix: Offer Curves and the Terms of Trade	75	(3)
Selected Bibliography	78	(1)
INTERNet	79	(1)
The Heckscher--Ohlin and Other Trade Theories	80	(33)
Introduction	81	(1)
Factor Endowments and the Heckscher-Ohlin Theory	82	(1)
The Formal Heckscher-Ohlin Model	83	(2)
Factor-Price Equalization and Income Distribution	85	(5)
Case Study 4-1 The Revealed Comparative Advantage of Various Countries and Regions	86	(3)
Case Study 4-2 Has International Trade Increased U.S. Wage Inequalities?	89	(1)
Empirical Tests of the Heckscher-Ohlin Theory	90	(1)
Economies of Scale and International Trade	91	(3)
Case Study 4-3 The New International Economies of Scale	93	(1)
Trade Based on Product Differentiation	94	(2)
Case Study 4-4 Growth of Intra-Industry Trade	96	(1)
Technological Gap and Product Cycle Models	96	(2)
Transportation Costs and International Trade	98	(3)
Case Study 4-5: The United States as the Most Competitive Economy in the World	99	(2)
Environmental Standards and International Trade	101	(12)
Summary	103	(1)
Review Questions and Problems	104	(2)
Appendix: The Specific-Factors and Intra-Industry Trade Models	106	(1)
The Specific-Factors Model	106	(2)
A Model of Intra-Industry Trade	108	(3)
Selected Bibliography	111	(1)
INTERNet	112	(1)
PART TWO: INTERNATIONAL TRADE POLICY	113	(56)
Trade Restrictions: Tariffs	115	(22)
Introduction	116	(1)
Types of Tariffs	117	(2)
Case Study 5-1 Average Tariff on Industrial Products in Major Developed Countries	118	(1)
Case Study 5-2 Average Tariff on Industrial Products in Some Major Developing Countries	119	(1)
Effects of a Tariff in a Small Nation	119	(2)
Effect of a Tariff on Consumer and Producer Surplus	121	(2)
Costs and Benefits of a Tariff in a Small Nation	123	(1)
Costs and Benefits of a Tariff in a Large Nation	124	(4)
Case Study 5-3 The Welfare Effects of Liberalizing Trade in Some U.S. Products	125	(1)
Case Study 5-4 The Welfare Effects of Liberalizing Trade in Some EU Products	126	(2)
The Optimum Tariff and Retaliation	128	(1)
Theory of Tariff Structure	128	(9)
Case Study 5-5 Rising Tariff Rates with the Degree of Domestic Processing	130	(1)
Case Study 5-6 Structure of Tariffs on Industrial Products in the United States, EU, Japan and Canada	131	(1)
Summary	132	(1)
Review Questions and Problems	133	(1)
Appendix: Optimum Tariff and Retaliation with Offer Curves	134	(2)
Selected Bibliography	136	(1)
INTERNet	136	(1)
Nontariff Trade Barriers and the Political Economy of Protectionism	137	(32)
Introduction	139	(1)
Import Quotas	139	(2)
Other Nontariff Trade Barriers	141	(3)
Case Study 6-1 Voluntary Export Restraints on Japanese Automobiles to the United States	143	(1)
Dumping and Export Subsidies	144	(3)
Case Study 6-2 Antidumping Measures in Force in 2002	146	(1)
The Political Economy of Protectionism	147	(4)
Case Study 6-3 Agricultural Subsidies in Developed Nations	148	(1)
Case Study 6-4 Pervasiveness of Nontariff Barriers	149	(2)
Strategic Trade and Industrial Policies	151	(2)
History of U.S. Commercial Policy	153	(4)
Case Study 6-5 Economic Effects on the U.S. Economy of Removing all Import Restraints	154	(3)
The Uruguay Round	157	(2)
Outstanding Trade Problems and the Doha Round	159	(10)
Case Study 6-6 The Multilateral Round of Trade Negotiations	160	(1)
Summary	161	(2)
Review Questions and Problems	163	(2)
Appendix: Strategic Trade and Industrial Policies with Game Theory	165	(2)
Selected Bibliography	167	(1)
INTERNet	167	(2)
PART THREE: INTERNATIONAL TRADE AND INVESTMENT RELATIONS	169	(84)
Economic Integration	171	(25)
Introduction	173	(1)
Forms of Economic Integration	173	(1)
Trade Creation and Trade Diversion in Customs Unions	174	(3)
Dynamic Benefits from Customs Unions	177	(1)
The European Union	178	(4)
Case Study 7-1 Economic Profile of EU, NAFTA, and Japan	179	(2)
Case Study 7-2 Gains from the Single EU Market in 1992	181	(1)
The European Free Trade Association	182	(1)
U.S. Free Trade Agreements and The North American Free Trade Agreement	182	(2)
Attempts at Economic Integration Among Developing Countries	184	(2)
Economic Integration in Central and Eastern Europe and in the Former Soviet Republics	186	(10)
Case 7-3 Economic Profile of Mercosur	187	(1)
Case 7-4 Changes in Trade Pattern with Economic Integration	188	(2)
Summary	190	(1)
Case Study 7-5 Per Capita Income in Transition Economies	191	(2)
Review Questions and Problems	193	(1)
Selected Bibliography	194	(1)
INTERNet	195	(1)
Growth and Development with International Trade	196	(27)
Introduction	198	(1)
Growth and Development Over Time	199	(1)
Trade Theory and Economic Development	200	(2)
The Contributions of Trade to Development	202	(1)
The Terms of Trade and Economic Development	203	(3)
Case Study 8-1 The East Asian Miracle of Growth and Trade	204	(2)
Case Study 8-2 Changes in Commodity Prices over Time	206	(1)
Immiserizing Growth	206	(1)
Export Instability and Economic Development	207	(2)
Import Substitution Versus Export Orientation	209	(3)
Case Study 8-3 The Growth of Rich Countries, Globalizers and Nonglobalizers	211	(1)
Trade Liberalization and Growth in Developing Countries	212	(1)
Current Problems Facing Developing Countries	212	(11)
Case Study 8-4 Manufactures in Total Exports of Selected Developing Countries	213	(3)
Case Study 8-5 The Foreign Debt Problem of Developing Countries	216	(1)
Summary	217	(1)
Review Questions and Problems	218	(2)
Appendix: Income Inequalities by Traditional and Purchasing-Power Parity (PPP) Measures	220	(1)
Selected Bibliography	221	(1)
INTERNet	222	(1)
International Resource Movements and Multinational Corporations	223	(30)
Introduction	224	(1)
Types of Foreign Investments	225	(1)
Data on International Capital Flows	226	(1)
Motives for International Portfolio Investments	227	(3)
Case Study 9-1 Fluctuations in Foreign Direct Investment to the United States	229	(1)
Motives for Direct Foreign Investments	230	(2)
Effects of International Capital Flows on Investing and Host Countries	232	(3)
Case Study 9-2 The Stock of Foreign Direct Investments Around the World	233	(2)
Reasons for the Existence of Multinational Corporations	235	(3)
Case Study 9-3 The World's Largest Multinational Industrial Corporations	237	(1)
Problems Created by Multinational Corporations in the Home Country	238	(2)
Case Study 9-4 Employment of U.S. MNCs Abroad	239	(1)
Problems Created by Multinational Corporations in the Host Country	240	(1)
Motives and Welfare Effects of International Labor Migration	241	(12)
Summary	243	(1)
Case Study 9-5 U.S. Immigration and Debate over Immigration Policy	244	(2)
Review Questions and Problems	246	(1)
Appendix: Analysis of Effects of International Capital Flows and Migration	247	(1)
Analysis of Effects of International Capital Flows on Investing and Host Countries	247	(2)
Analysis of Effects of International Labor Migration	249	(1)
Selected Bibliography	250	(1)
INTERNet	251	(2)
PART FOUR: THE BALANCE OF PAYMENTS, FOREIGN EXCHANGE MARKETS, AND EXCHANGE RATES	253	(78)
Balance of Payments	255	(24)
Introduction	256	(1)
The Balance of Payments: Definition and Use	257	(1)
Balance-of-Payments Accounting Principles: Credits and Debits	258	(1)
Double-Entry Bookkeeping	259	(2)
The International Transactions of the United States	261	(4)
Case Study 10-1 The Major Goods Exports and Imports of the United States	263	(2)
Accounting Balances and Disequilibrium in International Transactions	265	(1)
Measuring Deficits or Surpluses in the Balance of Payments	266	(1)
The Postwar Balance of Payments of the United States	267	(4)
Case Study 10-2 The Major Trade Partners of the United States	268	(1)
Case Study 10-3 The U.S. Trade Deficit with Japan	269	(1)
Case Study 10-4 The Exploding U.S. Trade Deficit with China	270	(1)
The International Investment Position of the United States	271	(8)
Case Study 10-5 The United States as a Debtor Nation	273	(1)
Summary	274	(1)
Review Questions and Problems	275	(1)
Selected Bibliography	276	(1)
INTERNet	277	(2)
The Foreign Exchange Market and Exchange Rates	279	(30)
Introduction	281	(1)
Functions of the Foreign Exchange Market	281	(2)
Equilibrium Exchange Rates	283	(4)
Case Study 11-1 The U.S. Dollar as the Dominant International Currency	284	(1)
Case Study 11-2 The Birth of a New Currency: The Euro	285	(2)
Cross Exchange Rates, Effective Exchange Rates, and Arbitrage	287	(3)
Case Study 11-3 Foreign Exchange Quotations	288	(1)
Case Study 11-4 The Effective Exchange Rate of the Dollar	289	(1)
The Exchange Rate and the Balance of Payments	290	(2)
Spot and Forward Exchange Rates	292	(1)
Foreign Exchange Futures and Options	293	(3)
Case Study 11-5 Quotations on Foreign Currency Futures and Options	294	(2)
Foreign Exchange Risks	296	(2)
Hedging	298	(2)
Speculation	300	(1)
Interest Arbitrage	301	(8)
Case Study 11-6 Eurocurrency or Offshore Financial Market	304	(3)
Selected Bibliography	307	(1)
INTERNet	308	(1)
Exchange Rate Determination	309	(22)
Introduction	310	(1)
Overview of Exchange Rate Determination	311	(2)
Trade or Elasticity Approach	313	(1)
Purchasing-Power Parity Theory	314	(1)
The Monetary Model to Exchange Rates	315	(4)
Case Study 12-1 Absolute Purchasing Power in the Real World	316	(1)
Case Study 12-2 Big MacCurrencies	317	(1)
Case Study 12-3 Relative Purchasing Power in the Real World	318	(1)
Asset or Portfolio Model of Exchange Rates	319	(2)
Case Study 12-4 Nominal and Real Exchange Rates, and the Monetary Model	320	(1)
Exchange Rate Dynamics	321	(3)
Case Study 12-5 Exchange Rate Overshooting of the U.S. Dollar	321	(3)
Exchange Rate Forecasting	324	(7)
Case Study 12-6 The Euro Exchange Rate Defies Forecasting	325	(1)
Summary	326	(1)
Review Questions and Problems	327	(1)
Selected Bibliography	328	(1)
INTERNet	329	(2)
PART FIVE: OPEN-ECONOMY MACROECONOMICS	331	(58)
Automatic Adjustments with Flexible and Fixed Exchange Rates	333	(30)
Introduction	334	(1)
Adjustment with Flexible Exchange Rates	335	(2)
Stability of the Foreign Exchange Market	337	(3)
Case Study 13-1 Price Elasticities in International Trade	340	(1)
Adjustment with Fixed Exchange Rates: The Gold Standard	340	(4)
Case Study 13-2 Effective Exchange Rate of the Dollar and the U.S. Current Account Balance	341	(3)
Income Determination in a Closed Economy	344	(3)
Income Determination in an Open Economy	347	(4)
Case Study 13-3 Income Elasticity of Imports	350	(1)
Case Study 13-4 Savings, Investments, and Current Account Balance in the Leading Industrial Nations	351	(1)
Foreign Repercussions	351	(1)
Absorption Approach	352	(1)
Synthesis of Automatic Adjustments with Flexible and Fixed Exchange Rates	353	(10)
Summary	355	(1)
Case Study 13-5 Interdependence in the World Economy	356	(2)
Review Questions and Problems	358	(1)
Appendix: Adjustment Under the Gold Standard: The Price-Specie-Flow Mechanism	359	(2)
Selected Bibliography	361	(1)
INTERNet	361	(2)
Adjustment Policies	363	(26)
Introduction	364	(1)
National Objectives and Policies	365	(1)
Policies to Achieve Internal and External Balance with Fixed but Changeable Exchange Rates	366	(2)
Effect of Monetary Policy on Internal and External Balance Under Fixed Exchange Rates	368	(2)
Effect of Fiscal Policy on Internal and External Balance Under Fixed Exchange Rates	370	(1)
Policy Mix for Internal and External Balance Under Fixed Exchange Rates	371	(2)
Effect of Monetary and Fiscal Policies on Internal Balance Under Flexible Exchange Rates	373	(3)
Case Study 14-1 Relationship Between U.S. Current Account and Budget Deficits	374	(2)
Correcting Unemployment with Inflation	376	(1)
Policy Mix in the Real World	377	(4)
Case Study 14-2 Effect of U.S. Monetary Policy	378	(2)
Case Study 14-3 U.S. Monetary and Fiscal Policies During the Past Decade	380	(1)
Case Study 14-4 Booms and Busts in the U.S. Economy	381	(1)
Direct Controls	381	(8)
Case Study 14-5 Direct Controls on International Transactions Around the World	383	(1)
Summary	384	(2)
Review Questions and Problems	386	(1)
Selected Bibliography	386	(1)
INTERNet	387	(2)
PART SIX: THE INTERNATIONAL MONETARY SYSTEM: PAST, PRESENT, AND FUTURE	389	(58)
Flexible versus Fixed Exchange Rates, European Monetary System, and Macroeconomic Policy Coordination	391	(26)
Introduction	392	(1)
Fixed Versus Flexible Rates: An Overview	393	(1)
The Case for Flexible Exchange Rates	394	(1)
The Case for Fixed Exchange Rates	395	(3)
Case Study 15-1 Macroeconomic Performance under Fixed and Flexible Exchange Rate Regimes	397	(1)
Optimum Currency Areas	398	(1)
European Monetary System and Transition to Monetary Union	399	(2)
The Creation of the Euro, the European Central Bank, and the Common Monetary Policy	401	(4)
Case Study 15-2 Maastricht Convergence Indicators	402	(2)
Case Study 15-3 Benefits and Costs of the Euro	404	(1)
Currency Board Arrangements and Dollarization	405	(2)
Case Study 15-4 Argentina's Currency Board Arrangements and Crisis	406	(1)
Adjustable Pegs, Crawling Pegs, and Managed Floating	407	(2)
International Macroeconomic Policy Coordination	409	(8)
Case Study 15-5 Exchange Rate Arrangements of IMF Members	410	(2)
Summary	412	(1)
Review Questions and Problems	413	(1)
Selected Bibliography	414	(1)
INTERNet	415	(2)
The International Monetary System: Past, Present, and Future	417	(30)
Introduction	419	(1)
Meaning of International Monetary System	419	(1)
The Gold Standard and the Interwar Experience	420	(2)
The Bretton Woods System	422	(2)
Operation and Evolution of the Bretton Woods System	424	(1)
U.S. Balance-of-Payments Deficits and Collapse of the Bretton Woods System	425	(3)
Case Study 16-1 Macroeconomic Performance Under Different Exchange Rate Regimes	426	(2)
Operation of the Present International Monetary System	428	(3)
Problems with the Present International Monetary System and Proposals for Reforms	431	(3)
Case Study 16-2 Exchange Rate Volatility and Misalignments	431	(3)
Financial Crises in Emerging Market Economies	434	(3)
Case Study 16-3 The Anatomy of a Currency Crisis: The Collapse of the Mexican Peso	435	(1)
Case Study 16.4 Chronology of Economic Crises in Emerging Markets: From Thailand to Argentina	435	(2)
Other Current International Economic Problems	437	(10)
Case Study 16-5 Trade Imbalances of the Leading Industrial Nations	439	(2)
Summary	441	(2)
Review Questions and Problems	443	(1)
Selected Bibliography	444	(1)
INTERNet	445	(2)
Glossary	447	(16)
Name Index	463	(2)
Subject Index	465