Course International Economics - Updated

INTERNATIONAL, DEVELOPMENT AND TRANSITION ECONOMICS Gérard Duchêne 20 + 20 hours PURPOSE OF THE COURSES Get the students familiar with the economist’s vision of international relations, in the fields of trade in goods and services, migration and foreign investments, exchange rates determination, long term sustainable growth and institutional transformation. The students will have to acquire (or review, for the ones who have already graduated in economics), the basic concepts which lie behind the experts’ treatment of international economic policy and globalisation. The two courses (International Economics and Development and Transition Economics) are so inter-related in their content that it is difficult to separate them : in all parts of the course, problems of emerging countries or North-South relations appear practically in every chapter. Only the last part of the course deals specifically with transition problems. In practice, the first course will deal with Chapters 1 to 10, and the second course with Chapters 11 to 20. The twin courses also serve as a base for several other courses of the master programme. ORGANISATION Two hours are devoted to each of the topics below. Students are supposed to have read the part of the textbook in relation to the question under review. I will present an overview of the basic principles and concepts (in a non-technical way) during the first part of the lesson, and we will devote the second part of the lesson to solving exercises, or discuss with the class practical questions or economic policy issues. EVALUATION Each student receives a mark for his (her) participation during the courses. A short exam takes place in the week following each of the two parts of the course. The final notes are an average of the exam note and the participation note. REFERENCES AND LINKS : The basic textbook is : Paul R. Krugman and Maurice Obstfeld, International Economics Theory and Policy, Pearson – Addison Wesley, 7-th edition 2005. This book exists also in French : Economie Internationale, Pearson Education, 7-ème édition 2006. The English version will be made available to the students when the course begins. Students are highly recommended to stay permanently in touch with issues and debates on international economic relations by reading the weekly “The Economist” or – from time to time – the daily newspaper “Financial Times”. Here are some useful internet references (for free) which might help students, both beginners and already trained in economics (I selected them from my personal library and I use them quite often) : Encyclopaedias http://economist.com/research/Economics/alphabetic.cfm?letter=A See the (economic) words you feel you do not understand and you will find there a quick but sound explanation http://en.wikipedia.org/wiki/Comparative_advantage (“comparative advantage” is just one example of what you can get on Wikipedia ; try other words or concepts you heard of and did not understand)

http://www.google.com/ Of course, you know that already Publications dealing with International, Development and Transition Economics http://www.imf.org/external/pubs/ft/fandd/2006/09/index.htm This is a quarterly review edited by the IMF. It is devised for already educated economists, but not too much. Everything is without maths, clearly exposed by well known specialists. http://wwwwds.worldbank.org/WBSITE/EXTERNAL/EXTWDS/0,,menuPK:64187515~pagePK:641878 31~pathtreeid:TERATOPIC_SUBTOPIC~piPK:64187924~searchMenuPK:64258545~theSite PK:523679,00.html This is the site of the World Bank, where you may find allot of documentation on many interesting topics. You may also search by country. http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/0,,contentMDK:20848411 ~pagePK:51123644~piPK:329829~theSitePK:29708,00.html This link is to the list of “Global Issues Seminars”, which are training sessions organised by the World Bank for graduating students. There are several items which you may choose (for instance, “Global Economy: International Trade”) and you get access to a series of good texts and data on that item. Data : you will find here some easily accessible economic data which you may use to make some simple calculations http://www.imf.org/external/data.htm This is an IMF data base delivering some key economic indicators for all countries of the world. Data on Vietnam are rather scarce, as you will see. http://pwt.econ.upenn.edu/php_site/pwt_index.php This is the famous Penn World Table, established by Pennsylvania University, which gives macroeconomic data on all countries of the world. It is very useful for assessing economic development on a long period of time. It might be a little difficult to understand what exactly the figures represent, we will see that more in detail in the course. http://stat.wto.org/Home/WSDBHome.aspx?Language= This site gives data on international trade flows of member countries of the WTO. As Vietnam is now “in”, try to find what your country exports and imports, from whom and to whom. http://unstats.un.org/unsd/comtrade/ This is the United Nations Statistical Division database on international trade. http://www.bis.org/cbanks.htm This is the website giving the address of all Central Banks in the world. Unfortunately, the Central Bank of Vietnam is not recorded. However, this site is important because Central Banks usually draw the Balance of Payments in all countries in the world. We will be obliged to work on foreign countries to explore how BoP are built. Although you can choose the country of your choice (and find there the most recent BoP) I recommend you to go on the website of the National Bank of Ukraine, which is correctly presented and which we will use as a case study in the course ; the website address of that Bank is http://www.bank.gov.ua/Engl/SDDS/index.htm Note that Central Banks also record (and sometimes fix) exchange rates as well as interest rates. We will have to look carefully at that kind of data on the Central Banks websites. http://www.unctad.org/Templates/Page.asp?intItemID=1890&lang=1 This is the website of the United Nations Commission for Trade and Development. It compiles statistics on trade by products, by regions, on prices, on FDIs, on trade in services, on tariffs etc. This international organisation edits a handbook of statistics which is available on line at the above address. Institutional databases http://www.freetheworld.com/download.html This is a very well known data base on economic institutions of all countries of the world. It shows an index of whether a country is economically “free” or not, and the way it is calculated. The “institutions” referred here are :

(a) the tax burden, (b) the legal system and credibility of property rights, (c) whether the country has a sound money or not, (d) the freedom to trade internationally, (e) the absence of over-regulation. As you will see, Vietnam has a rather good position in the overall ranking. There are other similar databases such as Transparency International, Heritage Foundation etc. In particular, the World Bank has recently released a database on governance on http://web.worldbank.org/WBSITE/EXTERNAL/WBI/EXTWBIGOVANTCOR/0,,menuPK:1 740542~pagePK:64168427~piPK:64168435~theSitePK:1740530,00.html This database synthesises most of previous institutional databases, and allows an assessment of the quality of governance of 213 countries. Vietnam is in it. PRESENTATION OF THE COURSES FIRST COURSE (20 hours) I - Global issues in international economics and emerging countries 1) Who trades with whom and why ? The gravity equation (KO 2) 2) Emerging countries, their growth and indebtedness, and the risk of crisis (KO 22) 3) Accounting at the country-level : national accounts and the Balance of Payments (KO 12) 4) Exchange rates and the currency market (from Hanoi Post Office to Singapore) (KO 13) 5) The Price level and exchange rates : purchasing power parity, real exchange rates (KO 15) II - Understanding international trade 6) The basics of comparative advantage (KO 3) 7) International trade, factor endowments and income determination (KO 4) 8) Terms of trade changes and the problem of transfers (including aid) (KO 5) 9) The problem of intra-industry trade : international trade with imperfect competition (KO 6) 10) Factors mobility : migrations, capital flows, trans-national corporations (KO 7) SECOND COURSE (20 hours) III - International trade policy 11) Tariff and non-tariff barriers (KO 11) 12) International negotiations (WTO), regional trade agreements (KO 12) 13) Trade policy and development strategies in emerging economies (KO 13) IV - International monetary economics 14) Money, interest rates, exchange rates (KO 14) 15) Aggregate demand, the exchange rate and the equilibrium of an open economy (KO 16) 16) Fixed exchange rates regimes and interventions on the currency market (KO 17) 17) Optimum currency areas (KO 20) 18) Do emerging economies need free international capital movements ? (KO 21) V - Specific topics on transition 19) Comparative descriptive economics on (European) transition countries 20) Measuring institutional changes in the transition process