Econ 165: International Economics
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Professor: |
Doireann Fitzgerald |
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Office: |
Room 335, Economics Department |
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Office Hours: |
Wednesdays 9 am – 11 am |
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E-mail: |
dfitzger at stanford.edu (please put Econ 165 in the subject line) |
TA: Todd Schoellman, azyndros at stanford.edu
Course description:
The aim of this class is to give students the tools necessary to read critically and understand discussions of international trade and macroeconomic policy found in popular media such as The Economist magazine, the Wall Street Journal and the Financial Times. The course is organized around several questions of current interest to policy makers, business leaders and the general public. It covers selected basic models in international trade and international macroeconomics relevant to these questions. Recent research on the empirical and practical relevance of these models is also discussed.
Prerequisites:
Econ 50, 51, 52.
Course schedule and location: Monday, Wednesday, 1.15pm – 3.05pm in Econ 140.
Final exam: Friday December 15th, 8.30am – 11.30am. If you cannot make this time, do
not take this class.
Assessment:
There will be five problem sets (20%) two midterms (20% each) and a final exam
(40%). In marginal cases, class participation will be taken into account.
The main textbook for the class is International Economics: Theory and Policy, 7th
edition, by Krugman and Obstfeld (K&O). Additional required readings will be posted on
the class webpage. Some recommended readings will be taken from Pop Internationalism
by Paul Krugman, Free Trade Under Fire (2nd edition) by Douglas Irwin and
Foundations of International Macroeconomics, by Maurice Obstfeld and Kenneth Rogoff
(O&R). These texts are on reserve at the library. Other recommended readings and
resources will be made available through links on the class webpage.
Discussions:
Where noted, the last 15 minutes of class will be devoted to general discussion of a set
topic of current
interest. If you do no other reading, at
least do the readings to prepare
for these discussions! I will call on students at random to participate in the discussion
(cold calling). What you say in the discussion will not affect your grade. Unexplained
absences, however, may count against you.
Webpage: Available through http://coursework.stanford.edu
Frequently asked questions
How much math is used in this course?
Familiarity with basic calculus is assumed. No accommodation will be made for students
that do not have this familiarity.
How much reading should I do?
Required readings have been kept to a minimum. Discussion readings are also required,
and should be done before the class for which they are assigned. If you are particularly
interested in a topic, you are invited to explore the recommended readings.
Do I have to go to section?
Section is compulsory. Attendance will be taken. Where indicated, the TA will cover new material. The TA will also go through the solutions to the previous problem set, and discuss any questions you have on problem sets, readings or lectures.
Can my friends and I work together on the problem sets?
Yes. The problem sets are intended to be learning experiences, so feel free to work in groups. However you may find it useful to attempt the problems on your own before working with others. Each student must submit their own problem set solutions. Doing the problem sets is the best way to prepare for the exams. If you copy another student’s answers without understanding the material, your exam performance will suffer.
How are the problem sets graded?
The problem sets are graded on a scale of check plus, check, check minus and zero (if no problem set is handed in). Legibility is important. Typewritten problem sets are much appreciated. Where appropriate, graphs (drawn by hand) are very useful.
Can I turn a problem set in late?
No. Problem sets turned in after the deadline (12 noon) will not be graded.
What if I cannot take one of the midterms?
There will be no make up exams. You should contact me in advance if you cannot make a midterm.
What material will be covered on the midterms?
The first midterm will cover the material from the first part of the quarter. The second midterm will cover only the material from the second part of the quarter.
What do I do if a
mistake was made in grading my midterm?
After a midterm is returned, you will have one week to contact your TA with problems or concerns. Beyond this deadline, no complaints will be entertained.
What material will be covered on the final?
The final will cover material from the entire quarter, weighted
towards the final part.
Lecture 1:
Monday 25th September 2006
Topic: Introduction
1. What is international economics?
2. Motivating facts and questions
3. Review of budget sets, utility maximization and demand.
Key concepts: Diminishing marginal rate of substitution; Relative demand
Required reading:
Recommended reading:
Lecture 2:
Wednesday 27th September 2006
Topic: Endowment economies I
1. Aggregation over consumers – some useful results with homothetic preferences
2. Free trade vs autarky in a 2-good small open endowment economy
3. A 2-country 2-good endowment world
Key concepts: Homothetic preferences; Terms of trade; Perfect competition; Small open economy; Gains from trade; Comparative advantage
Required reading:
Recommended reading:
Section: No section this week
Week 2
Lecture 3:
Monday 2nd October 2006
Topic: Endowment economies II
1. Analysis of gains from trade using the Edgeworth Box
2. Evidence on trade liberalization and relative
prices from
3. The redistributive effects of trade
4. Introduction to economies with production
Key concepts: Pareto efficiency; Contract curve
Required reading:
Recommended reading:
Discussion topic: Should trade policy be used as a tool for domestic redistribution?
Discussion reading:
Lecture 4:
Wednesday 4th October 2006 – First
problem set due
Topic: The standard trade model (introducing production)
1. Economies with production
2. The effect of terms-of-trade changes in the short and long run
3. Evidence on trade liberalization, shifts in production and welfare
4. What explains changes in the terms-of-trade
Key concepts: Production possibility frontier; Immiserizing growth
Required reading:
Recommended reading:
Section: Trade policy
Week 3
Lecture 5:
Monday 9th October 2006
Topic: Ricardo I
1. Introduction to technology and production
2. 2-good small open Ricardian economy
3. 2-good 2-country Ricardian world
Key concepts: Factors of production; Production function; Marginal rate of transformation; Constant returns to scale; Unit input requirements; Relative supply; Absolute advantage
Required reading:
Discussion topic: Does
Discussion reading:
Lecture 6:
Wednesday 11th October 2006 – Second
problem set due
Topic: Ricardo II
1. Gains from trade in the 2-good 2-country model
2. Wages in the 2-good 2-country model
3. Sketch of a more general model
4. Evidence on the Ricardian view of the world
5. What the Ricardian model cannot explain
Key concepts: Derived demand
Required reading:
Recommended reading:
Section: Review for first midterm
Week 4
Lecture 7:
Monday 16th October 2006
Topic: Specific factors model
1. More about production
2. Autarky in the specific factors model
3. A small open econonomy with specific factors
4. Distribution of gains from trade
5. Application: the trade and wages debate
6. Political economy of trade policy
Key concepts: Marginal product; Diminishing marginal product
Required reading:
Recommended reading:
Discussion topic: Are sweatshops good for workers in developing countries?
Discussion reading:
Lecture 8:
Wednesday 18th October 2006 First
midterm exam (1 hour)
Topic: Increasing-returns-driven specialization I
1. Motivation: Evidence on intra-industry trade, trade between similar countries
2. What are increasing returns/ economies of scale?
Key concepts: Imperfect competition; Differentiated products; Increasing returns to scale
Required reading:
Recommended reading:
Section: Immigration and
inequality in the
Week 5
Lecture 9:
Monday 23rd October 2006
Topic: Increasing-returns-driven specialization II
1. Imperfect competition – monopoly
2. Imperfect competition – monopolistic competition
3. Gains from trade
Key concepts: Profit maximization; Pure monopoly; Monopolistic competition; Fixed costs; Markups; Free entry
Required reading:
Recommended reading:
Lecture 10:
Wednesday 25th October 2006
Topic: Increasing returns III; Trade and development
1. Evidence on trade liberalization and variety
2. External economies and the agglomeration of economic activity
3. Infant industry protection – theory and evidence
4. The evidence on trade liberalization, trade and growth
Key concepts: External economies; Path dependence
Required reading:
Recommended reading:
Discussion: Should developing countries embrace free trade?
Discussion reading:
·
Dani Rodrik, “Globalization
for Whom?” Harvard Magazine, Jul-Aug 2002.
·
The Economist, “More or
Less Equal?”
Section: Review of national income accounting in an open economy
Reading: Greg Mankiw: Macroeconomics 5th edition, Chapter 5, Sections 1 and 2
Week 6
Lecture 11:
Monday 30th October 2006 – Third
problem set due
Topic: Intertemporal trade I
1. A small 2-period endowment economy
2. The role of government consumption
3. Adding investment to the model
Key concepts: Intertemporal preferences; Discount factor; Interest rate; Trade balance; Current account
Required reading:
Recommended reading:
Lecture 12:
Wednesday 1st November 2006
Topic: Intertemporal trade II
1. More on the small 2-period economy with investment
2. A 2-region world economy
Key concepts: Elasticity of intertemporal substitution
Required reading:
Recommended reading:
Discussion: Is the
Discussion reading:
Section: Review of insurance and incentive compatibility
Week 7
Lecture 13:
Monday 6th November 2006 – Fourth problem set due
Topic: Sovereign debt I
1. A 2-state model with full commitment
2. Absence of commitment
3. Lack of commitment and sanctions
4. Why do countries repay their debts?
5. Investment and sanctions
Required reading:
Recommended reading:
Lecture 14:
Wednesday 8th November 2006
Topic: Sovereign debt II
1. Investment and sanctions – debt overhang
2. Debt buybacks
Required reading:
Recommended reading:
Discussion: Should we
forgive
Discussion reading: