Chapter 15 Exchange Rates, Interest Rates, and Interest Parity (IP)
International Trade: Goods/services AND financial assets (stocks, bonds, CDs, FDI), and exrates change in response to both types of trade. PPP and LOP apply to goods, and we learned in
Chapter 14 Prices and Exchange Rates: Purchasing Power Parity (PPP)
We start with the Law of One Price (LOP): PD = E PF , where PD is the domestic price in $;
PF is the foreign price, e.g., in ; and E is the $/ ex-rate. LOP says that a tradable commodity
Chapter 13 The Foreign-Exchange Market
The market for foreign exchange arises for tourism, exports/import, and international
investment. Usually only tourism requires actual currency, the majority of the market for
foreign exchange involves the transfer o
Chapter 12 The Balance of Payments
Balance of Payments (BP) is an accounting record (using double entry bookkeeping)
of a countrys trade in goods, services and financial assets with the rest of the world
(ROW), over some time period - monthly, quarterly,
Chapter 11 An Introduction to International Finance
Chapters 1-10 deal with international trade in goods and services. Chapters 11-21 deal with
trade in financial assets international stocks and bonds, multinational corporations (MNCs)
Chapter 7 NonTariff Barriers (NTBs) and Arguments for Protection
1. NTBs include quotas, subsidies, health & safety standards, government procurement
2. Arguments for protection protection of jobs, industry restructuring, national
Chapter 6 Tariffs
Intl trade: In the process of raising a countrys overall consumption, production, prosperity,
wealth, and standard of living, there is (are): a) redistribution of production and b) changes in
factor prices (wages, rents). Therefore, ther
Chapter 4 The Heckscher-Ohlin Model
The classical model has several shortcomings:
1. Makes unrealistic predictions like complete specialization that are not consistent with the
real-world. Complete specialization results from constant opportunity cost ass
Chapter 3 Classical Model of International Trade We now have a model to answer question: How and why national engage in trade? CH 3 presents the classical theory of international trade going back to Adam Smith (1776) and David Ricardo (1819). Why Classica
Chapter 2 Tools of Analysis for International Trade Models
See p. 28 in textbook. We construct an economic model of intl trade to answer
the questions like:
Which countries trade what to whom?
Why does int'l. trade occur?
What goods will a country impo
Chapter 1 An Introduction to International Trade
See opening questions on p. 2 in text.
Almost 200 countries in the world goods are produced, exchanged and consumed
in each country Global Economy.
Review of GNP vs. GDP.
GNP: Production/output/income measu