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Course Description
In this course we will cover the basic tools to understand what determines the flow of goods across countries, i.e. international trade, and what determines the flow of savings and investments from one country to another, i.e. international finance. We will also cover applications to a number of topics of current interest, including the debate on globalization, free trade agreements, the U.S. current account deficit, the medium run prospects for exchange rates, European integration, and the debate on global financial architecture following the financial crises in East Asia and Argentina.
Prerequisites
The prerequisites for this course are 14.01 Principles of Microeconomics and 14.02 Principles of Macroeconomics.
Textbook
The textbook is:
[KO] Krugman, Paul, and Maurice Obstfeld. International Economics: Theory and Policy. Boston, MA: Addison Wesley, 2008. ISBN: 9781408208076.
Some of the other references are listed in the readings section; some are for your own reading.
Recitations
There will be weekly recitation sections where you may ask questions about the problem sets and review material from lecture. Be prepared to participate in class when called on by the instructor.
Grading
Grading criteria.
| ACTIVITIES |
PERCENTAGES |
| Problem sets and class participation |
34% |
| Midterm exam (90 minutes) |
33% |
| Final exam (90 minutes) |
33% |
Cooperation on problem sets is encouraged. A group of up to 3 students may submit a joint answer to any problem set (i.e. one copy, the names of all persons in the group must appear at the top of each problem set, at the time when it is handed in). An in-class mid-term will be held after lecture 13. A 90-minute final exam will be held during exam week. They will cover the lectures, the readings, the problem sets, and other material handed out or discussed in class up to that time.
Recommended Citation
For any use or distribution of these materials, please cite as follows:
Guido Lorenzoni, course materials for 14.54 International Trade, Fall 2006. MIT OpenCourseWare (http://ocw.mit.edu/), Massachusetts Institute of Technology. Downloaded on [DD Month YYYY].
Calendar
Course calendar.
| SES # |
TOPICS |
KEY DATES |
| I. International trade |
| L1-L3 |
International trade and gains from trade; The Ricardian model |
|
| L4-L6 |
The specific factors model and the standard trade model |
Problem set 1 due in Ses #L4 |
| L7 |
Globalization and inequality |
|
| L8 |
The transfer problem |
Problem set 2 due |
| L9-L10 |
Trade policy - Tariffs |
|
| L11-L12 |
A case study of trade policy |
Problem set 3 due in Ses #L12 |
| L13 |
Multinationals - Guest lecture by Pol Antras |
|
|
Midterm exam |
|
| II. Open economy macroeconomics |
| A. Inter-temporal trade and financial markets |
| L14-L15 |
Inter-temporal trade and the current account |
|
| L16 |
Current account adjustment and real exchange rates (with application to the U.S. current account deficit) |
|
| L17-L18 |
The Foreign exchange market and currency speculation |
|
| B. Short-run adjustment and crises |
| L19-L20 |
Money and exchange rates, PPP, and the real exchange rate |
Problem set 4 due in Ses #L19 |
| L21-L22 |
The Mundell-Fleming model and exchange rate regimes |
Problem set 5 due in Ses #L22 |
| L23-L25 |
Financial crises and currency crises |
Problem set 6 due in Ses #L25 |
| L26 |
Course summary |
|
|
Final exam |
|