Lecturer: Dr. Giovanni Di Bartolomeo

Classes: Monday (10:40-12:20) and Tuesday (1:50-3:30)

Classroom: V6

Course Description. The course aims to give undergraduate students the necessary tools for understanding the growing international interdependence of national economies. The subjects covered during each lecture will be presented in both an analytical and intuitive way. This will make the course accessible also to students that have not yet completed the first-year course in Economics. The first part is devoted to presenting the old and new theories of international trade and the theory of economic integration. The rest of the time will be spent on international monetary economics. This second part will cover the following topics: the foreign exchange markets and the theories of exchange rate determinations; the balance of payments and the theories of its adjustment; macroeconomic policies in open economies; and the international monetary system and its institutions.

Course Aims. The main objective of this course is to present a comprehensive, up-to-date, and clear exposition of the theory and principles of international economics that are essential for understanding, evaluating, and suggesting solutions to the important international economic problems and issues facing the world, the United States in particular. The general purpose of the course is to develop key skills associated with: reading about and understanding complex conceptual issues; following and understanding key empirical and theoretical debates; demonstrating to write papers, and participating in group discussions.

Student Learning Outcomes. Students completing the International Economics class should: 1) Grasp the importance of the pure theory of international trade and its practical applications for understanding mutually beneficial trade. 2) Determine the basis of comparative advantage and examine the effect of international trade on the earnings of factors of production. 3) Discriminate between the “production” and “consumption” gains from free trade. 4) Identify the political economy of protectionism and resulting policies. 5) Distinguish between a fixed and a flexible exchange rate system. 6) Describe and analyze real-world behavior in response to the currency appreciation/depreciation of a nation. 7) Examine and use monetary theories of exchange rate determination. 8) Define the concept and repercussions of a deficit or surplus of the balance of payments. 9) Evaluate the balance of payments adjustment in various international monetary systems. 10) Evaluate the effects of macroeconomic policies in different international monetary systems. 11) Understand the foundations of the optimal currency areas and international economic integration. Moreover, during the course, students will be stimulated (and guided) to write a final compulsory paper based on personal research and to discuss it with the instructor.

Course outline

Part 1: International trade theory

• Lecture 1 – Ricardian theory of trade. Read Salvatore, Ch. 2.

• Lecture 2 – Neoclassical theory of trade. Read Salvatore, Ch. 3.

• Lecture 3 – Demand and supply, offer curve, and terms of trade. Read Salvatore, Ch. 4.

• Lecture 4 – The Heckscher-Ohlin model. Read Salvatore, Ch. 5.

• Lecture 5 – Trade restrictions: Tariff. Read Salvatore, Ch. 8.

• Lecture 6 – Trade restrictions: Non-Tariff and new protectionism. Read Salvatore, Ch. 9.

• Lecture 7 – The new theories of trade. Read Salvatore, Ch. 6 and Gandolfo's handout.

• Deadline for paper assignment.

• Lecture 8 – Customs unions and free trade areas. Read Salvatore, Ch. 10.

• Review Class

• Mid-term exam.

Part 2: International monetary economics

• Lecture 11 – Foreign exchange markets and exchange rates. Read Salvatore, Ch. 14.

• Lecture 12 – Theories of exchange rate determination. Read Salvatore, Ch. 15.

• Lecture 13 – Balance of payments. Read Salvatore, Ch. 13.

• Lecture 14 – The monetary approach and the portfolio approach. Read Salvatore, Ch. 15.

• Lecture 15 – The price adjustment mechanism, Read the handout.

• Deadline for paper submission. Read Salvatore, Ch. 16.

• Lecture 16 – The income adjustment mechanism. Read Salvatore, Ch. 17.

• Lecture 17 – The Mundell-Fleming model – basics. Read Salvatore, Ch. 18.

• Lecture 18 – The Mundell-Fleming model – policies. Read Salvatore, Ch. 18.

• Lecture 19 – Optimal currency areas and Monetary Union. Read Salvatore, Ch. 20.

• Lecture 20 – International monetary system. Read Salvatore, Ch. 21.

• Review Class

• Final Exam

Assessment

Attendance: Classes meet twice a week, and attendance is expected at all classes. Being late or absent without valid motivation will cause your grade to be lowered. After three unexcused absences, you will be withdrawn from the course.

Course Requirements: It is required that students read the references suggested for each topic before lectures. This will make it possible to realize interactive lectures stimulating discussions and reflections.

Exam. Exams: will be held at mid-term and end of the term. I would also like to ask you for a compulsory paper on a topic to be decided. I would recommend preliminary discussions with the instructor on the paper argument.

Evaluation: The final grade will be based on the mid-term exam (30%), on regular attendance, homework, and participation (10%), on the research paper (30%), and on the final exam (30%).

Textbook and Reading List

• Salvatore, Dominick, International Economics, MacMillan International Edition (last available edition).

• Other materials (journal articles, official documents, etc.) will be distributed during the course.