International Economics: Theory and Policy is a proven approach in which each half of the book leads with an intuitive introduction to theory and follows with self-contained chapters to cover key policy applications. The Eighth Edition integrates the latest research, data, and policy in hot topics such as outsourcing, economic geography, trade and environment, financial derivatives, the subprime crisis, and China’s exchange rate policies.

Contents

Chapter 1. Introduction

What Is International Economics About?

International Economics: Trade and Money

Part I. International Trade Theory

Chapter 2. World Trade: An Overview

Who Trades with Whom?

The Changing Pattern of World Trade

Do Old Rules Still Apply?

Chapter 3. Labor Productivity and Comparative Advantage: The Ricardian Model

The Concept of Comparative Advantage

A One-Factor Economy

Trade in a One-Factor World

Misconceptions About Comparative Advantage

Comparative Advantage with Many Goods

Adding Transport Costs and Nontraded Goods

Empirical Evidence on the Ricardian Model

Chapter 4. Resources, Comparative Advantage, and Income Distribution

A Model of a Two-Factor Economy

Effects of International Trade Between Two-Factor Economies

The Political Economy of Trade: A Preliminary View

Empirical Evidence on the Heckscher-Ohlin Model

Appendix: Factor Prices, Goods Prices, and Input Choices

Chapter 5. The Standard Trade Model

A Standard Model of a Trading Economy

International Transfers of Income: Shifting of the RD Curve

Tariffs and Export Subsidies: Simultaneous Shifts in RS and RD

Appendix: Representing International Equilibrium with Other Curves

Chapter 6. Economies of Scale, Imperfect Competition, and International Trade

Economies of Scale and International Trade: An Overview

Economies of Scale and Market Structure

The Theory of Imperfect Competition

Monopolistic Competition and Trade

Dumping

The Theory of External Economies

External Economies and International Trade

Economic Geography and Interregional Trade

Appendix: Determining Marginal Revenue

Chapter 7. International Factor Movements

International Labor Mobility

International Borrowing and Lending

Direct Foreign Investment and Multinational Firms

Appendix 1: Finding Total Output from the Marginal Product Curve

Appendix 2: More on Intertemporal Trade

Part II. International Trade Policy

Chapter 8. The Instruments of Trade Policy

Basic Tariff Analysis

Costs and Benefits of a Tariff

Other Instruments of Trade Policy

The Effects of Trade Policy: A Summary

Appendix 1: Tariff Analysis in General Equilibrium

Appendix 2: Tariffs and Import Quotas in the Presence of Monopoly

Chapter 9. The Political Economy of Trade Policy

The Case for Free Trade

National Welfare Arguments Against Free Trade

Income Distribution and Trade Policy

International Negotiations and Trade Policy

The Doha Disappointment

Appendix: Proving That the Optimum Tariff Is Positive

Chapter 10. Trade Policy in Developing Countries

Import-Substituting Industrialization

Results of Favoring Manufacturing: Problems of Import-Substituting Industrialization

Trade Liberalization Since 1985

Export-Oriented Industrialization: The East Asian Miracle

Chapter 11. Controversies in Trade Policy

Sophisticated Arguments for Activist Trade Policy

Globalization and Low-Wage Labor

Globalization and the Environment

Part III. Exchange Rates and Open-Economy Macroeconomics

Chapter 12. National Income Accounting and the Balance of Payments

The National Income Accounts

National Income Accounting for an Open Economy

The Balance of Payments Accounts

Chapter 13. Exchange Rates and the Foreign Exchange Market: An Asset Approach

Exchange Rates and International Transactions

The Foreign Exchange Market

The Demand for Foreign Currency Assets

Equilibrium in the Foreign Exchange Market

Interest Rates, Expectations, and Equilibrium

Appendix: Forward Exchange Rates and Covered Interest Parity

Chapter 14. Money, Interest Rates, and Exchange Rates

Money Defined: A Brief Review

The Demand for Money by Individuals

Aggregate Money Demand

The Equilibrium Interest Rate: The Interaction of Money Supply and Demand

The Money Supply and the Exchange Rate in the Short Run

Money, the Price Level, and the Exchange Rate in the Long Run

Inflation and Exchange Rate Dynamics

Chapter 15. Price Levels and the Exchange Rate in the Long Run

The Law of One Price

Purchasing Power Parity

A Long-Run Exchange Rate Model Based on PPP

Empirical Evidence on PPP and the Law of One Price

Explaining the Problems with PPP

Beyond Purchasing Power Parity: A General Model of Long-Run Exchange Rates

International Interest Rate Differences and the Real Exchange Rate

Real Interest Parity

Appendix: The Fisher Effect, the Interest Rate, and the Exchange Rate Under the Flexible-Price Monetary Approach

Chapter 16. Output and the Exchange Rate in the Short Run

Determinants of Aggregate Demand in an Open Economy

The Equation of Aggregate Demand

How Output Is Determined in the Short Run

Output Market Equilibrium in the Short Run: The DD Schedule

Asset Market Equilibrium in the Short Run: The AA Schedule

Short-Run Equilibrium for an Open Economy: Putting the DD and AA Schedules Together

Temporary Changes in Monetary and Fiscal Policy

Inflation Bias and Other Problems of Policy Formulation

Permanent Shifts in Monetary and Fiscal Policy

Macroeconomic Policies and the Current Account

Gradual Trade Flow Adjustments and Current Account Dynamics

Appendix 1: Intertemporal Trade and Consumption Demand

Appendix 2: The Marhsall-Lerner Condition and Empirical Estimates of Trade Elasticities

Chapter 17. Fixed Exchange Rates and Foreign Exchange Intervention

Why Study Fixed Exchange Rates?

Central Bank Intervention and the Money Supply

How the Central Bank Fixes the Exchange Rate

Stabilization Policies with a Fixed Exchange Rate

Balance of Payments Crises and Capital Flight

Managed Floating and Sterilized Intervention

Reserve Currencies in the World Monetary System

The Gold Standard

Appendix 1: Equilibrium in the Foreign Exchange Market with Imperfect Asset Substitutability

Appendix 2: The Timing of Balance of Payments Crises

Part IV. International Macroeconomic Policy

Chapter 18. The International Monetary System, 1870–1973

The Interwar Years, 1918–1939

The Bretton Woods System and the International Monetary Fund

Analyzing Policy Options Under the Bretton Woods System

The External Balance Problem of the United States

Worldwide Inflation and the Transition to Floating Rates

Chapter 19. Macroeconomic Policy and Coordination Under Floating Exchange Rates

The Case for Floating Exchange Rates

The Case Against Floating Exchange Rates

Macroeconomic Interdependence Under a Floating Rate

What Has Been Learned Since 1973?

Are Fixed Exchange Rates Even an Option for Most Countries?

Directions for Reform

Appendix: International Policy Coordination Failures

Chapter 20. Optimum Currency Areas and the European Experience

How the European Single Currency Evolved

The Euro and Economic Policy in the Euro Zone

The Theory of Optimum Currency Areas

The Future of EMU

Chapter 21. The Global Capital Market: Performance and Policy Problems

The International Capital Market and the Gains from Trade

International Banking and the International Capital Market

Regulating International Banking

Chapter 22. Developing Countries: Growth, Crisis, and Reform

Income, Wealth, and Growth in the World Economy

Structural Features of Developing Countries

Developing-Country Borrowing and Debt

East Asia: Success and Crisis

Lessons of Developing-Country Crises

Reforming’s Financial “Architecture”

Understanding Global Capital Flows and the Global Distribution of Income: Is Geography Destiny?

Mathematical Postscripts