International Trade and Payments (6359.4)

This unit examines models and issues in international trade theory and policy. The first half of the unit covers the main theories of international trade; the Ricardian-model of comparative advantage, the Heckscher-Ohlin model of factor proportions and recent developments in trade theory based on imperfect competition and economics of scale. Different trade policies used to restrict trade and their welfare implications are also examined.
The second half of the unit discusses the Balance of Payment (BOP) accounts and how different international transactions are recorded in these accounts. Different theories of exchange rate determination are also examined. Moreover, we will discuss the mechanisms available to businesses to hedge themselves against foreign exchange risk. In addition to examining various theoretical models, empirical evidence and policy issues will be discussed.

Learning outcomes

Upon successful completion of this unit, students will be able to:
1. Explain the assumptions and structure of standard models of international trade theory and policy;
2. Analyse the difference between economic integrations and explain the welfare implications of nations joining these integrations;
3. Understand the BOP accounts and how transactions are recorded in these accounts;
4. Evaluate how different factors affect the exchange rate; and
5. Understand and explain how recent financial crises happened.