Beijing Normal University s1

BEIJING NORMAL UNIVERSITY

INTERNATIONAL BUSINESS

(Spring Term, 2016)

Professor David Reisman Department of Economics Beijing Normal University

General Description This module is concerned with the economic principles the student will need to understand the major issues in the global business climate. The topics will include the international comparison of living standards, the costs and benefits of globalisation, recent proposals to reform the international financial architecture and the case for closer monetary and financial integration. Although the concentration will be on macroeconomics, introductory sections on microeconomics will ensure that the student understands the functioning of markets and the nature of market failure.

The module is accessible to students with limited background in economics. They will acquire the economic tools necessary for an understanding of contemporary business. Students with previous training in economics will be able to apply their knowledge to present-day problems.

Course Evaluation

1. An individual essay of 2000 words: 40%. Students will choose their own topics in consultation with the tutor. Essays should be submitted by e-mail no later than the final meeting of this course.

2. A group project of 4000 words: 60%. Students will divide into six groups to prepare presentations for the six seminar topics given below. PowerPoint slides for all seminars should be circulated to 2

the tutor and all students registered for this course by e-mail no later than one day before the seminar. The final version of each group’s project should be submitted to the tutor by e-mail no later than one week after the seminar.

3. There is no final examination. Assessment is based exclusively on coursework and class participation.

Textbook: Mankiw, N.G. (2015), Principles of Economics, 7th. edn., Cengage Learning.

Alternative Textbook: Melvin, M. and W. Boyes (2013), Principles of Macroeconomics, 9th edn., Cengage Learning.

Supplementary Reading: Carbaugh, R.J. (2011), International Economics, 14th edn. Gerber, J. (2014), International Economics, Pearson, 6th edn. Hill, C.W.L (2015), International Business, McGraw-Hill, 8th edn. Krugman, P., M. Obstfeld and J. Melitz (2012), International Economics, Pearson, 9th edn.

Useful websites: http://www.worldbank.org (The World Bank Group)) http://www.imf.org (The International Monetary Fund) http://www.adb.org (The Asian Development Bank) http://www.adbi.org (The Asian Development Bank Institute) http://www.wto.org (The World Trade Organization) http://www.bis.org (The Bank for International Settlement) http://www.iie.com/ (The Institute for International Economics) http://www.nber.org (The National Bureau of Economic Research) www.wws.princeton.edu/~pkrugman/ (Paul Krugman) http://www.gsb.columbia.edu/faculty/jstiglitz/ (Joseph Stiglitz) http://yaleglobal.yale.edu (Yale Global) http://www.federalreserve.gov/ (Federal Reserve Bank of the US) http://www. cgdev.org/ (Center for Global Development) 3

Course Outline

Week 1: The Economics of Exchange What is business economics? What do business economists do? The market-clearing price: supply and demand Market failure: externalities, public goods, monopolies

Reading: Mankiw, Ch. 1, 4, 5, 10, 11 Melvin and Boyes, Ch. 1, 2, 3, 18

Week 2 National income accounting: the GDP and the GNP Introduction to the economy as a whole Measuring national income The circular flow of income in an open economy The components of GDP Real and nominal variables National income as a measure of national welfare

Reading: Mankiw, Ch. 23, 24 Melvin and Boyes, Ch. 5

Week 3 Unemployment and Inflation The cost of living The participation rate Unions and wages The Philips Curve Unemployment

Reading: Mankiw, Ch. 24, 28 Melvin and Boyes, Ch. 7

Week 4 4

Consumption, Investment and the Multiplier Household consumption and saving Business investment: real and financial The multiplier: expansion in national income

Reading: Mankiw, Ch. 26, 27 Melvin and Boyes, Ch. 9, 10

Week 5 Aggregate Demand and Aggregate Supply Productivity and production Consumption and investment The rate of interest Adaptive expectations Rational expectations The short-run aggregate supply curve The long-run supply curve and the natural rate

Reading: Mankiw, Ch. 33, 34, 35 Melvin and Boyes, Ch. 8, 11, 15

First Seminar: Economic Crisis Compare the ‘Asian Crisis’ of 1997-8 with the ‘Great Recession of 2008- 2011. What were the main differences and similarities? Illustrate your answer with reference to Thailand, the USA and China. In your answer, draw attention to underlying macroeconomic instabilities and to economic regulation. What advice would you give to businesses seeking to survive and prosper in as downturn? What lessons would you draw to prevent an international or a regional economic crisis in the future?

Week 6 Money, Banking, and Stabilisation Policy The functions of money Which assets are money? Banking crises: capital and regulation Macroeconomic stabilisation 5

Monetary policy: interest and the money supply Fiscal policy: taxes, public spending and the budget Leads, lags, expectations: is discretion ineffective?

Second Seminar: Inflation and Unemployment What are the ‘right’ levels of inflation and unemployment for a modern globalised economy? What use would you make of budget deficits/surpluses, interest rates and money-supply policy to regulate an economy in disequilibrium? What are the theoretical and practical difficulties that arise in using these tools? In what way is business, both domestic and international, affected by the policies you identify?

Week 7 Economic growth Third world and First Why growth rates differ The contribution of entrepreneurship and government Productivity and production possibilities

Reading: Mankiw, Ch. 25 Melvin and Boyes, Ch. 16, 17

Week 8 International Trade Comparative advantage The balance of payments Freedom of trade Non-tariff barriers

Third Seminar: China and India 6

Compare the development strategies of China and India. What are the economic strengths and weaknesses of each country? What role is being played by economic policy in each country? In what way is each being affected by inflation, unemployment and capital flows? Which do you expect to be the stronger economic power in 2050?

Week 9 Exchange Rates The Gold Standard Bretton Woods Fixed and floating rates International reserves

Fourth Seminar: Currency Unions and Economic Associations For what economic and political reasons did the European countries choose to form the European Union? What common policies have they introduced? What role does the Eurozone play in facilitating and constraining their arrangements? Why does the United States succeed in integrating its member-states when Europe is finding it so difficult to design common policies?

Week 10 Two Seminars

Fifth Seminar: The International Financial Architecture According to the IMF a country with a persistent and large current account deficit should devalue and liberalise. Argue a case for and against this advice to deal with a short-run emergency situation. Explain what help the IMF and the World Bank could provide to assist a country to return its economy to growth without inflation. In what circumstances would the package be an interference with national sovereignty?

Sixth Seminar: The Less-Developed Countries Explain why the poor countries are poor. Design an economic strategy to accelerate their rate of growth in per capita income. Illustrate your answer 7 with the specific circumstances of one low-income country in Africa and one low-income country in Asia. What can they learn from the recent economic experience of China? Show the contribution that international business might make to the prosperity of the countries you select.