- International Economics • SIS-616-A01-2016X • Summer 2016, p. 1 - INTERNATIONAL ECONOMICS SIS-616 A01 Stephen J. Silvia Office: SIS 320 School of International Service Tel: W 202.885.2462 American University e-mail: [email protected] Summer 2016 Office hours: Monday 8-9 pm, Wednesday 3:30-5:30, or by appointment Economics is the science of thinking in terms of models joined to the art of choosing models which are relevant to the contemporary world. – John Maynard Keynes COURSE DESCRIPTION How do countries exchange wealth in a world with hundreds of currencies? How do we know whether one country is richer or poorer than another? Why do countries trade? What are the effects of trade? International Economics provides you with the tools and insights that economists have developed over the years to answer these and many other questions about trade and monetary relations among open economies. It also explores the range of policy choices and the impact of those choices on people, countries and the global economy. COURSE PREREQUISITE Introductory macro and micro economics is the prerequisite. LEARNING OBJECTIVES The objective of this course is for you to acquire a sound grasp of the essential vocabulary and analytical tools that economists use to explain how the international economy works. LEARNING OUTCOMES By the end of the course, students should be able: (1) to apply the core concepts, models and theories of international economics accurately to explain real-world outcomes, and (2) to analyze correctly the domestic and international economic implications of policy choices. This is not an econometrics course. It does not cover inferential statistical techniques. You will need some math, but the most that you will need is elementary-school level arithmetic and basic algebra (i.e., no more math than you need to balance a checkbook). A few articles on the syllabus do include inferential statistics, so you will need to draw on what you have learned in your methods courses to read them discernibly. - International Economics • SIS-616-A01-2016X • Summer 2016, p. 2 - COURSE REQUIREMENTS Course requirements consist of: (1) six problem sets (Each is worth five points for a total of 30 percent); (2) a take home midterm examination, which amounts to 30 percent of the total grade; (3) a take home final examination, which accounts for 30 percent of the total grade, and (4) class participation, which is worth 10 percent. PROBLEM SETS: You are to submit your problem sets on the BlackBoard site for the course. Since I distribute the answers to the problem sets shortly after they are graded, I have to be strict regarding the deadline for submitting them. The deadline for submitting a problem set is 5 pm am on the day the problem set is due. Assignments submitted after the deadline will have a one-point penalty deducted for each day that they are late, starting at 5:01 p.m. on the due date. I will not accept assignments after I post the answer key. Students failing to submit a problem set before I post the answer key will receive a zero for that problem set. I encourage you to work with your classmates on the problem sets, because that’s a good way to learn the material, but you must submit your completed problem sets individually. Remember, it’s vital that you understand the material yourself if you are to do well in this course because in-class examinations account for seventy percent of your grade. EXAMINATIONS: The midterm and final are both take home exams. They will have short-answer questions. The final exam is not cumulative. It only covers the second half of the course. Calculators are NOT allowed in the exams. Any mathematics is kept simple enough for you to work it out without a calculator. CLASS PARTICIPATION: Class participation has three components: (1) Attendance; which is mandatory. (2) Participation; asking and answering questions will be a part of your participation grade. (3) Posting two articles from news sources on BlackBoard. Each student is required to post at least one article from a news source that discusses international trade and one article that discusses exchange rates. Good sources for articles include The Economist magazine, The New York Times, and The Washington Post. SUPPORT SERVICES The Academic Support and Access Center (ASAC) supports the academic development and educational goals of American University students and is committed to providing access for individuals with disabilities within the university’s diverse community. Topics of interest include time management, effective writing, textbook reading, note taking, critical thinking, memory skills and test taking. Do not hesitate to use these services. You are already paying for them, and they can really make a difference in how you do in all of your courses. You can find more information about the ASAC at: http://www.american.edu/ocl/asac/ ACADEMIC INTEGRITY CODE Standards of academic conduct are set forth in the University's Academic Integrity Code - International Economics • SIS-616-A01-2016X • Summer 2016, p. 3 - (http://www.american.edu/academics/integrity/code.cfm). By registering, you have acknowledged your awareness of the Academic Integrity Code, and you are obliged to become familiar with your rights and responsibilities as defined by the Code. Violations of the Academic Integrity Code will not be treated lightly, and disciplinary actions will be taken should such violations occur. Please see me if you have any questions about the academic violations described in the Code in general or as they relate to particular requirements for this course. EMERGENCY PREPAREDNESS IN CASE OF DISRUPTION OF CLASSES In the event of an emergency, American University will implement a plan for meeting the needs of all members of the university community. Should the university be required to close for a period of time, we are committed to ensuring that all aspects of our educational programs will be delivered to our students. These may include altering and extending the duration of the traditional term schedule to complete essential instruction in the traditional format and/or use of distance instructional methods. Specific strategies will vary from class to class, depending on the format of the course and the timing of the emergency. Faculty will communicate class-specific information to students via AU e-mail and Blackboard, while students must inform their faculty immediately of any absence. Students are responsible for checking their AU e-mail regularly and keeping themselves informed of emergencies. In the event of an emergency, students should refer to the AU Student Portal, the AU Web site (www.prepared.american.edu) and the AU information line at (202) 885-1100 for general university-wide information, as well as contact their faculty and/or respective dean’s office for course and school/ college-specific information. READINGS Required Readings: - There is a textbook for this course. It is: Robert C. Feenstra and Alan M. Taylor, Essentials of International Economics, 3rd edition (New York: Worth, 2014). - All other required readings are posted on BlackBoard except for the week one reading by Paul Krugman. The URL for it is on this syllabus. The videos have URLs listed on the syllabus. Recommended Readings: You do NOT have to do the recommended readings. Most are examples of how economists use the concept that we’re discussing for that week. So, they are typically a bit more difficult than the required readings. They are there in case you would like to explore the topic further. - International Economics • SIS-616-A01-2016X • Summer 2016, p. 4 - COURSE READINGS AND OUTLINE: ALL the readings listed below are REQUIRED, unless otherwise indicated. The RECOMMENDED readings are there for your information. There is NO obligation to read them. May 9. Trade and Technology: The Ricardian Model of Comparative Advantage. - Feenstra and Taylor, chapter 2. - Paul R. Krugman, “Ricardo’s Difficult Idea,” http://web.mit.edu/krugman/www/ricardo.htm (1996). - “Wookienomics: Like the Force, economics binds the galaxy together,” Economist, 19 December 2015. - S.J. Silvia video, “Demonstrating Comparative Advantage,” https://vimeo.com/104645094 (Password: SIS1957) Recommended: - Daniel M. Bernhofen and John C. Brown, “An Empirical Assessment of the Comparative Advantage Gains from Trade: Evidence from Japan,” American Economic Review 95, no. 1 (March 2005): 208-25. - Rüdiger Dornbusch, Stanley Fischer and Paul Samuelson, “Comparative Advantage, Trade and Payments in a Ricardian Model with a Continuum of Goods,” American Economic Review 67, no. 5 (1977), PP. 823-39. - Organization for Economic Cooperation and Development, Globalisation, Comparative Advantage and the Changing Dynamics of Trade (Paris: OECD, 2011). - Paul A. Samuelson, “Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization,” Journal of Economic Perspectives 18, no. 3 (Summer 2004), pp. 135-146. May 11. Gains and Losses from Trade in the Specific-factors Model. - Feenstra and Taylor, chapter 3. - Kevin O’Rourke, “The European Grain Invasion, 1870-1913,” Journal of Economic History 57, no. 4 (December 1997): 775-801. Recommended: - Richard E. Caves, “‘Vent for Surplus’ Models of Trade and Growth,” in R. E. Baldwin, et al., eds., Trade, Growth, and the Balance of Payments: Essays in Honor of Gottfried Haberler (Chicago: Rand McNally, 1965), pp. 95-115. - Carl Davidson and Steven J. Matus, “Trade Liberalization and Compensation,” International Economic Review 47, no. 3 (August 2006), pp. 723-47. *** PROBLEM SET #1 POSTED AFTER MAY 11 SESSION; DUE ON MAY 16 BEFORE CLASS. May 16. Trade and Resources: The Heckscher-Ohlin Model. - Feenstra and Taylor, chapter 4. - Paul R. Krugman, “What do Undergrads need to know about Trade?” American Economic Review 83, no. 2 (May, 1993), pp. 23-26, http://www.jstor.org/stable/2117633 - “Trade in the balance: Globalisation can make everyone better off.