Aims

The module should provide an understanding of:
1. The determinants of international trade, including the implications of imperfect competition
in international markets;
2. The cases when a protectionist policy towards international trade may be appropriate;
3. The fundamental determinants of the balance of payments and exchange rates;
4. Alternative exchange rate arrangements and international policy co-ordination.

The aim of the module is to familiarise students with issues and models that underpin international trade theory and the determination of exchange rates. In the first half of the module, simple models will be developed that focus on key issues that help explain the existence of trade, such as comparative advantage and resource availability; consideration will also be given to the implications of the use of policy instruments, such as tariffs or subsidies. The second half of the module considers flexible and sticky price models of exchange rate determination in a world of either fixed or floating exchange rates.

Outline Of Syllabus

The Ricardian Model
The Specific Factors Model
The Heckscher-Ohlin Model
The Standard Trade Model
Imperfect Competition and Modern Trade Theory
Tariffs, subsidies, and welfare
Exchange rates, national income accounting and the balance of payments
An asset perspective on exchange rate determination
The Flexible Price Model
The Sticky Price Model
Fixed and floating exchange-rate regimes

Teaching Rationale And Relationship

Lectures and structured guided learning provide an overview of the main topics and their treatment in the current literature.
Seminars provide students with an opportunity to reinforce learning and monitoring progress by solving problems related to the issues raised in the lectures and in the structured guided learning.

Assessment Rationale And Relationship

The exam tests analytical skills through the application of theories and the solutions to analytical problems.

In the case of an alternative assessment for semester 1 (100% of the module mark) being necessary, a separate 2-hour written examination will be offered, prior to the end of the term.