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Michael Olafusi

MIT: International Trade

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You can register on MIT Opencourseware for International Trade at https://ocw.mit.edu/courses/economics/14-54-international-trade-fall-2006/ 

About the course

This course is an introduction to the theory of international trade and finance with applications to current policy issues. In this course we will cover the basic tools to understand what determines the flow of goods across countries, i.e. international trade, and what determines the flow of savings and investments from one country to another, i.e. international finance. We will also cover applications to a number of topics of current interest, including the debate on globalization, free trade agreements, the U.S. current account deficit, the medium run prospects for exchange rates, European integration, and the debate on global financial architecture following the financial crises in East Asia and Argentina.


I. International trade
L1-L3 International trade and gains from trade; The Ricardian model

KO, chapter 2.

Handout 1.1 (PDF)

Handout 1.2 (PDF)

L4-L6 The specific factors model and the standard trade model KO, chapters 3 and 5.
L7 Globalization and inequality

Handout 2 (PDF)

Kremer, Michael, and Eric Maskin. "Globalization and Inequality." October 2006.

L8 The transfer problem

Keynes, J. M. "The German Transfer Problem." Economic Journal 39 (1929): 1-7.

Ohlin, B. "The German Transfer Problem: A Discussion." Economic Journal 39 (1929): 172-182.

L9-L10 Trade policy - Tariffs

KO, chapters 8 and 9.

Handout 3 (PDF)

L11-L12 A case study of trade policy McMillan, Margaret S., Dani Rodrik, and Karen H. Welch. "When Economic Reform Goes Wrong: Cashews in Mozambique." National Bureau of Economic Research Working Paper No. 9117, August 2002.
L13 Multinationals - Guest lecture by Pol Antras  
  Midterm exam  
II. Open economy macroeconomics
A. Inter-temporal trade and financial markets
L14-L15 Inter-temporal trade and the current account

KO, chapter 12.

Handout 4 (PDF)

Buy at MIT Press Buy at Amazon Obstfeld, Maurice, and Kenneth Rogoff. Foundations of International Macroeconomics. Cambridge, MA: MIT Press, 1996, chapter 1, sections 1.1-1.3. ISBN: 9780262150477.

L16 Current account adjustment and real exchange rates (with application to the U.S. current account deficit)

Handout 5 (PDF)

"A Survey of the World Economy." The Economist (September 22, 2005).

Obstfeld, Maurice, and Kenneth Rogoff. "The Unsustainable US Current Account Position Revisited." National Bureau of Economic Research Working Paper No. 10869, November 2004.

Blanchard, Olivier, Francesco Giavazzi, and Filipa Sa. "The U.S. Current Account and the Dollar." MIT Department of Economics Working Paper No. 05-02, January 26, 2005.

L17-L18 The Foreign exchange market and currency speculation

KO, chapter 13.

Burnside, Craig, Martin Eichenbaum, Isaac Kleshchelski, and Sergio Rebelo. "The Returns to Currency Speculation." mimeograph, Northwestern University, October 2006.

B. Short-run adjustment and crises
L19-L20 Money and exchange rates, PPP, and the real exchange rate

KO, chapters 14 and 15.

Handout 6 (PDF)

Goldberg, Pinelopi, and Frank Verboven. "Market Integration and Convergence to the Law of One Price: Evidence from the European Car Market." Centre for Economic Policy Research Discussion Paper No. 2926, August 2001.

L21-L22 The Mundell-Fleming model and exchange rate regimes

Buy at Amazon Blanchard, Olivier. Macroeconomics. 3rd ed. Upper Saddle River, NJ: Prentice Hall, 2003, chapters 19 to 21. ISBN: 9780130671004.

Chapter 19: "The Goods Market in an Open Economy."

Chapter 20: "Output, the Interest Rate, and the Exchange Rate."

Chapter 21: "Exchange Rate Regimes."

L23-L25 Financial crises and currency crises

KO, chapters 17 and 22.

Handout 6 (PDF)

Obstfeld, Maurice. "The Logic of Currency Crises." 1994.

DeLong, J. Bradford. "The International Financial Crises of the 1990s: Analytics." 2001. (Grasping Reality with Both Hands: Brad DeLong's Semi-Daily Journal)

Calvo, Guillermo. "Explaining Sudden Stops, Growth Collapse and BOP Crises: The Case of Distortionary Output Taxes." National Bureau of Economic Research Working Paper No. 9864, July 2003.

L26 Course summary  
  Final exam  

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