Unit I - An introduction to

International Economics
(IE)

Day and Date: Thursday, July 24,’08

Unit Highlights…

• Meaning
• Significance
• Scope
• Composition of IE –
Trade theory
Trade policy and
International finance/Open economy
macroeconomics
Text book reference chapters…

 International Economics by Dominick

Salvatore – Chapter 1

 International Economics by Francis

Cherunilam – Chapter 1
What is IE?

International economics describes and

predicts PRODUCTION, TRADE, and
INVESTMENT across countries.
What is IE?

The study of ECONOMIC INTERACTIONS

among countries -- including trade,
investment, financial transactions, and
movement of people -- and the POLICIES
and INSTITUTIONS that influence them.
Why study IE?

 Trends towards ever-increasing openness-

Liberalization and Globalization
 Rapid integration of international economic
markets – new opportunities, new challenges
 Revolution in ICT
Scope of IE
• Trade
• Globalization and regional integration
• Comparative economic policy
• International political economy –international
organizations and policy cooperation
• Monetary and real/technological dynamics in
open economies
• Migration
• International investment
• Internet commerce and regulation
Composition of the study of IE

Three aspects of IE –
1. Trade theory
2. Trade policy and
3. International finance/Open economy
macroeconomics
1. Trade theory

International trade theory helps us assimilate,

• Why nations trade?

• What are gains from trade?
• What is the pattern of trade?
2. Trade policy

Restrictions and regulations that nations

impose on the free movement of
commodities, capital, investment, and
people across borders.
3.International finance/Open economy
macroeconomics

Cross-border capital flows

To conclude…

Hallmarks of today’s world economy,

 Liberalization
 Integration
 Innovation
You should now know…
 What is IE?
 Why study IE?
 What is the scope of IE?
 What is the composition of IE as an
academic discipline?