ECON

 220:  International  Economics  Principles  

University  of  Illinois  at  Urbana-­‐Champaign  
College  of  Liberal  Arts  &  Sciences  
Department  of  Economics  
 
Luiz  Felipe  Leite  Estanislau  do  Amaral   Fall  2014  
209  David  Kinley  Hall   Mondays/  Wednesdays,  1:00pm-­‐2:20pm  
 
Communication:    
  Office:  17  David  Kinley  Hall  
  E-­‐mail:  leitees2@illinois.edu  
Office  Hours:       Monday  11:00am-­‐12:00pm  
    Tuesday  11:00pm-­‐12:00pm  
    Friday          3:30pm-­‐4:30pm  
    Or  by  appointment  
 
Catalog  Description:  
Principles-­‐level  course  in  international  economics  for  non-­‐majors.  The  first  half  of  course,  international  
trade,   covers   such   topics   as   comparative   advantage,   protectionism   (tariff   and   nontariff),   impact   on  
income   distribution,   and   industrial   policies.   The   second   half,   international   finance,   covers   topics   such   as  
balance   of   payments,   exchange-­‐rate   determination,   currency   crises,   dollarization,   and   macroeconomic  
policy   in   an   open   economy.   Issues   relating   to   globalization   will   be   covered   in   both   halves.   (3   Hours)  
Prerequisite:  ECON  102.  
 
Course  Description:  
This   is   a   principles-­‐level   course   in   international   economics   for   non-­‐majors.   International   economics   is  
the  area  of  economics  concerning  transactions  and  interactions  between  agents  (consumers,  firms  and  
governments)  of  different  countries.  The  main  goal  is  to  introduce  students  to  general  principles  of  both  
international  microeconomics  and  international  macroeconomics.  

The   first   part   of   the   course   deals   with   international   microeconomics   and   focuses   on   international   trade.  
Initially,   we   will   see   the   main   theories   explaining   international   trade:   who   benefits   from   trade,   why  
certain  trade  patterns  appear,  how  is  international  trade  related  to  income  distribution,  etc.  Then,  we  
will  focus  on  international  trade  policy:  what  are  the  instruments  to  encourage  or  discourage  trade,  why  
is  trade  not  as  prevalent  as  the  theory  would  imply,  and  what  are  the  main  arguments  for  and  against  
free  trade.  

The   second   part   of   the   course   will   focus   on   international   macroeconomics,   or   open   economy  
macroeconomics.  It  will  go  over  exchange  rate  determination,  the  interaction  between  exchange  rates,  
interest  rates,  inflation,  and  aggregate  output;  and  discuss  international  monetary  systems  and  optimal  
currency  areas.  

 
 
 

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Course  Format:  
The  course  will  be  comprised  of  biweekly  lectures.  
 
Course  Objectives:  
• Introduce  students  to  principles  in  international  economics.  
• Provide  a  basic  understanding  of  the  workings  of  international  trade  and  international  finance.  
• Develop  economic  reasoning.  
 
Learning  Resources:  
Required:  Krugman,  Obstfeld,  Melitz.  International  Economics:  Theory  and  Policy,  10th  Edition,  2012.  
Pearson.  (Earlier  editions  are  acceptable,  the  online  platform  will  not  be  used).  

Student  Assessment:  
Scoring  
• Attendance  -­‐  50  Total  Points  
• Homework  Assignments  -­‐  100  Total  Points  
• Paper  Assignment  -­‐  150  Total  Points  
• Exam  2  -­‐  200  Total  Points  
• Exam  3  -­‐  200  Total  Points  
• Final  Exam  -­‐  300  Total  Points  
 
Your  grade  will  be  calculated  as  a  percentage  of  these  points.    The  final  grade  for  the  class  will  be  scored  
out  of  1,000  points.    To  calculate  your  grade  before  all  exams  and  assignments  are  finalized,  divide  the  
total  points  you  have  scored  in  the  course  so  far  by  the  total  amount  of  potential  points.  Multiply  that  
number  by  100  and  round  to  the  nearest  integer  then  compare  that  number  to  the  Plus/Minus  Grade  
Cutoffs  below.  
 
Plus/Minus  Grade  Cutoffs  
                   A+    ≥    97                      B+    ≥    87                      C+    ≥    77                      D+    ≥    67   60  >  F  
97    >    A          ≥    94   87    >    B          ≥    84   77    >    C          ≥    74   67    >    D          ≥    64    
94    >    A-­‐      ≥    90   84    >    B-­‐      ≥    80   74    >    C-­‐      ≥    70   64    >    D-­‐      ≥    60    
 
Assessment  Policies  
Homework  Assignment  Policy:      
All  assignments  are  to  be  turned  in  at  the  beginning  of  the  class  in  which  they  are  due.    Late  assignments  
receive   no   credit.     Assignments   can   be   turned   in   early   at   your   instructor’s   office.     The   assignment  
portion   of   your   grade   will   be   the   average   of   all   your   assignment   scores   with   the   lowest   assignment  
grade  dropped.  
 
Paper  Assignment  Policy:  
Students  are  required  to  turn  in  a  small  paper  analyzing  an  article  published  in  the  general  press  dealing  
about  topics  covered  in  class.  Detailed  instructions  will  be  given  later.  
 
Exam  Policy:      
In  the  event  that  a  student  misses  one  of  the  first  three  exams,  the  points  from  the  missed  exam  will  be  
placed  on  the  final.  There  are  no  make-­‐up  exams.  The  final  will  then  be  scored  out  of  500  rather  than  

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300.     In   the   event   that   a   student   misses   a   second   in-­‐term   exam,   the   instructor   reserves   the   right   to   give  
the  student  a  zero  on  that  exam.      
 
The   following   materials   are   allowed   for   use   during   the   exam:   accounting   calculator   or   four-­‐function  
calculator.  There  are  to  be  no  books,  papers  other  than  the  exam  itself,  cell-­‐phones  or  other  items  that  
connect  to  the  internet.    Students  found  to  be  using  unapproved  items  are  in  violation  of  the   Academic  
Integrity  policy  of  the  University  and  will  be  subject  to  disciplinary  action.  
 
Important  Dates:  
Deadline  to  Add:  September  8  
Exam  1:  September  29,  7:00pm-­‐9:00pm,  113  David  Kinley  Hall  
Deadline  to  Drop  without  a  grade  of  W:  October  17  
Exam  2:  November  10,  7:00pm-­‐9:00pm,  113  David  Kinley  Hall  
Paper  Assignment:  December  10,  in  class.  
Final  Exam:  TBA  
   

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Final  Exam  Conflict  Policy:  
From  the  University’s  final  exam  policy:    
• Any  student  having  more  than  two  consecutive  final  examinations  is  entitled  to  rescheduling  as  
follows  if  he  or  she  takes  the  following  action  no  later  than  the  last  day  of  classes:    
o The  student  must  investigate  whether  a  conflict  examination  is  being  held  at  another  
time  for  any  of  the  examinations  involved.      
o If  a  conflict  examination  has  been  scheduled  for  any  of  the  courses,  the  student  must  
take  one  or  more  of  these  conflict  examinations.  If  conflict  examinations  are  offered  for  
more  than  one  course,  the  student  must  take  the  conflict  for  the  course  that  has  the  
largest  number  of  students.  
o If  no  conflict  examinations  have  been  scheduled,  the  student  must  contact  the  
instructor  of  the  course  having  the  largest  number  of  students.  The  contact  must  be  
made  no  later  than  the  last  day  of  classes,  and  that  instructor  must  provide  a  makeup  
examination.  
o Normally  in  a  semester  several  combined-­‐sections,  conflict,  and  noncombined  
examinations  are  given  at  the  same  time.  As  a  guide  to  resolving  conflicts,  an  order  of  
priority  has  been  established  within  each  examination  period,  and  a  student  should  
resolve  a  conflict  using  the  published  examination  schedules  and  the  following  priority  
guidelines.  
! National  and  state  professional  examinations  (e.g.,  CPA,  actuarial  science,  
Architecture  Registration  Examination)  take  priority  over  campus  final  
examinations.  An  instructor  must  offer  a  conflict  examination  to  a  student  
scheduled  to  take  a  national  or  state  professional  examination  and  a  campus  
final  examination  at  the  same  time.  
! A  noncombined  course  examination  has  precedence  over  any  combined-­‐
sections  or  conflict  examination.  
! A  department  offering  a  combined-­‐sections  final  examination  must  provide  a  
conflict  examination  if  required  to  accommodate  student  conflicts.  
 
The  University’s  final  exam  policy  is  available  at:  
http://studentcode.illinois.edu/article3_part2_3-­‐201.html  
 
Emergency  Response  Recommendations:  
The  university  maintains  guidelines  for  emergency  responses.    A  list  of  recommendations  when  to  
evacuate  and  when  to  find  shelter  are  available  at:    
http://illinois.edu/cms/2251/general_emergency_response_recommendations_8_16_13_final.docx  
Floor  plans  for  specific  buildings  are  available  at:  
http://police.illinois.edu/emergencyplanning/floorplans/  
 
Statement  on  Accommodations:  
To  obtain  disability-­‐related  academic  adjustments  and/or  auxiliary  aids,  students  with  disabilities  must  
contact  the  course  instructor  and  the  Disability  Resources  Educational  Services  (DRES)  as  soon  as  
possible.    To  contact  DRES  you  may  visit  1207  S.  Oak  Street,  Champaign,  call  333-­‐4603  (V/TTY),  or  email  
a  message  to  disability@uiuc.edu.  
 

   

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Academic  Integrity:  
“The  University  has  the  responsibility  for  maintaining  academic  integrity  so  as  to  protect  the  quality  of  
education  and  research  on  our  campus  and  to  protect  those  who  depend  upon  our  integrity.    
 
Expectations  of  Students.  It  is  the  responsibility  of  each  student  to  refrain  from  infractions  of  academic  
integrity,  from  conduct  that  may  lead  to  suspicion  of  such  infractions,  and  from  conduct  that  aids  others  
in  such  infractions.  Students  have  been  given  notice  of  this  Part  by  virtue  of  its  publication.  Regardless  of  
whether  a  student  has  actually  read  this  Part,  a  student  is  charged  with  knowledge  of  it.  Ignorance  is  not  
a  defense.”  
 
The  University’s  full  academic  integrity  policy  is  available  at:  
http://studentcode.illinois.edu/article1_part4_1-­‐401.html  
 
 
 
 
   

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Semester  Schedule:  
 
• Aug.  25:  Introduction;  Basics:  Supply  and  Demand.  
• Aug.  27:  Market  Equilibrium,  Welfare  and  Taxes.  
• Sep.  1:  No  Class  (Labor  Day).  
• Sep.  3:  World  Trade:  An  Overview.  
• Sep.  8:  International  Trade  in  Partial  Equilibrium.  (HW  Assignment  1  due).  
• Sep.  10:  Instruments  of  Trade  Policy.  
• Sep.  15:  International  Trade  in  General  Equilibrium.  
• Sep.  17:  The  Ricardian  Model  (I).  (HW  Assignment  2  due).  
• Sep.  22:  The  Ricardian  Model  (II).  
• Sep.  24:  The  Ricardian  Model  (III).  
• Sep.  29:  Review  Session  (Optional).  
     Midterm  1.  (HW  Assignment  3  due).  
• Oct.  1:  Specific  Factors  and  Income  Distribution  (I).  
• Oct.  6:  Specific  Factors  and  Income  Distribution  (II).  
• Oct.  8:  The  Heckscher-­‐Ohlin  Model  (I).  
• Oct.  13:  The  Heckscher-­‐Ohlin  Model  (II).  
• Oct.  15:  The  Political  Economy  of  Trade  Policy.  
• Oct.  20:  National  Income  Accounts.  
• Oct.  22:  The  Balance  of  Payments.  (HW  Assignment  4  due).  
• Oct.  27:  Exchange  Rates:  An  Introduction.  
• Oct.  29:  The  Asset  Approach  to  Exchange  Rates.  (HW  Assignment  5  due).  
• Nov.  3:  Money  Markets  and  Interest  Rates.  
• Nov.  5:  The  Asset  Approach  in  the  Long  Run  
• Nov.  10:  Review  Session  (Optional)  
       Midterm  2.  (HW  Assignment  6  due)    
• Nov.  12:  The  Purchasing  Power  Parity  Theory.  
• Nov.  17:  The  Real  Exchange  Rate.  
• Nov.  19:  Open  Economy  Macroeconomic  Equilibrium  (I).  
• Nov.  24:  No  Class  (Fall  Break)  
• Nov.  26:  No  Class  (Fall  Break)  
• Dec.  1:  Open  Economy  Macroeconomic  Equilibrium  (II).  (HW  Assignment  7  due).  
• Dec  3:  Open  Economy  Macroeconomic  Policy.  
• Dec.  8:  Fixed  Exchange  Rate  Regimes.  
• Dec.  10:  Alternative  Exchange  Rate  Regimes.  (HW  Assignment  8  due;  Paper  due)  
 

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