International Economics

Cover
Title Page
Copyright
Preface
Brief Contents
Contents
Case Studies
Chapter 1 Introduction
	1.1 The Globalization of the World Economy
		1.1A We Live in a Global Economy
			Case Study 1-1 The Dell PCs, iPhones, and iPads Sold in the United States are Anything but American!
		1.1B The Globalization Challenge
			Case Study 1-2 What Is an “American” Car?
	1.2 International Trade and the Nation’s Standard of Living
		Case Study 1-3 Is India’s Globalization Harming the United States?
		Case Study 1-4 Rising Importance of International Trade to the United States
	1.3 The International Flow of Goods, Services, Labor, and Capital
		1.3A The International Flow of Goods and Services: The Gravity Model
			Case Study 1-5 The Gravity Model at Work
		1.3B The International Flow of Labor and Capital
			Case Study 1-6 Major Net Exporters and Importers of Capital
		1.3C Globalization Before and After the Global Financial Crisis
	1.4 International Economic Theories and Policies
		1.4A Purpose of International Economic Theories and Policies
		1.4B The Subject Matter of International Economics
	1.5 Current International Economic Problems and Challenges
	1.6 Organization and Methodology of the Text
		1.6A Organization of the Text
		1.6B Methodology of the Text
	Summary
	Key Terms
	Questions for Review
	Problems
	Appendix
		A1.1 Basic International Trade Data
		A1.2 Sources of Additional International Data and Information
Part 1 International Trade Theory
	Chapter 2 The Law of Comparative Advantage
		2.1 Introduction
		2.2 The Mercantilists’ Views on Trade
			Case Study 2-1 Munn’s Mercantilistic Views on Trade
			Case Study 2-2 Mercantilism Is Alive and Well in the Twenty-First Century
		2.3 Trade Based on Absolute Advantage: Adam Smith
			2.3A Absolute Advantage
			2.3B Illustration of Absolute Advantage
		2.4 Trade Based on Comparative Advantage: David Ricardo
			2.4A The Law of Comparative Advantage
			2.4B The Gains from Trade
			2.4C The Case of No Comparative Advantage
			2.4D Comparative Advantage with Money
				Case Study 2-3 The Petition of the Candlemakers
		2.5 Comparative Advantage and Opportunity Costs
			2.5A Comparative Advantage and the Labor Theory of Value
			2.5B The Opportunity Cost Theory
			2.5C The Production Possibility Frontier Under Constant Costs
			2.5D Opportunity Costs and Relative Commodity Prices
		2.6 The Basis for and the Gains from Trade under Constant Costs
			2.6A Illustration of the Gains from Trade
			2.6B Relative Commodity Prices with Trade
		2.7 Empirical Tests of the Ricardian Model
			Case Study 2-4 Other Empirical Tests of the Ricardian Model
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A2.1 Comparative Advantage with More Than Two Commodities
			A2.2 Comparative Advantage with More Than Two Nations
	Chapter 3 The Standard Theory of International Trade
		3.1 Introduction
		3.2 The Production Frontier with Increasing Costs
			3.2A Illustration of Increasing Costs
			3.2B The Marginal Rate of Transformation
			3.2C Reasons for Increasing Opportunity Costs and Different Production Frontiers
		3.3 Community Indifference Curves
			3.3A Illustration of Community Indifference Curves
			3.3B The Marginal Rate of Substitution
			3.3C Some Difficulties with Community Indifference Curves
		3.4 Equilibrium in Isolation
			3.4A Illustration of Equilibrium in Isolation
			3.4B Equilibrium-Relative Commodity Prices and Comparative Advantage
				Case Study 3-1 The Comparative Advantage of the Largest Advanced and Emerging Economies
		3.5 The Basis for and the Gains from Trade with Increasing Costs
			3.5A Illustrations of the Basis for and the Gains from Trade with Increasing Costs
			3.5B Equilibrium-Relative Commodity Prices with Trade
			3.5C Incomplete Specialization
			3.5D Small-Country Case with Increasing Costs
				Case Study 3-2 Specialization and Export Concentration in Selected Countries
			3.5E The Gains from Exchange and from Specialization
				Case Study 3-3 Job Losses in High U.S. Import-Competing Industries
				Case Study 3-4 International Trade and Deindustrialization in the United States, the European Union, and Japan
		3.6 Trade Based on Differences in Tastes
			3.6A  Illustration of Trade Based on Differences in Tastes
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A3.1 Production Functions, Isoquants, Isocosts, and Equilibrium
			A3.2 Production Theory with Two Nations, Two Commodities, and Two Factors
			A3.3 Derivation of the Edgeworth Box Diagram and Production Frontiers
			A3.4 Some Important Conclusions
	Chapter 4 Demand and Supply, Offer Curves, and the Terms of Trade
		4.1 Introduction
		4.2 The Equilibrium-Relative Commodity Price with Trade—Partial Equilibrium Analysis
			Case Study 4-1 Demand, Supply, and the International Price of Petroleum
			Case Study 4-2 The Index of Export to Import Prices for the United States
		4.3 Offer Curves
			4.3A Origin and Definition of Offer Curves
			4.3B Derivation and Shape of the Offer Curve of Nation 1
			4.3C Derivation and Shape of the Offer Curve of Nation 2
		4.4 The Equilibrium-Relative Commodity Price with Trade—General Equilibrium Analysis
		4.5 Relationship Between General and Partial Equilibrium Analyses
		4.6 The Terms of Trade
			4.6A Definition and Measurement of the Terms of Trade
			4.6B Illustration of the Terms of Trade
				Case Study 4-3 The Terms of Trade of the G-7 Countries
				Case Study 4-4 The Terms of Trade of Advanced and Developing Countries
			4.6C Usefulness of the Model
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A4.1 Derivation of a Trade Indifference Curve for Nation 1
			A4.2 Derivation of Nation 1’s Trade Indifference Map
			A4.3 Formal Derivation of Nation 1’s Offer Curve
			A4.4 Outline of the Formal Derivation of Nation 2’s Offer Curve
			A4.5  General Equilibrium of Production, Consumption, and Trade
			A4.6  Multiple and Unstable Equilibria
	Chapter 5 Factor Endowments and the Heckscher–Ohlin Theory
		5.1 Introduction
		5.2 Assumptions of the Theory
			5.2A The Assumptions
			5.2B Meaning of the Assumptions
		5.3 Factor Intensity, Factor Abundance, and the Shape of the Production Frontier
			5.3A Factor Intensity
			5.3B Factor Abundance
			5.3C Factor Abundance and the Shape of the Production Frontier
				Case Study 5-1 Relative Resource Endowment of Various Countries
				Case Study 5-2 Capital–Labor Ratios of Selected Countries
		5.4 Factor Endowments and the Heckscher–Ohlin Theory
			5.4A The Heckscher—Ohlin Theorem
			5.4B General Equilibrium Framework of the Heckscher–Ohlin Theory
			5.4C Illustration of the Heckscher—Ohlin Theory
				Case Study 5-3 Classification of Major Product Categories in Terms of Factor Intensity
				Case Study 5-4 The Factor Intensity of Trade of Various Countries
		5.5 Factor–Price Equalization and Income Distribution
			5.5A The Factor–Price Equalization Theorem
			5.5B Relative and Absolute Factor–Price Equalization
			5.5C Effect of Trade on the Distribution of Income
				Case Study 5-5 Has International Trade Increased U.S. Wage Inequalities?
			5.5D The Specific-Factors Model
			5.5E Empirical Relevance
				Case Study 5-6 Convergence of Real Wages among Leading Advanced Countries
		5.6 Empirical Tests of the Heckscher–Ohlin Model
			5.6A  Empirical Results—The Leontief Paradox
				Case Study 5-7 Capital and Labor Requirements in U.S. Trade
			5.6B Explanations of the Leontief Paradox and Other Empirical Tests of the H–O Model
				Case Study 5-8 The H–O Model with Skills and Land
			5.6C Factor–Intensity Reversal
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A5.1 The Edgeworth Box Diagram for Nation 1 and Nation 2
			A5.2 Relative Factor–Price Equalization
			A5.3 Absolute Factor–Price Equalization
			A5.4 Effect of Trade on the Short-Run Distribution of Income: The Specific-Factors Model
			A5.5 Illustration of Factor–Intensity Reversal
			A5.6 The Elasticity of Substitution and Factor–Intensity Reversal
			A5.7 Empirical Tests of Factor–Intensity Reversal
	Chapter 6 Economies of Scale, Imperfect Competition, and International Trade
		6.1 Introduction
		6.2 The Heckscher–Ohlin Model and New Trade Theories
		6.3 Economies of Scale and International Trade
			Case Study 6-1 The New International Economies of Scale
			Case Study 6-2 Job Loss Rates in U.S. Industries and Globalization
		6.4 Imperfect Competition and International Trade
			6.4A Trade Based on Product Differentiation
				Case Study 6-3 U.S. Intra-Industry Trade in Automotive Products
				Case Study 6-4 Variety Gains with International Trade
			6.4B Relationship Between Intra-Industry and H–O Trade Models
			6.4C Measuring Intra-Industry Trade
				Case Study 6-5 Growth of Intra-Industry Trade
				Case Study 6-6 Intra-Industry Trade Indexes for G-20 Countries
				Case Study 6-7 Index of Intra-Industry Trade of Some U.S. Industries, 2017
			6.4D Formal Model of Intra-Industry Trade
			6.4E Another Version of the Intra-Industry Trade Model
		6.5 Trade Based on Dynamic Technological Differences
			6.5A Technological Gap and Product Cycle Models
			6.5B Illustration of the Product Cycle Model
				Case Study 6-8 The United States as the Most Competitive Economy
		6.6 Costs of Transportation, Environmental Standards, and International Trade
			6.6A Costs of Transportation and Nontraded Commodities
			6.6B Costs of Transportation and the Location of Industry
			6.6C Environmental Standards, Industry Location, and International Trade
				Case Study 6-9 Environmental Performance Index
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A6.1 External Economies and the Pattern of Trade
			A6.2 Dynamic External Economies and Specialization
	Chapter 7 Economic Growth and International Trade
		7.1 Introduction
		7.2 Growth of Factors of Production
			7.2A Labor Growth and Capital Accumulation over Time
			7.2B The Rybczynski Theorem
		7.3 Technical Progress
			7.3A Neutral, Labor-Saving, and Capital-Saving Technical Progress
			7.3B Technical Progress and the Nation’s Production Frontier
				Case Study 7-1 Growth in the Capital Stock per Worker of Selected Countries
		7.4 Growth and Trade: The Small-Country Case
			7.4A The Effect of Growth on Trade
			7.4B Illustration of Factor Growth, Trade, and Welfare
			7.4C Technical Progress, Trade, and Welfare
				Case Study 7-2 Growth in Output per Worker from Capital Deepening, Technological Change, and Improvements in Efficiency
		7.5 Growth and Trade: The Large-Country Case
			7.5A Growth and the Nation’s Terms of Trade and Welfare
			7.5B Immiserizing Growth
			7.5C Illustration of Beneficial Growth and Trade
				Case Study 7-3 Growth and the Emergence of New Economic Giants
		7.6 Growth, Change in Tastes, and Trade in Both Nations
			7.6A Growth and Trade in Both Nations
			7.6B Change in Tastes and Trade in Both Nations
				Case Study 7-4 Growth, Trade, and Welfare in the Leading Industrial Countries
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A7.1 Formal Proof of the Rybczynski Theorem
			A7.2 Growth with Factor Immobility
			A7.3 Graphical Analysis of Hicksian Technical Progress
Part 2 International Trade Policy
	Chapter 8 Trade Restrictions: Tariffs
		8.1 Introduction
			Case Study 8-1 Average Tariff on Nonagricultural Products in Major Developed Countries
			Case Study 8-2 Average Tariffs on Nonagricultural Products in Some Major Developing Countries
		8.2 Partial Equilibrium Analysis of a Tariff
			8.2A Partial Equilibrium Effects of a Tariff
			8.2B Effect of a Tariff on Consumer and Producer Surplus
			8.2C Costs and Benefits of a Tariff
				Case Study 8-3 The Welfare Effect of Liberalizing Trade on Some U.S. Products
				Case Study 8-4 The Welfare Effect of Liberalizing Trade on Some EU Products
		8.3 The Theory of Tariff Structure
			8.3A The Rate of Effective Protection
			8.3B Generalization and Evaluation of the Theory of Effective Protection
				Case Study 8-5 Structure of Tariffs on Industrial Products in the United States, the European Union, Japan, and Canada
				Case Study 8-6 Tariff Escalation for Various Developing-Country Regions and Sectors
		8.4 General Equilibrium Analysis of a Tariff in a Small Country
			8.4A General Equilibrium Effects of a Tariff in a Small Country
			8.4B Illustration of the Effects of a Tariff in a Small Country
			8.4C The Stolper–Samuelson Theorem
		8.5 General Equilibrium Analysis of a Tariff in a Large Country
			8.5A General Equilibrium Effects of a Tariff in a Large Country
			8.5B Illustration of the Effects of a Tariff in a Large Country
		8.6 The Optimum Tariff
			8.6A The Meaning of the Concept of Optimum Tariff and Retaliation
			8.6B Illustration of the Optimum Tariff and Retaliation
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A8.1 Partial Equilibrium Effects of a Tariff in a Large Nation
			A8.2 Derivation of the Formula for the Rate of Effective Protection
			A8.3 The Stolper–Samuelson Theorem Graphically
			A8.4 Exception to the Stolper–Samuelson Theorem—The Metzler Paradox
			A8.5 Short-Run Effect of a Tariff on Factors’ Income
			A8.6 Measurement of the Optimum Tariff
	Chapter 9 Nontariff Trade Barriers and the New Protectionism
		9.1 Introduction
		9.2 Import Quotas
			9.2A Effects of an Import Quota
				Case Study 9-1 The Economic Effects of the U.S. Quota on Sugar Imports
			9.2B Comparison of an Import Quota to an Import Tariff
		9.3 Other Nontariff Barriers and the New Protectionism
			9.3A Voluntary Export Restraints
				Case Study 9-2 Voluntary Export Restraints (VERs) on Japanese Automobiles to the United States and Europe
			9.3B Technical, Administrative, and Other Regulations
			9.3C International Cartels
			9.3D Dumping
				Case Study 9-3 Number of Antidumping Measures Imposed by G20 Members
			9.3E Export Subsidies
				Case Study 9-4 Agricultural Subsidies in OECD Countries
				Case Study 9-5 Pervasiveness of Nontariff Barriers
			9.3F Analysis of Export Subsidies
		9.4 The Political Economy of Protectionism
			9.4A Fallacious and Questionable Arguments for Protection
			9.4B The Infant-Industry and Other Qualified Arguments for Protection
			9.4C Who Gets Protected?
				Case Study 9-6 Benefits to the World Economy from Complete Trade Liberalization
		9.5 Strategic Trade and Industrial Policies
			9.5A Strategic Trade Policy
			9.5B Strategic Trade and Industrial Policies with Game Theory
			9.5C The U.S. Response to Foreign Industrial Targeting and Strategic Trade Policies
				Case Study 9-7 Trump Almost Started a Trade War in 2018
		9.6 History of U.S. Commercial Policy
			9.6A The Trade Agreements Act of 1934
			9.6B The General Agreement on Tariffs and Trade (GATT)
			9.6C The 1962 Trade Expansion Act and the Kennedy Round
			9.6D The Trade Reform Act of 1974 and the Tokyo Round
			9.6E The 1984 and 1988 Trade Acts
		9.7 The Uruguay Round, the Failed Doha Round, and the Outstanding Trade Problems
			9.7A The Uruguay Round
				Case Study 9-8 Gains from the Uruguay Round
			9.7B The Failed Doha Round
				Case Study 9-9 The Multilateral Rounds of Trade Negotiations
			9.7C Outstanding Trade Problems
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A9.1 Centralized Cartels
			A9.2 International Price Discrimination
			A9.3 Tariffs, Subsidies, and Domestic Goals
	Chapter 10 Economic Integration: Customs Unions and Free Trade Areas
		10.1 Introduction
		10.2 Trade-Creating Customs Union
			10.2A Trade Creation
			10.2B Illustration of a Trade-Creating Customs Union
		10.3 Trade-Diverting Customs Unions
			10.3A Trade Diversion
			10.3B Illustration of a Trade-Diverting Customs Union
		10.4 The Theory of the Second Best and Other Static Welfare Effects of Customs Unions
			10.4A The Theory of the Second Best
			10.4B Conditions More Likely to Lead to Increased Welfare
			10.4C Other Static Welfare Effects of Customs Unions
		10.5 Dynamic Benefits from Customs Unions
		10.6 History of Attempts at Economic Integration
			10.6A The European Union
				Case Study 10-1 Economic Profile of the EU, NAFTA, and Japan
				Case Study 10-2 Gains from the Single EU Market
			10.6B The European Free Trade Association
			10.6C The North American and Other Free Trade Agreements
				Case Study 10-3 Mexico’s Gains from NAFTA—Expectations and Outcome
			10.6D Attempts at Integration Among Developing Countries
				Case Study 10-4 Economic Profile of Mercosur
				Case Study 10-5 Changes in Trade Patterns with Economic Integration
			10.6E  Economic Integration in Central and Eastern Europe and in the Former Soviet Republics
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A10.1 General Equilibrium Analysis of the Static Effects of a Trade-Diverting Customs Union
			A10.2 Regional Trade Agreements and Other Groups Around the World in June 2018
	Chapter 11 International Trade and Economic Development
		11.1 Introduction
		11.2 The Importance of Trade to Development
			11.2A Trade Theory and Economic Development
			11.2B Trade as an Engine of Growth
			11.2C The Contributions of Trade to Development
			11.2D International Trade and Endogenous Growth Theory
				Case Study 11-1 The East Asian Miracle of Growth and Trade
		11.3 The Terms of Trade and Economic Development
			11.3A The Various Terms of Trade
			11.3B Alleged Reasons for Deterioration in the Commodity Terms of Trade
			11.3C Historical Movement in the Commodity and Income Terms of Trade
				Case Study 11-2 Change in Commodity Prices Over Time
		11.4 Export Instability and Economic Development
			11.4A Cause and Effects of Export Instability
			11.4B Measurements of Export Instability and Its Effect on Development
			11.4C International Commodity Agreements
		11.5 Import Substitution versus Export Orientation
			11.5A Development Through Import Substitution versus Exports
			11.5B Experience with Import Substitution
				Case Study 11-3 The Growth of GDP of Rich Countries, Globalizers, and Nonglobalizers
			11.5C Trade Liberalization and Growth in Developing Countries
				Case Study 11-4 Manufactures in Total Exports of Selected Developing Countries
		11.6 Current Problems Facing Developing Countries
			11.6A Poverty in Developing Countries
			11.6B The Foreign Debt Problem of Developing Countries
				Case Study 11-5 The Foreign Debt Burden of Developing Countries
			11.6C Trade Problems of Developing Countries
				Case Study 11-6 Globalization and World Poverty
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A11.1 Income Inequalities by Traditional and Purchasing-Power Parity (PPP) Measures
			A11.2 The World by Income
	Chapter 12 International Resource Movements and Multinational Corporations
		12.1 Introduction
		12.2 Some Data on International Capital Flows
			Case Study 12-1 Fluctuations in Foreign Direct Investment Flows to the United States
		12.3 Motives for International Capital Flows
			12.3A Motives for International Portfolio Investments
			12.3B Motives for Direct Foreign Investments
				Case Study 12-2 The Stock of Foreign Direct Investments Around the World
		12.4 Welfare Effects of International Capital Flows
			12.4A Effects on the Investing and Host Countries
			12.4B Other Effects on the Investing and Host Countries
		12.5 Multinational Corporations
			12.5A Reasons for the Existence of Multinational Corporations
			12.5B Problems Created by Multinational Corporations in the Home Country
				Case Study 12-3 The World’s Largest Industrial Corporations
				Case Study 12-4 Employment of U.S. MNCs Abroad
			12.5C Problems Created by Multinational Corporations in the Host Country
		12.6 Motives for and Welfare Effects of International Labor Migration
			12.6A Motives for International Labor Migration
			12.6B Welfare Effects of International Labor Migration
			12.6C Other Welfare Effects of International Labor Migration
				Case Study 12-5 U.S. Immigration and Debate Over Immigration Policy
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A12.1 The Transfer Problem
			A12.2 International Trade, Financial and Aid Flows, and Migration
Part 3 The Balance of Payments, Foreign Exchange Markets, and Exchange Rates
	Chapter 13 Balance of Payments
		13.1 Introduction
		13.2 Balance of Payments Accounting
			13.2A Current Account and Capital Account
			13.2B Financial Account
			13.2C International Transactions with Double-Entry Bookkeeping
		13.3 The International Transactions of the United States
			Case Study 13-1 The Major Goods Exports and Imports of the United States
		13.4 Accounting Balances and the U.S. Balance of Payments
		13.5 The Postwar Balance of Payments of the United States
			Case Study 13-2 The Exploding U.S. Trade Deficit with China
			Case Study 13-3 The Major Trade Partners of the United States
		13.6 The Importance of the Current Account
		13.7 The International Investment Position of the United States
			Case Study 13-4 The United States as a Debtor Nation
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A13.1 The IMF Method of Reporting International Transactions
	Chapter 14 Foreign Exchange Markets and Exchange Rates
		14.1 Introduction
		14.2 Functions of the Foreign Exchange Markets
			Case Study 14-1 The U.S. Dollar as the Dominant International Currency
			Case Study 14-2 The Birth of a New Currency: The Euro
		14.3 Foreign Exchange Rates
			14.3A Equilibrium Foreign Exchange Rates
				Case Study 14-3 Foreign Exchange Quotations
			14.3B Arbitrage
			14.3C The Exchange Rate and the Balance of Payments
		14.4 Spot and Forward Rates, Currency Swaps, Futures, and Options
			14.4A Spot and Forward Rates
			14.4B Foreign Exchange Swaps
			14.4C Foreign Exchange Futures and Options
				Case Study 14-4 Size, Currency, and Geographical Distribution of the Foreign Exchange Market
		14.5 Foreign Exchange Risks, Hedging, and Speculation
			14.5A Foreign Exchange Risks
			14.5B Hedging
			14.5C Speculation
		14.6 Interest Arbitrage and the Efficiency of Foreign Exchange Markets
			14.6A Uncovered Interest Arbitrage
				Case Study 14-5 Carry Trade
			14.6B Covered Interest Arbitrage
			14.6C Covered Interest Arbitrage Parity
			14.6D Covered Interest Arbitrage Margin
			14.6E Efficiency of Foreign Exchange Markets
		14.7 Eurocurrency or Offshore Financial Markets
			14.7A Description and Size of the Eurocurrency Market
				Case Study 14-6 Size and Growth of Eurocurrency Market
			14.7B Reasons for the Development and Growth of the Eurocurrency Market
			14.7C Operation and Effects of Eurocurrency Market
			14.7D Eurobond and Euronote Markets
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A14.1 Derivation of the Formula for the Covered Interest Arbitrage Margin
	Chapter 15 Exchange Rate Determination
		15.1 Introduction
		15.2 Purchasing-Power Parity Theory
			15.2A Absolute Purchasing-Power Parity Theory
				Case Study 15-1 Absolute Purchasing-Power Parity in the Real World
				Case Study 15-2 The Big Mac Index and the Law of One Price
			15.2B Relative Purchasing-Power Parity Theory
			15.2C Empirical Tests of the Purchasing-Power Parity Theory
				Case Study 15-3 Relative Purchasing-Power Parity in the Real World
		15.3 Monetary Approach to the Balance of Payments and Exchange Rates
			15.3A Monetary Approach Under Fixed Exchange Rates
			15.3B Monetary Approach Under Flexible Exchange Rates
			15.3C Monetary Approach to Exchange Rate Determination
			15.3D Expectations, Interest Differentials, and Exchange Rates
				Case Study 15-4 Monetary Growth and Inflation
				Case Study 15-5 Nominal and Real Exchange Rates, and the Monetary Approach
				Case Study 15-6 Interest Differentials, Exchange Rates, and the Monetary Approach
		15.4 Portfolio Balance Model and Exchange Rates
			15.4A Portfolio Balance Model
			15.4B Extended Portfolio Balance Model
			15.4C Portfolio Adjustments and Exchange Rates
		15.5 Exchange Rate Dynamics
			15.5A Exchange Rate Overshooting
			15.5B Time Path to a New Equilibrium Exchange Rate
				Case Study 15-7 Exchange Rate Overshooting of the U.S. Dollar
		15.6 Empirical Tests of the Monetary and Portfolio Balance Models and Exchange Rate Forecasting
			Case Study 15-8 The Euro Exchange Rate Defies Forecasting
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A15.1 Formal Monetary Approach Model
			A15.2 Formal Portfolio Balance Model and Exchange Rates
Part 4 Open-Economy Macroeconomics and the International Monetary System
	Chapter 16 The Price Adjustment Mechanism with Flexible and Fixed Exchange Rates
		16.1 Introduction
		16.2 Adjustment with Flexible Exchange Rates
			16.2A Balance-of-Payments Adjustments with Exchange Rate Changes
			16.2B Derivation of the Demand Curve for Foreign Exchange
			16.2C Derivation of the Supply Curve for Foreign Exchange
		16.3 Effect of Exchange Rate Changes on Domestic Prices and the Terms of Trade
			Case Study 16-1 Currency Depreciation and Inflation in Developing Countries During the 1997–1998 East Asian Crisis
		16.4 Stability of Foreign Exchange Markets
			16.4A Stable and Unstable Foreign Exchange Markets
			16.4B The Marshall–Lerner Condition
		16.5 Elasticities in the Real World
			16.5A Elasticity Estimates
			16.5B The J-Curve Effect and Revised Elasticity Estimates
				Case Study 16-2 Estimated Price Elasticities in International Trade
				Case Study 16-3 Other Estimated Price Elasticities in International Trade
				Case Study 16-4 Effective Exchange Rate of the Dollar and U.S. Current Account Balance
				Case Study 16-5 Dollar Depreciation and the U.S. Current Account Balance
				Case Study 16-6 Exchange Rates and Current Account Balances during the European Financial Crisis of the Early 1990s
			16.5C Currency Pass-Through
				Case Study 16-7 Exchange Rate Pass-Through to Import Prices in Industrial Countries
		16.6 Adjustment under the Gold Standard
			16.6A The Gold Standard
			16.6B The Price–Specie Flow Mechanism
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A16.1 The Effect of Exchange Rate Changes on Domestic Prices
			A16.2 Derivation of the Marshall–Lerner Condition
			A16.3 Derivation of the Gold Points and Gold Flows Under the Gold Standard
	Chapter 17 The Income Adjustment Mechanism and Synthesis of Automatic Adjustments
		17.1 Introduction
		17.2 Income Determination in a Closed Economy
			17.2A Determination of the Equilibrium National Income in a Closed Economy
			17.2B Multiplier in a Closed Economy
		17.3 Income Determination in a Small Open Economy
			17.3A Import Function
			17.3B Determination of the Equilibrium National Income in a Small Open Economy
				Case Study 17-1 Income Elasticity of Imports
			17.3C Graphical Determination of the Equilibrium National Income
				Case Study 17-2 Private Sector and Current Account Balances
			17.3D Foreign Trade Multiplier
				Case Study 17-3 Growth in the United States and the World, and U.S. Current Account Deficits
				Case Study 17-4 Growth and Current Account Balance in the G7 Countries and the BRICS
		17.4 Foreign Repercussions
			Case Study 17-5 Effect of the Asian Financial Crisis of the Late 1990s on OECD Countries
		17.5 Absorption Approach
		17.6 Monetary Adjustments and Synthesis of the Automatic Adjustments
			17.6A Monetary Adjustments
			17.6B Synthesis of Automatic Adjustments
			17.6C Disadvantages of Automatic Adjustments
				Case Study 1 7-6 Interdependence in the World Economy
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A17.1 Derivation of Foreign Trade Multipliers with Foreign Repercussions
			A17.2 The Transfer Problem Once Again
	Chapter 18 Open-Economy Macroeconomics: Adjustment Policies
		18.1 Introduction
			Case Study 18-1 Government, Private-Sector, and Current Account Balances in the G7 Countries
		18.2 Internal and External Balance with Expenditure-Changing and Expenditure-Switching Policies
		18.3 Equilibrium in the Goods Market, in the Money Market, and in the Balance of Payments
		18.4 Fiscal and Monetary Policies for Internal and External Balance with Fixed Exchange Rates
			18.4A Fiscal and Monetary Policies from External Balance and Unemployment
			18.4B Fiscal and Monetary Policies from External Deficit and Unemployment
			18.4C Fiscal and Monetary Policies with Elastic Capital Flows
				Case Study 18-2 Relationship Between U.S. Current Account and Budget Deficits
			18.4D Fiscal and Monetary Policies with Perfect Capital Mobility
				Case Study 18-3 Effect of U.S. Fiscal Policy in the United States and Abroad
		18.5 The IS–LM–BP Model with Flexible Exchange Rates
			18.5A The IS–LM–BP Model with Flexible Exchange Rates and Imperfect Capital Mobility
			18.5B The IS–LM–BP Model with Flexible Exchange Rates and Perfect Capital Mobility
				Case Study 18-4 Effect of Monetary Policy in the United States and Other OECD Countries
		18.6 Policy Mix and Price Changes
			18.6A Policy Mix and Internal and External Balance
			18.6B Evaluation of the Policy Mix with Price Changes
			18.6C Policy Mix in the Real World
				Case Study 18-5 U.S. Monetary and Fiscal Policies during the Past Decade
				Case Study 18-6 Deeper U.S. Recession without Strong Fiscal and Monetary Measures
		18.7 Direct Controls
			18.7A Trade Controls
			18.7B Exchange Controls
				Case Study 18-7 Direct Controls on International Transactions Around the World
			18.7C Other Direct Controls and International Cooperation
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A18.1 Derivation of the IS Curve
			A18.2 Derivation of the LM Curve
			A18.3 Derivation of the BP Curve
			A18.4 Mathematical Summary
	Chapter 19 Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply
		19.1 Introduction
		19.2 Aggregate Demand, Aggregate Supply, and Equilibrium in a Closed Economy
			19.2A Aggregate Demand in a Closed Economy
			19.2B Aggregate Supply in the Long Run and in the Short Run
			19.2C Short-Run and Long-Run Equilibrium in a Closed Economy
				Case Study 19-1 Deviations of Short-Run Outputs from the Natural Level in the United States
		19.3 Aggregate Demand in an Open Economy Under Fixed and Flexible Exchange Rates
			19.3A Aggregate Demand in an Open Economy Under Fixed Exchange Rates
			19.3B Aggregate Demand in an Open Economy Under Flexible Exchange Rates
		19.4 Effect of Economic Shocks and Macroeconomic Policies on Aggregate Demand in Open Economies with Flexible Prices
			19.4A Real-Sector Shocks and Aggregate Demand
			19.4B Monetary Shocks and Aggregate Demand
			19.4C Fiscal and Monetary Policies and Aggregate Demand in Open Economies
		19.5 Effect of Fiscal and Monetary Policies in Open Economies with Flexible Prices
			Case Study 19-2 Central Bank Independence and Inflation in Industrial Countries
			Case Study 19-3 Inflation targeting—A New approach to Monetary Policy
		19.6 Macroeconomic Policies to Stimulate Growth and Adjust to Supply Shocks
			19.6A Macroeconomic Policies for Growth
			19.6B Macroeconomic Policies to Adjust to Supply Shocks
				Case Study 19-4 Petroleum Shocks and Stagflation in the United States
				Case Study 19-5 Impact of an Increase in the Price of Petroleum
				Case Study 19-6 Actual and Natural Unemployment Rates and Inflation in the United States
		Summary
		Key Terms
		Questions for Review
		Problems
	Chapter 20 Flexible versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination
		20.1 Introduction
		20.2 The Case for Flexible Exchange Rates
			20.2A Market Efficiency
			20.2B Policy Advantages
		20.3 The Case for Fixed Exchange Rates
			20.3A Less Uncertainty
			20.3B Stabilizing Speculation
			20.3C Price Discipline
				Case Study 20-1 Macroeconomic Performance under Fixed and Flexible Exchange Rate Regimes
			20.3D The Open-Economy Trilemma
		20.4 Optimum Currency Areas, the European Monetary System, and the European Monetary Union
			20.4A Optimum Currency Areas
			20.4B European Monetary System (1979–1998)
				Case Study 20-2 The 1992–1993 Currency Crisis in the European Monetary System
			20.4C Transition to Monetary Union
				Case Study 20-3 Maastricht Convergence Indicators
			20.4D Creation of the Euro
				Case Study 20-4 Benefits and Costs of the Euro
			20.4E The European Central Bank and the Common Monetary Policy
				Case Study 20-5 The Eurozone Crisis
		20.5 Currency Boards Arrangements and Dollarization
			20.5A Currency Board Arrangements
				Case Study 20-6 Argentina’s Currency Board Arrangements and Crisis
			20.5B Dollarization
		20.6 Exchange Rate Bands, Adjustable Pegs, Crawling Pegs, and Managed Floating
			20.6A Exchange Rate Bands
			20.6B Adjustable Peg Systems
			20.6C Crawling Pegs
			20.6D Managed Floating
				Case Study 20-7 Exchange Rate Arrangements of IMF Members
		20.7 International Macroeconomic Policy Coordination
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A20.1 Exchange Rate Arrangements
	Chapter 21 The International Monetary System: Past, Present, and Future
		21.1 Introduction
		21.2 The Gold Standard and the Interwar Experience
			21.2A The Gold Standard Period (1880–1914)
			21.2B The Interwar Experience
		21.3 The Bretton Woods System
			21.3A The Gold-Exchange Standard (1947–1971)
			21.3B Borrowing from the International Monetary Fund
		21.4 Operation and Evolution of the Bretton Woods System
			21.4A Operation of the Bretton Woods System
			21.4B Evolution of the Bretton Woods System
				Case Study 21-1 Macroeconomic Performance Under Different Exchange Rate Regimes
		21.5 U.S. Balance-of-Payments Deficits and Collapse of the Bretton Woods System
			21.5A U.S. Balance-of-Payments Deficits
			21.5B Collapse of the Bretton Woods System
		21.6 The International Monetary System: Present and Future
			21.6A Operation of the Present System
			21.6B Current IMF Operation
			21.6C Problems with Present Exchange Rate Arrangements
			21.6D Proposals for Reforming Present Exchange Rate Arrangements
			21.6E Financial Crises and the International Monetary System
				Case Study 21-2 The Anatomy of a Currency Crisis: The Collapse of the Mexican Peso
				Case Study 21-3 Chronology of Economic Crises in Emerging Markets
				Case Study 21-4 The 2008–2009 Global Financial Crisis and Great Recession
			21.6F Other Current International Economic Problems
				Case Study 21-5 Trade Imbalances of the Leading Advanced Nations
		Summary
		Key Terms
		Questions for Review
		Problems
		Appendix
			A21.1 International Reserves: 1950–2018
Glossary of Key Terms
Name Index
Subject Index
EULA