INTERNATIONAL ECONOMICS -II

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Paper Code: 
ECO 421
Credits: 
4
Contact Hours: 
60.00
Max. Marks: 
100.00
Objective: 

1.     To make the students understand the concept of tariffs and other non-tariff barriers and to acquaint them with the theory of Economic Integration, particularly Customs Union.

2.     To acquaint the students with the meaning and components of balance of payments and devaluation.

3.     To introduce the students to the role of foreign exchange market, transactions involving foreign exchange and theories of exchange rate determination.

12.00
Unit I: 
International Trade Policy – I

Free Trade vsProtectionism;Tariffs – meaning and types;Partial Equilibrium Analysis of a Tariff;Rate of Effective Protection;General Equilibrium effects of tariffs in a small nation – The Stolper Samuelson Theorem;General Equilibrium effects of tariffs in a large nation – The Optimum Tariff.

12.00
Unit II: 
International Trade Policy – II

Import Quotas – Meaning, types and effects;Import Tariff vs Import Quota;Othernon tariff barriers – Voluntary Export Restraints; Technical, Administrative and Other Regulations; International Cartels; Dumping; Export Subsidies;Strategic Trade and Industrial Policies.

12.00
Unit III: 
Economic Integration

Forms of economic integration;Trade creating customs union;Trade diverting customs union;Static and Dynamic effects of customs union;European Union, NAFTA, EFTA.

12.00
Unit IV: 
Balance of Payments & Devaluation

Components of balance of payments;Balance of payments disequilibrium – meaning and causes;Measures to correct disequilibrium in the balance of payments;Foreign Trade Multiplier;Devaluation – elasticities approach, Marshall-Lerner condition, income absorption approach;The J – curve effect.

12.00
Unit V: 
Foreign Exchange Market and Exchange Rates

Functions of foreign exchange market;Transactions in foreign exchange market – spot & forward exchanges, futures, options, swap operation, arbitrage, foreign exchange risks, hedging and speculation;Determination of exchange rates – PPP theory & BOP theory;Exchange rate system – fixed exchange rates, flexible exchange rates.

Essential Readings: 
  1. Salvatore, D., International Economics: Trade and Finance, Wiley; Eleventh edition 2014.
  2. Cherunilam, Francis, International Economics, Tata McGraw-Hill Publishing Company Limited, New Delhi, 2001. 
References: 
  1. Appleyard, Dennis R., International Economics, McGraw Hill Education (India) , Chennai,  8th edition, 2016.
  2. Rana K.C and Verma K.N., International Economics, Vishal Publishing Company, 2017
Academic Session: 
2022-23