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international economics class notes
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International economics class notes with pictures of the powerpoint to be explained further
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International Economics- PDF/Theory
- PPP/’video’
- Problems/exercises
- For report (make calculations correct!)
- Read economic news.
Questions week 1
1. B
2. C
3. C
4. Export + import /GDP x 100% (gives indication how open economies are) A
5. C
6. C
7. B
8. Debatable B & C
9. A
10. A
Class Notes Week 1
Globalization
- International trade
- International production
o Global/regional supply chains
Outsourcing (involve a third party)
Offshoring (what they used to do in a country and that part of the
business to someplace else)
reshoring (move offshored operation back)
Friend-shoring (moving part of operations to geopolitical allies)
Near-shoring (move part of operation to another country
nearby)
If you have a larger percentage of a company its not really a portfolio investment but more a
FDI
Decoupling (said by biden)
- Try to cut off the linkage between the us and Chinese economies.
- The new term for this is de-risking (its not completely possible to cut off the linkage.
o Try to not be too dependent on other countries.
Horizontal FDI if you do the same thing in the same industry in another country
Vertical FDI if different industries are involved.
Inflow/Outflow: follow the money in what direction it goes.
,PowerPoints Week 1
What is international economics about?
International trade in goods AND services
- Not just for consumers (e.g. components)
- Not just goods, but also services
International ownership of assets
- FDI (foreign direct investments), (automobile assembly plants)
- Portfolio investments (shares, bonds)
o Objective is not to control any foreign entity, just make a financial return.
Currency exchange
- International transactions require conversions between currencies.
o Are important as international transactions requiring one currency into
another.
o Change all the time, it will either appreciate or depreciate.
What makes them change? (week 5)
International organizations
- WTO, IMF, Worldbank
o World trade organizations (WTO)
o International monetary fund (IMF)
What is globalization
One of the key concepts of international economics.
Globalization refers to the trend towards a more integrated global economic system.
- Countries became more depending on eachother
Two key facets of economics globalization are:
- The Globalization of markets
o Exports/imports goods and services.
International trade has grown faster than total world production
- The globalization of production
o Not only sell but also produce more abroad as well. (since 1980’s)
MNE’s
multinational enterprise’s
set-up or bought up subsidiaries abroad
o engaging in FDI
- Offshoring (buy or set up subsidiaries abroad)
- Outsourcing (hire thirds parties to do production or assemblies in other countries)
- Global supplychains are not only sufficient but also fragile.
, - Intrafirm trade (trade between different subsidiaries from the same multinational
company) (making up about 30% of world trade)
The drivers of globalization
there are two macro factors underlying the trend towards greater globalization.
1. Technological change (two important factors)
a. Improvements in transportation
i. Big container ships
ii. Steam ships great improvement to sailing ships
b. Information and communication technology. (developments in ICT are crucial)
i. Can only be done with huge and up to date information
2. Declining trade and investment barriers.
a. The roll of governments of either facilitating or hindering in international
trade or investments (attitudes are changing)
First Wave of Globalization: 1870 – 1914
Decreases in tariff barriers & new technologies.
- Declining transportation costs
o Shift from sail to steamships; railways
Mainly driven by European and American businesses
- Became the richest countries in the world.
Ended by world war 1 and great depression
- protectionism
second wave of globalization: 1945 – 1980
GB and US took the lead to create a new international economic order
- Bread and wood system
developed countries, manufactured goods.
- largely freed of barriers
o IMF
o Worldbank
o GATT (general agreement on tariffs and trade -> WTO (World trade
organization)
Purpose was to made the trade more free or fair (to stimulate
globalization)
- Lower transportation costs (e.g. containers)
Rich country specialization in manufacturing niches
- Creating clusters and supply chains
Most developing countries didn’t participate.
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