Introduction to International Economics, International Student Version

Dominick Salvatore is the Distinguished Professor of Economics and the Director of the Ph.D. Program in Economics at Fordham University in New York City. He is the Honorary Professor at the Shanghai Finance University and Hunan University and was a Visiting Professor at various universities including University of Rome (2003-2010), American University in Cairo (2007), University of Pretoria (2009), Peking University (2009-2011), University of Trieste (1996-2002), and University of Vienna (1995-2003). Dr. Salvatore is a Fellow of the New York Academy of Sciences and past Chairman of its Economics Section. He is also the past president of the North American Economic and Finance Association (NAEFA) and the International Trade and Finance Association (ITFA). He is a Consultant to the United Nations, the World Bank, the International Monetary Fund, the Economic Policy Institute, and several major international corporations and global banks. He is the co-editor of the Journal of Policy Modeling and the Open Economies Review, the Associate Editor of The American Economist and Frontiers in Finance and Economics, and the past Editor of the Handbook Series in Economics, Greenwood Press. He has given more than 500 lectures around the world, was awarded the Achievement Award by the City of University of New York in 1997, and was nominated for the 2010 National Medal of Science awarded by the President of the United States.

1. Introduction to the Global Economy 1 PART ONE: INTERNATIONAL TRADE THEORY 29

2. Comparative Advantage 31

3. The Standard Trade Model 55

4. The Heckscher–Ohlin and Other Trade Theories 80

PART TWO: INTERNATIONAL TRADE POLICY 113

5. Trade Restrictions: Tariffs 115

6. Nontariff Trade Barriers and the Political Economy of Protectionism 137

PART THREE: INTERNATIONAL TRADE AND INVESTMENT RELATIONS 175

7. Economic Integration 177

8. Growth and Development with International Trade 200

9. International Resource Movements and Multinational Corporations 226

PART FOUR: THE BALANCE OF PAYMENTS, FOREIGN EXCHANGE MARKETS, AND EXCHANGE RATES 255

10. Balance of Payments 257

11. The Foreign Exchange Market and Exchange Rates 280

12. Exchange Rate Determination 308

PART FIVE: OPEN-ECONOMY MACROECONOMICS 331

13. Automatic Adjustments with Flexible and Fixed Exchange Rates 333

14. Adjustment Policies 362

PART SIX: THE INTERNATIONAL MONETARY SYSTEM: PAST, PRESENT, AND FUTURE 389

15. Flexible versus Fixed Exchange Rates, European Monetary Systems, and Macroeconomic

Policy Coordination 391

16. The International Monetary System: Past, Present, and Future 418