Introductions
Economics 28b
The Global Economy
Instructor:Scott A. Redenius
TA: Shentong Rao
BUGS: Harry Xiao
Course Prerequisites:
You Must Have One of the Following
• Econ 2a
• Econ 10a (prerequisite) and 20a (corequisite)
• An approved Intro Econ transfer course or course sequence
• Econ exam credit
AP Micro and Macro 4 or 5
International Baccalaureate Economics
5 or better
Higher-Level exam
A-Level Economics exam A, B, or C
French Baccalaureate Economics exam 14 or better
Econ 28b
The Global Economy
An introduction to International Economics
Course topics
International Trade Theory (chs. 1-7)
International Trade Policy (chs. 8-12)
International Factor Movements (ch. 15)
Foreign Exchange (chs. 16-21)
Macroeconomic policies for open economies (chs. 22-24) will not be
covered
The Course – Grading
Homework 20% weekly – the lowest score will be dropped
Project 20% 4 sections, each worth 5%
Exam 1 20% 3/5, in recitation
Exam 2 20% 4/2, in recitation
Exam 3 20% TBD – held during the final exam period
The exams are not cumulative
Sample exams will be posted in Moodle
Course grades will be based on the distribution given in the syllabus
Learning Goals
Students will be better able to
1. apply economic principles and models to evaluate international news and
policy proposals
2. discuss economic features of globalization and counter some misconceptions
about its effects
3. discuss the institutions of the international economy such as the World Trade
Organization and most favored nation principle
4. use the economic models and modeling approaches developed in the course
5. access and use international economic data from official sources
6. effectively communicate economic research in writing w/ correct citations
What Makes International Economics Different?
International trade is between nations rather than within a nation
Nations are sovereign
They have their own governments that act in their own interests
Other nations and international bodies have limited ability to
influence national policies
A nation can impose restrictions on the interactions between its
citizens and the rest of the world
What Makes International Economics Different?
The implications can be seen by contrasting trade within a country with
trade between countries
Within a country
Common currency
Uniform laws / Regulations / Court system
Free flow of goods and services
Factor mobility (capital and labor)
What Makes International Economics Different?
The implications can be seen by contrasting trade within a country with
trade between countries
Between countries
Different currencies, so exchange rates (affected by differences in
monetary and fiscal policy)
Different laws / Regulations / Court systems
Governments can limit international flows of goods and services
Governments can limit international factor mobility (capital and
labor)
Globalization
The terms “globalization” and “global economy” have become
commonplace and globalization has had obvious impacts
A few examples
Food
Pandemics
Social movements
Film/culture
Economic Globalization /
Global Economy
Our focus will be on economic aspects of globalization
Economic globalization
The integration of national economies through trade, capital flows,
migration, and technology transfers
Global economy
The economy of the world, including all of world’s national
economies
Globalization / Global Economy
2,100
World exports
1,600
Index (1960 = 100)
1,100
600
World pro-
duction
100
60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 11 14 17 20
19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20
Source: My calculations; data from World Bank, World Development Indicators
Globalization / Global Economy
35
30
Exports (% of World GDP)
25
20
15
10
60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 11 14 17 20
19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20
Source: World Bank, World Development Indicators, series NE.EXP.GNFS.ZS
Globalization / Global Economy
(Exports + Imports) as a % of GDP Exports I mports
100
1970 2019 GDP
United States 11.1 26.3 X M
100
Canada 42.1 65.4 Y
Japan 20.9 34.8
France 31.1 64.1
United Kingdom 43.3 62.9
Australia 25.9 45.8
Denmark 57.1 110.6
China 5.3 35.9
India 8.0 39.4
Korea 33.4 75.8
What is Driving Globalization?
Policy changes – elimination of or reductions in
trade barriers
capital controls
limits on immigration
Technological and institutional changes
Falling transportation costs
Improving communications
And Globalization Could
Go Much Further
Trade
Shipping across international borders is costly
Crossing the U.S.-Canada border has the same impact on trade as
shipping 1,500-2,500 miles
Differences in language, legal systems, business practices, etc., are
important barriers to trade
Factor flows
International migration is heavily restricted
Financial capital has a home bias – people appear to invest in
domestic assets rather than foreign assets, all other things equal
But Will It?
Or Will the Shape of Globalization Change?
Pandemic supply chain problems
Diversification of supply chains
Growing geopolitical tensions
Reshoring
Friendshoring
