internationaleconomicswgangliu.weebly.com/uploads/4/4/5/1/4451767/... · syllabus preliminaries...

SyllabusPreliminaries

China Trade in WorldSummary

International EconomicsLecture 1 Introduction

Weigang Liu

Beijing University of Technology

18th, January, 2019

Weigang Liu International Economics

Outline

1 Syllabus

2 Preliminaries

3 China Trade in the World

What is this course?

Introduce students to a number of theories of internationaleconomics

TradeOpen-economy macroeconomicsAll in 48 hours.

Use these theories to:Analyze consequences of international trade and implication ofglobalizationAsses recent policy debatesBring the models to the data.

This will be fundamentally a theoretical course, but thetheories have real world applications!

Who am I?

Weigang LiuGraduate from Peking University, 2015Post-doctoral in CASS from 2015 to 2018.

Research fieldTrade theoryTechnology diffusion in Multinational Production.

Contact informationOffice: Room 403E, Jingguan BuildingOffice hours: Monday & Thursday, 3:30-4:30 pmEmail: [email protected] is for setting up appointments only, ask questions inperson!

Who am I?

Prerequisites

EconomicsConsumer theoryProduction theoryetc.

MathematicsMathematical analysisLectures and exams will be a combination of diagrams andmath.

The goal is to gain an understanding of the mechanisms atwork rather than formally prove results.

Prerequisites

Text bookInternational Economics: Theory and Policy

Krugman, Obstfeld, and Melitz11th or 10th edition, either is okay.

International MacroeconomicsSchmitt-Groche, Uribe, WoodfordUnpublished Manuscript, 2016

It should be noted that this course will not follow thetextbook exactly.

Lecture notes

Lecture notes would be post on my homepage one day beforethe class

Website: http://wgangliu.weebly.com/Recommendation:

Bring printed handout of lecture slides to class to take notes.Exams based more closely on lecture slides than on book.

Lecture notes

Grading: overview

Two in-class midterms: 25% each

Final exam: 30%

Problem sets: 10%

Class participation: 10%.

Grading: overview

Final exam: 30%

Problem sets: 10%

Grading: overview

Final exam: 30%

Problem sets: 10%

Grading: overview

Final exam: 30%

Problem sets: 10%

Exam arrangement and requirement

Midterm #1: Thursday, March 14

Midterm #2: Monday, April 15Requirement:

In class, two hoursNo communications, notes, etc.Time limit strictly enforced

Final exam would be scheduled offically.

Problem sets

Only 10% of your grade

It is good preparation for the exams to go through theproblem sets

I will give problem set solutions after the due date

Time permitting, we can walk through similar problems at theend of class.

Problem sets

Other requirements

No late, one verbal warning, then class participation penalites

No laptops

No cell phones

I will do my best to post the lecture slides for each class thenight before so you can print them out to take notes.

Other requirements

No laptops

No cell phones

Other requirements

No laptops

No cell phones

Other requirements

No laptops

No cell phones

Glance at the main parts of this course

Comparative advantageRicardian Model, Modern Comparative Advantage, Bring thetheory to the Data

Winners and losers of TradeSpecific Factors Model, Heckscher-Ohlin Model (Midterm #1)

Trade and firmsMonopolistic Competition, Heterogenous Firms

Policy analysis with trade modelsGravity, Quantitative Trade Models, More topics on Policyanalysis with Trade Models (Midterm #2)

International FinanceCurrent AccountGlobal ImbalancesExchange RatesForeign Exchange MarketInternational Financial MarketsSovereign DebtCurrency Crises and Banking Panics

Why do people trade?

[Class question]: What are some ways which you have tradedtoday?

Possible answers:Trading your (or your parent’s) current or future earnings formy teachingI am teaching you so that I can repair the fence the dogchewed.

[Class question]: What makes countries (or people) trade?Typical theoretical answers:

Different skill sets (with countries, we call them“technologies”)Different endowmentsProduce different things.

Why do people trade?

[Class question]: What are some ways which you have tradedtoday?

Possible answers:Trading your (or your parent’s) current or future earnings formy teachingI am teaching you so that I can repair the fence the dogchewed.

[Class question]: What makes countries (or people) trade?Typical theoretical answers:

Different skill sets (with countries, we call them“technologies”)Different endowmentsProduce different things.

Why study trade and international finance?

Reason #1:Trade is an increasingly important part of the world economy.

Reason #2:Trade seems closely linked with economic growth

In almost all cases, trade makes all countries better off. Wecall this the gains from trade. Despite the potential gains,much resistance to freer trade.Reason #3:

How can we understand this resistance?

An introduction to economic models

Trade models are general equilibrium models

What does this mean? Roughly speaking, there are a lot ofmoving pieces.

To avoid confusion, it is very important to be organized whilemodeling.Three parts of any trade model:

Exogenous model parametersEndogenous model outcomesAn equilibrium concept.

Exogenous model parameters

The exogenous model parameters are the elements of themodel that are taken “as given”

You as the economist choose their values

They do not respond to other elements of the model

But these are the things that you as an economist can changeto see how the outcome of the model can change.

Endogenous model outcomes

The endogenous model outcomes are the elements of themodel that “move around”

You as the economist do not get to choose their values

Instead, they respond to the other elements of the model(including both the exogenous model parameters and otherendogenous outcomes)

These are the parts of the model that you are interested inwatching change when you change the exogenous modelparameters.

An equilibrium concept

An equilibrium concept is the set of rules that tells you whatthe endogenous model outcomes should be for a given set ofexogenous model parameters

An equilibrium may be one or more conditionsEvery model should have the following phrase:

“Given a [insert set of exogenous model parameters here],equilibrium is dened by the [insert endogenous model outcomeshere] such that [list equilibrium conditions here]."

Example: Supply and Demand

What are the three parts of that model?Exogenous model parameters:

Supply curve and demand curveEndogenous model outcomes:

Price and quantityEquilibrium concept:

“For a given supply curve and demand curve, equilibrium isdefined by a price and quantity such that demand equalssupply."

A precautionary note

Benefit of economic models: clearly state assumptions, followmodel to logical conclusion

A good economic model abstracts from the unimportant tofocus on a particular mechanism

However, models are (at best) a stylized notion of reality

In particular, the exogenous parameters of one model mayvery well be the endogenous outcomes of anotherEconomics in general requires careful thought about:

How the model assumptions affect the model outcomes(“thinking within the model”)What other aspects are missing from the model that mayaffect the outcomes in reality (“thinking outside the model”).

Goods Trade in China

Data Source: China Statistical Yearbook (2018)

Service Trade in China

Compostion of China Goods Trade, 2017 (100 M RMB)

Compostion of Primary Goods, 2017 (100 M RMB)

Compostion of China Trade, 2017

World trade volume trends, January 2008–April 2018

Source: Trade and Development Report (2018), UNCTAD

World trade, global output and related elasticities, selectedcountry groups and periods, 1870–2016

Share in global merchandise exports, 1948–2017

Developing economies’ share of trade by weight,1970–2016

Total gross exports, selected country groups and China,1948–2016

Global network of merchandise trade, selected years,1986–2016

World trade in value added by sectors, selected countrygroups, 1995–2011

Value added shares in gross exports of developingeconomies, level and changes, 1995–2014

Export structure by technological levels, selecteddeveloping regions, 1990–2016

Export structure by technological levels and selectedpartners, selected developing regions, 1990–2016

Summary

Syllabus of this course is introduced

You should remember the requirements and arrangments

Preliminaries to understand the model in trade

Overivew of the trade in China and World

Summary

Homework #1

Find the ten top trade parterner of China during the lastdecade (2008-1017)To describe the characteristics of regional trade, i.e. the tradein ProvincesDue the beginning of the next class.

Appendix For Further Reading

internationaleconomicswgangliu.weebly.com/uploads/4/4/5/1/4451767/... · syllabus preliminaries...

Documents