iep~session 1

7/27/2019 IEP~Session 1

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Amity Business School

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MBA 2013, 3rd Semester

INTERNATIONAL ECONOMICS AND POLICY

Amanpreet Kang


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How many continents?

How many oceans?

How many countries?

When were nations formed?

How were they organized earlier?

What has happened ever since?

Newest Nation state?

Our World


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What is developed and developing country classification?

Our World


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http://en.wikipedia.org/wiki/File:Ban_Ki-moon_headshot.jpg


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Course Objectives


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The purpose of studying the course:

Visualize & cope with Global Changes in Business scenario

Understanding the role of State

Understanding the role of International Institutions & TradePolicies

Exposure to World Economies, Transformations &Emerging markets

To develop an understanding about International Trade &Globalization

Introduction to International Economic Indicators &Terminologies

Course Objectives


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1. Major developments in World economy/

politico-economic developments

2. Foundations of International Economics

3. Classical Trade Theories Theory of

Absolute Advantage, Theory of RelativeAdvantage and Hecksher Ohlin

4. New Trade Theories IPLC, Competitive

Advantage of Nations

Case Discussions 2 cases

Session Plan


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5. Economic/ Political/ Legal Systems

6. Role of State - Transformation of Europe,Russia, East Europe, China, Africa

7. BarriersTariff & Non Tariff, Dumping,

Antidumping

8. Class Test 1/ Quiz 1 (Objective)

9. Bretton Woods Formation of International

Financial Institutions IMF, World Bank andWTO; Role of IMF and World Bank (IBRD, IDA,

IFC, MIGA, ICSID)

Session Plan


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10. GATT Negotiation Rounds; Tariff

Conversions, Uruguay Rounds

11. Evolution of WTO - Membership, Structure,

Basic Principles (MFN, NT); 12. Agreement

on a) Agriculture b) Trade-in-Services c)TRIMS d) Intellectual Property Rights;

12. Dispute Settlement Mechanism

13. Appeal and Appellate proceduresCase Discussions 2 cases

14. Mid-Semester Test

Session Plan


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15. Regional Economic Integration & Economic

Transformation;

16. Levels of Economic Integration

17. Trade Blocks- EU, EFTA, NAFTA, CARICOM,

ACM, ECSCA, ASEAN, SAARC, SAPTA,Cartels, OPEC

18. Economic, Commercial, Political, Financial,

Marketing, Cultural, Legal & Policy issues & their

management

19. Conflict between Industrialized & Developing

Countries

20. Free Trade, Debt Problem

Session Plan


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25. International Investment FII and FDI; ADB,

EXIM Bank, Forfeiting & Project Exports

Case Discussions 1 case

Session Plan


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30 Sessions

Plan for 30 sessions:

25 Hours of Teaching and case discussions

2 hours Tests (Mid Semester and ClassTests)

3 hours of presentations

Teaching Hours


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Mid Semester Test 1/ 2 Hours (Subjective)

Class Test/ Quiz 1 and 2 1 Hour (Half an Hour each)

Group Activities (including presentation on topic assigned and

project) 3 Hours (20 minutes each)

Project guidelines will be given, topic will be assigned

Presentation guidelines will be given, topic will be

assigned

Cases 6 (to be included in class discussion; case study will

be provided after theoretical discussion)

Internal Evaluation


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(8 marks) Mid Semester Test 1 Hour

(7 marks) Class Test/ Quiz 1 and 2 1 Hour (Half an

Hour each)

(10 marks) Group Activities (including presentation

on topic assigned and project) 3 Hours (20 minuteseach)

Project guidelines will be given, topic will be

assigned

Presentation guidelines will be given, topic willbe assigned

Cases 6 (to be included in class discussion; case

study will be provided after theoretical discussion)

Components Internal Evaluation


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1. International Economics, Francis Cherunilam (4th Edition), McGraw Hill

2. International Economics, BO Sodersten and Geoffrey Reed

(3rd Edition), Macmillan

3. International Economics, Paul Krugman and Maurice Obstfeld(6th Edition), Pearson Education

4. Economics, Samuelson & Nordhaus (18th Edition), Tata McGraw Hill

Text and References


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Must Read:

India Unbound; Elephant Paradigm Gurucharan Das

Capitalism in the Age of Globalisation Samir Amin

(Chapter 1 only)

Must Watch:

Capitalism: A Love Story Michael Moore

Schindler's List

May Read:

Das Kapital Karl Marx

Read and Watch


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Introduction to Economics and

International Economics


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Science

Goal - To improve the living conditions of people in theireveryday lives.

3 fundamental questions:

Whatcommodities are produced and in what quantities?

Howare the goods produced?

For whomare goods produced?

Economies organized through

alternative economic systems (WILL BE DISCUSSED)

Which help in allocation of its scarce resource.

Economics


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Basic Economic Systems

Market economies

Command economies

Mixed economies

Based on:

Ownership of resources

Allocation of resources

What are resources?

Economics


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The different forms of an economic organisation are:

Market economy most economic questions are settled by

market mechanisms.

Individuals and private firms make major decisions

about production and consumption

A system of prices, markets, profits & loss and

incentives & rewards determine what, how and whom

goods are produced. Firms produce goods that yield highest profits (what)

By the techniques of production that are least costly (how)

Consumption determined by individuals decisions about

how to use income generated by labour and land (whom)

Economics


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Command economy the government makes all important

decisions about production and distribution.

Government owns most of the means of production

(land and capital)

It owns and directs operations of most enterprises

It employs most workers and directs them what to do

Decides about how the output of society should bedivided among different goods and services.

Government answers major economic questions

through its ownership of resources and power to

enforce decisions.

Economics


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Mixed economy has the elements of market and

command.

Economics


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In answering questions related to what and how things should

be produced,

economies are deciding how to allocate resources among

thousands of different possible commodities and services.

Given that the resources are scarce relative to wants,economies must choose:

Among different potential bundles of goods (what)

Select from among different techniques of production (how)

Decide in the end who will consume the goods (whom)

Economies hence should make choices about

INPUTS (Factors of production)

OUTPUTS

Economics


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INPUTS (Factors of production) are commodities or servicesused to produce goods and services.

Land (or natural resources): Land, energy resources, non-energy

resources and environmental resources.

Labour: Human time spent in production Capital: durable goods of a society to produce other goods.

OUTPUTS are useful goods or services that result from the

production process and are consumed or employed for further

production. What outputs to be produced and in what quantities

How to produce them

For whom outputs should be produced and distributed.

Economics


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International economics deals with:

International forces influencing the domestic economic conditions

International forces shaping the economic relationship betweencountries, world economic integration and transition.

the economic interdependence among countries

and includes the effects of such interdependence and the factorswhich affect it.

Economic activities between countries are different from thosewithin the countries because:

Factors of production are less mobile between countries thanwithin the country.

Goods are mobile within and between countries but forgovernment restrictions.

International Economics


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Global economy consists of: A large number of politically independent nations

Nations have

Different types of interdependencies, and

Diverse economic characteristics between and within them Categories of economies: GDP per capital

Low($1,025 or less), Middle(Lowe middle $1,026 to $4,035 andHigher middle $4,036 to $12,475) and High IncomeEconomies

Segmentation into Low, Middle and High IncomeEconomies Basis of segmentation? Position ofcountries? Wealth distribution in the world? Position ofIndia?

First, second and third world countries?

Features of Global Economy


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Developing and Developed Economies

Developing Low and Middle income; all third world

countries; not on basis of income alone as Kuwait and

UAE that have high per capita income are developing

economies; criteria such as sectoral distribution ofincome, employment generation, social development

indicators, etc. are also used; categorized as North

(exceptions Australia, NZ) and South; LDCs, MDCs,

underdeveloped countries, Least Developed Countries

Newly Industrializing Economies developing economies

which have been experiencing rapid industrialization

Asian Tigers



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Transition Economies refers to economies which are in

transition from centralized economic system to the market

economy, also represent a transition from authoritarianism

to democracy.



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Characteristics of Developed Economies

Income, economic development, growth, distribution of

income, standard of living, composition of output,

characteristics of working conditions, overall improvement

in economic welfare. UNCTAD: Human Development Report (Human

Development Index, Human Poverty Index, Gender

Development Index)

Use of sophisticated technology, innovation and fastdiffusion of ideas and technology, dominance of tertiary

and secondary sector in income and employment

generation, market friendly economic policies, open trade

and investment policies, democratic rights, competition and

consumer choice.



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Characteristics of Developing Economies

Low income, inequality in income distribution

Dimensions of Poverty as highlighted by poor include:

Lack of income and assets to attain basic necessities

food, shelter, clothing, health and education.

Sense of voicelessness and powerlessness in the

institutions of state and society Vulnerability to adverse shocks and inability to cope with

them.



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Region vs. Nations

It WAS common to consider a nation as economic unit.

There are vast differences in economic conditions and other

factors relevant to business, between different regions of a

country particularly if country is vast and culturally diverse.



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Growing Economic Power of Developing Countries

The economic growth rate and the export growth rate of

developing economies is significantly higher than that of the

developed economies and the trend is expected to continue.

Overall good performance of the developing countries has beenmainly because of the impressive performance of a small

number of them.

There are 4 developing countries among the 12 largest

economies of the world.

A number of developing economies have a trade surplus withdeveloped countries.

Growing regional integration???



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The term International Economic Gap refers to the wide

economic disparity between the developed and the developing

nations.

The economic and living conditions have improved a lot in the

last century. However, the distribution of these global gains isunequal.

There is general feeling that the present international

economic order is biased against the developing economies.

Some reasons for persistence and widening of the economic

gap are:

Differences in growth rates

Unequal access

Population explosion,etc.

International Economic Gap


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There has been increasing concentration of income, resources

and wealth among people, corporations and countries.

OECD has

19% of global population

71% global trade in goods and services

60% FDI

Global M&As are concentrating industrial power in mega-

corporations at the risk of eroding competition.

Global commercial bank lends a major share to developingnations.

Within the group of developing countries there are wide

disparities in per capita income levels, growth rates, share of

trade, share of foreign investments, etc.



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Inclusive global democracy is needed in which all countries

small as well as large should have a voice in decisions.

NIEO (New International Economic Order)

It refers to a set of demands to ensure that the developingcountries get a fair, equal and considerate deal in the

international economic system.

The demand for NIEO assumes that the current international

economic order is unfair.



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Q1) Compare Developed and Developing Countries w.r.t. Definition

Characteristics

Location

Land Use and Natural Resources Level of Technology

Principle economic Activity

Tasks to be completed

iep~session 1

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