International Macroeconomics and Trade

Introduction

International macroeconomics and trade offers an introduction to advanced open-economy macroeconomics and international trade. Norway is a small, open economy, and understanding how the Norwegian economy is affected by international economic trends, shocks and policy regimes is crucial for any student who wishes to understand economic development in the short and long term. In an integrated world economy, location of production is determined by countries’ comparative advantages, the degree of scale economies as well as trade costs. At the macro level, international trade go hand in hand with international lending and borrowing, and we have seen debt-induced economic crises many times in recent history. In this course, we will analyze questions of crucial importance to small important economies like Norway from different perspectives, to shed light on both advantages and disadvantages of international economic cooperation.

This course combines insights from two broad fields of economics, namely international macroeconomics and international trade. Students will learn concepts and tools from both fields, and will use them to investigate key questions related to international economic affairs. Why do some countries accumulate high foreign debt while others maintain foreign wealth? Can foreign debt accumulation be sustainable? What happens when a country is thrown into an economic crisis? How does globalization impact countries’ welfare? What are the consequences of trade liberalization? Who lose and who gain from multinational production?

The course will be of interest to students of economics and finance. In the lectures, we will develop advanced economic models to shed light on empirical questions. It is highly recommended that students have some background in economics and math at a sufficient level, corresponding to GRA 6031 Microeconomics or similar.

Course content

The course consists of three parts. The first part (50%) introduces international trade. The second part (〜20%) deals with current account determination, while the third part (〜30%) studies real exchange rates.

The lectures on international trade will cover topics such as comparative advantages, new trade theory, trade and growth and foreign direct investments. In international macro, the course will touch upon topics such as current account sustainability, real exchange rate determination, persistent differences in living standards, exchange rate regimes and currency unions, and policy responses to international economic crises.