International Economics

1
International Economics

• International Economics concerns the flow of
  commodities, services, and productive factors
  (capital and labor) across national boundaries.

2
International Transactions

• Trade in commodities refers to imports and
  exports of merchandise
• Trade in services involves such activities as
  shipping, insurance, travel, or tourist services
  performed by companies of one country for the
  residents of another

3
International Transactions

• Capital flows represent
• the establishment of manufacturing plants in
  foreign countries or
• the acquisition of foreign bonds, stocks, and
  bank accounts.
• Labor flows describe the international migration
  of workers.

4
Why Nations Trade

• International trade provides us with a variety of
  goods and services from other countries
• International trade promotes specialization and
  efficiency in production and
• International trade provides a source of income
  and employment for the countries involved

5
Domestic Vs. International Economic Relations

• National boundaries have profound implications
  for the conduct of trade
• Exchange Rates
• Commercial Policy
• Different Domestic Policies
• Relative Immobility of Productive Factors
• Statistical Data and
• Marketing Considerations

6
Balance of Payments

• A set of accounts called the countrys Balance Of
  Payments (BOP) summarizes all the transactions by
  residents, firms and government of one country
  with their counterparts in the rest of the world

7
BOP Accounts

• Current Account
• Capital Account
• Official Settlements Account

8
Current Account

• Merchandise Trade
• Military Transactions
• Travel and Transportation
• Other Services
• Investment Income
• Unilateral Transfers

9
Capital Account

• Long-Term Capital Account
• a. Transactions in Real Assets
• b. Transactions in Financial Assets
• Short-Term Capital Account
• a. Short-Term Financial Assets
• b. Private Credits

10
Official Settlements Account

• Official Reserves
• a. Official Gold Reserves
• b. Official Foreign Exchange Holdings
• c. Reserve Position in the IMF and
• d. Special Drawing Rights (SDRs)
• Liabilities to Foreign Authorities