Robert C. Feenstra and Alan M. Taylor are Professors of Economics at the University of California, Davis. They each began their studies abroad: Feenstra received his B.A. in 1977 from the University of British Columbia, in Canada, and Taylor received his B.A. in 1987 from King’s College, Cambridge, in England. They trained as professional economists in the United States, where Feenstra earned his Ph.D. in economics from MIT in 1981 and Taylor earned his Ph.D. in economics from Harvard University in 1992. Feenstra has been teaching international trade at the undergraduate and graduate levels at UC Davis since 1986, where he holds the C. Bryan Cameron Distinguished Chair in International Economics. Taylor teaches international finance and macroeconomics, macroeconomics, and economic history at UC Davis, where he also holds appointments as Director of the
Center for the Evolution of the Global Economy and Professor of Finance in the Graduate School of Management.
Both Feenstra and Taylor are active in research and policy discussions in international economics. They are research associates of the National Bureau of Economic Research, where Feenstra directed the International Trade and Investment research program from 1992 to 2016. They have both published graduate level books in international economics: Offshoring in the Global Economy and Product Variety and the Gains from Trade (MIT Press, 2010) by Robert C. Feenstra, and Global Capital Markets: Integration, Crisis and Growth (Cambridge University Press, 2004) by Maurice Obstfeld and Alan M. Taylor. Feenstra received the Bernhard Harms Prize from the Institute for World Economics, Kiel, Germany, in 2006, and delivered the Ohlin Lectures at the Stockholm School of Economics in 2008. Taylor was awarded a Guggenheim Fellowship in 2004 and was a Houblon-Norman/George Fellow at the Bank of England in 2009–2010.
Feenstra lives in Davis, California, with his wife, Gail. They have two grown children, Heather and Evan, and a grandson, Grant. Taylor also lives in Davis, with his wife, Claire, and has two young children, Olivia and Sebastian.
Brief Contents
PART 1
Introduction to International Macroeconomics
Chapter 1
PART 2
The Global Macroeconomy
Exchange Rates
Chapter 2
Chapter 3
Chapter 4
PART 3
Introduction to Exchange Rates and the Foreign Exchange Market
Exchange Rates I: The Monetary Approach in the Long Run
Exchange Rates II: The Asset Approach in the Short Run
The Balance of Payments
Chapter 5
Chapter 6
Chapter 7
PART 4
National and International Accounts: Income, Wealth, and the Balance of Payments
Balance of Payments I: The Gains from Financial Globalization
Balance of Payments II: Output, Exchange Rates, and Macroeconomic Policies in the Short Run
Applications and Policy Issues
Preface
Why a New Approach Was Needed
We live in an age in which globalization is more than ever an integral part of our lives. When we undertook the writing of our text, we looked at the existing texts and saw that the dramatic economic developments of recent years had not been incorporated into a newly written undergraduate text, and felt the time was ripe to incorporate fresh theories and perspectives, an emphasis on empirical studies, and other up-to-date approaches into the study of international economics. With this book, we have expanded the vision of international economics to encompass the latest theory and events in the world today.
We have taught the chapters of this book many times, and have benefited from the feedback of professors at colleges and universities in the United States and throughout the world. Like us, they have been enthusiastic about the response from students to our fresh, accessible, and up-to-the-minute approach, and we hope that you will enjoy the book, too.
▲ SIDE BARS illuminate topics that, while not essential, nonetheless provide deeper understanding of the issues under discussion.
▲ NEW! Discovering Data problems at the end of each chapter ask students to seek out, analyze, and interpret real-world data related to chapter topics.
▲ NEW! Work It Out problems at the end of each chapter provide students with step-by-step assistance, helping develop analytical skills. These problems each have a live online counterpart in LaunchPad with interactive tutorials.
■ The book is issued in multiple formats, which allows instructors to tailor the content to their needs and keep costs down for their students:
■ a combined edition (International Economics)
■ two split editions (International Trade and International Macroeconomics)
▲ NEW! Work It Out problems offer skill-building activities and tutorials that walk students through each step of solving an end-of-chapter problem using choice-specific feedback and video explanations for each step.
■ NEW! Discovering Data Problems expand on the material at the end of each chapter. The problems provide additional opportunities to directly link the student to real, up-to-date data to solve topical questions.
■ All teaching resources are available for instructors within LaunchPad. These resources include animated lecture PowerPoint slides with instructor notes, the solutions manual, test bank questions, and more.
New in Each Chapter of the Fourth Edition
The opening example in Chapter 1, Trade in the Global Economy, is now the worldwide opening of the movie Jurassic World in the summer of 2015. There is new coverage on opening relations with Cuba. A new section called The Future of Trade discusses free-trade area agreements, and the impact of global climate change, using the Northern Sea Route example that opened the chapter in the third edition. Finally, there is new coverage on migration, immigration, and the refugee crisis in Europe.
Chapter 2, Trade and Technology: The Ricardian Model, now describes Jamie Anderson’s gold medal victory in the Women’s Slopestyle Event at the 2014 Olympics. Where did her snowboard come from?
Chapter 3, Gains and Losses from Trade in the Specific-Factors Model, now has a Discovering Data problem on the Trade Adjustment Assistance program.
Chapter 4, Trade and Resources: The Heckscher–Ohlin Model, contains a Discovering Data problem on highly disaggregated products.
The refugee crisis in Europe was unfolding in 2015 and is described in Chapter 5, Movement of Labor and Capital Between Countries. Immigrants coming from Syria and other war-torn regions have put enormous pressures on the countries of Western Europe, leading to the policy changes described. There is a new Application called Immigration into the United States, which includes an examination of the benefits that immigrants bring to host countries. The Application called The Effects of the Mariel Boat Lift on Industry Output in Miami has been updated to include the flood of Cuban people heading to Mexico, and hoping to go from there to the United States after diplomatic relations between the United States and Cuba resumed.
Chapter 6, Increasing Returns to Scale and Monopolistic Competition, contains a thoroughly updated and reworked section on the Gains and Adjustment Costs for the United States Under NAFTA. There is a new
Chapter 17 (Chapter 6), Balance of Payments I: The Gains from Financial Globalization, and Chapter 18 (Chapter 7), Balance of Payments II: Output, Exchange Rates, and Macroeconomic Policies in the Short Run, have completely updated data and new Discovering Data questions manipulating BEA and FRED data.
Chapter 19 (Chapter 8), Fixed Versus Floating: International Monetary Experience, has completely updated data and a new Discovering Data problem to explore the data resources at the International Monetary Fund website.
Chapter 20 (Chapter 9), Exchange Rate Crises: How Pegs Work and How They Break, has updated data on reserve accumulation and operations by the Chinese central bank, and a new Discovering Data problem with data from countries with fixed exchange rates.
Chapter 21 (Chapter 10), The Euro, has been thoroughly updated with current economic and political developments in the ongoing crisis in Europe and the Eurozone, especially regarding Brexit.
Topics and Approaches
Reviewers and class testers have enthusiastically supported the topics we have included in our presentation. Topics covered in International Economics and in International Trade include the offshoring of goods and services (Chapter 6); tariffs and quotas under imperfect competition (Chapter 9); and international agreements on trade, labor, and the environment (Chapter 11). These topics are in addition to core chapters on the Ricardian model (Chapter 2), the specific-factors model (Chapter 3), the Heckscher–Ohlin model (Chapter 4), trade with increasing returns to scale and imperfect competition (Chapter 6), import tariffs and quotas under perfect competition (Chapter 8), and export subsidies (Chapter 10).
Chapters in International Economics and in International Macroeconomics include the gains from financial globalization (Chapter 17 in the combined edition; Chapter 6 in the International Macroeconomics split edition), fixed versus floating regimes (Chapter 19/Chapter 8), exchange rate crises (Chapter 20/Chapter 9), and the euro (Chapter 21/Chapter 10). These topics are in addition to core chapters on foreign exchange markets and exchange rates in the short run and the long run (Chapters 13–15/Chapters 2–4), the national and international accounts (Chapter 16/Chapter 5), the open economy IS–LM model (Chapter 18/Chapter 7), and a chapter on various applied topics of current interest (Chapter 22/Chapter 11).
In writing our chapters we have made every effort to link them analytically. For example, although immigration and foreign direct investment are sometimes treated as an afterthought in international economics books, we integrate these topics into the discussion of the trade models by covering the movement of labor and capital between countries in Chapter 5. Specifically, we analyze the movement of labor and capital between countries in the short run using the specific-factors model, and explore the long-run implications using the Heckscher–Ohlin model. Chapter 5 therefore builds on the models that the student has learned in Chapters 3 and 4, and applies them to issues at the forefront of policy discussion.
In the macroeconomics section from International Economics or International Macroeconomics this analytical linking is seen in the parallel
Introduction to International Macroeconomics
The Global Macroeconomy
Foreign Exchange: Currencies and Crises
How Exchange Rates Behave
Why Exchange Rates Matter
When Exchange Rates Misbehave
Summary and Plan of Study
Economic Crisis in Iceland
Globalization of Finance: Debts and Deficits
Deficits and Surpluses: The Balance of Payments
Debtors and Creditors: External Wealth
Darlings and Deadbeats: Defaults and Other Risks
Summary and Plan of Study
Government and Institutions: Policies and Performance
Integration and Capital Controls: The Regulation of International Finance
Independence and Monetary Policy: The Choice of Exchange Rate Regimes
Institutions and Economic Performance: The Quality of Governance
