293NECOK238B – International Economics

BA in Business and Management

Fall semester, Academic Year 2015-2016
Course leader: András TÉTÉNYI, assistant professor

Lecturer(s): András TÉTÉNYI, assistant professor

Viktória ENDRŐDI-KOVÁCS, assistant professor
Gergely REZESSY, guest lecturer
Judit KOZENKOW, guest lecturer
Department: Department of World Economy
Office hours: Mondays 11.00
Availability: Phone number: +36-1-482-5314
Room: main building, room 142
Email address: andras.tetenyi@uni-corvinus.hu
Course type: Core
Prerequisites: Microeconomics and Macroeconomics
Credits: 6
Number of hours One 90 minute lecture and one 90 minute seminar per week
per semester
Time of class: lecture: Mondays 13.40, seminars: Mondays 15.30, Thursdays 8.00
& 9.50
Venue: lecture: E236, seminars C417 (Thursdays) and 416 (Mondays)

Aims and objectives and description of the course:

The aim of the course is to introduce students to the basic models, theories and methods of
international economics, and help them use these models and theories to understand real
world phenomena like international trade, international finance, foreign investments, and
migration.

Learning outcomes:
Accomplishing this course will help
 your skills in abstract thinking and modeling develop;
 sharpen your problem-solving skills;
 develop your analytical thinking;
 you develop a more critical attitude of looking at things.

Course description
The course introduces students to the main theories and methods of international economics.
The first half of the course deals with the basic models explaining international trade, such as
the theory of comparative advantages, the Hecksher-Ohlin model, and various alternative trade
theories. The effects and reasons of government intervention in international trade, a topic of
growing importance today, will be discussed, along with the pros and cons of protectionism.
During the second part of the semester the course will discuss other topics of international
economics, such as international factor flows, international finance and foreign exchange. The
course combines rigorous economic analysis with attention to issues of economic policy alive

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and important today. Special attention is given to analyzing current world economic events, as
well as the relevance of empirical application of the theories and models discussed.

Methodology to be used
Each week there will be an 90 minute lecture followed by an 90 minute seminar. Lectures will
tend to be interactive, but the main idea here is to develop the theories and models that will be
further discussed during the seminars. Seminars will concentrate on solving problems and
exercises related to the topic of the lectures, and also discussing some further implications.
Material of the lectures will not be repeated on the seminars, except where further clarification
is necessary. Attending lectures and seminars and trying to understand the material there will
save you lots of time.

Detailed class schedule, 1st – 16th week

Date of lecture Topics to be discussed, readings required for the class

Week 1 Introduction. Framework of the course
14th of September The basic theory of international trade using demand and supply
Reading: Pugel pp 15-32.
Week 2 Comparative advantages. The production possibility curve and
21st of September community indifference curves. Gains from trade
Reading: Pugel pp 33-63.
Week 3 The Hecksher-Ohlin (H-O) model of international trade. Three
28th of September consequences of the H-O model. The H-O theory and reality
Reading: Pugel pp 63-90.
Week 4 Alternative trade theories. Scale economies, imperfect competition
5th of October and the product life cycle
Reading: Pugel pp 91-119.
Week 5 Trade and economic growth. Natural resources and trade.
12th of October Reading: Pugel pp 121-140.
First assignment due!
Week 6 Trade policies. Tariff barriers to trade and their effects. Review for the
19th of October midterm exam.
Reading: Pugel pp 143-163.
Week 7 Midterm exam, 26th October
Week 8 Nontariff barriers to trade. The effects of a quota. The costs of
2nd of November protectionism. Arguments for and against protectionism
Reading: Pugel pp 165-177, 185-197, 199-216
Week 9 Trade blocs and economic integration. Trade creation and trade
9th of November diversion. Economics of the European Union.
Reading: Pugel pp 259-281
Week 10 International factor flows. Multinational corporations and migration
16th of November Reading: Pugel pp 343-378
Week 11 Payments among nations. The balance of payments.
23rd of November Reading: Pugel pp 381-398
Second assignment due!
Week 12 The foreign exchange market. Forward exchange and international
30th of November financial investments.
Reading: Pugel pp 399-440
Week 13 What determines exchange rates – the PPP approach
7th of December Reading: Pugel pp 441-457

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Week 14 Review for the final exam
Week 15 Final exam
Week 16 Make-up exam

Assignments
Besides taking part is seminar discussions, students are required to hand in two short
assignments during the semester. Your task will be to find an article in the international
business press (daily’s such as Wall Street Journal, New York Times, Washington Post etc)
and elaborate how the case you found fits in with the theories discussed in class.
 Assignment 1: Find an article on an African country and world trade. How does it relate
in your opinion to comparative advantages and the Hecksher-Ohlin theory?
 Assignment 2: Find an article on global migration. How does it relate to what we have
learned about the advantages and disadvantages of migration for host and home
countries?

You must summarize each article in half a page (in Times size 12, normal line spacing), and
then write 1/3-1/2 page on how the article relates to the theories we have discussed in class.
Do not forget to write your name and Neptun code on the paper, and also provide an exact
reference to the original article. You do not need to hand in the original article.

The first assignment is due on the 5th week, the second is due on the 11th. Please hand it in on
paper to the leader of your seminar after class. Submissions by email are not accepted, and
neither are any excuses. Late submissions are worth 0 points. Each home assignment will be
given a maximum of 5 points. Grading of the assignments is based on the following guidelines:
 If you do not elaborate on the relationship between theory and the article, you will be
given a maximum of 2 points. Same goes if you do not include the summary of the
original article.
 Make sure you explicitly reference the theories we have discussed in class, and make
sure you understand and use them correctly.
 Word-by-word copy-pastes from the original article will result in 0 points. Use your own
words!
 Expect to get points deducted if you do not meet some of the formal requirements
(your assignment is too short, you forget to write your name on it, etc).
 Also, please take care to use grammatically correct English. Bad English can also lead
to losing points, as it can imply that you do sloppy work and it can make it difficult for
us to understand what you have written. Still, bad English is preferable to word-by-
word copy-pastes.

Assessment, grading:
10% class attendance, participation in discussions
10% home assignments
40% mid-term exam
40% final exam

The exams will cover the following material:

 Mid-term exam: material of weeks 1 to 6.
 Final exam: material of weeks 8 to 14.

Mid-term assessment (counted as 40 per cent in the final result) will be based upon a written
exam including numerical exercises, definitions, short essay-type questions and multiple choice

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tests. The final exam at the end of the semester is similar, but only covers material from the
second half of the semester. Students may retake the midterm exam without any penalty at the
end of the semester, in this case they will write their final exam from the material of the entire
semester, and this will count as 80 per cent of the final grade. For rules on retaking the final
exam, see the ISP’s Study and Exam Regulations.

The points for class participation are made up as follows. Class attendance, although highly
recommended, is not compulsory. Still, class attendance sheets will be taken. Those who do
attend class regularly (they are present on at least 10 lectures and seminars) will receive a
maximum of 5 points. A further 5 points can be gained by regularly contributing to seminar
discussions. Also, students should try not to be late, as attendance sheets will be circulated at
beginning of classes.

Compulsory readings:

Thomas A. Pugel (2009): International Economics, 14th ed., McGraw-Hill.

The 12th and 13th editions of the book may also be used. If you do have a previous edition, we
still recommend that you photocopy and read Chapter 6 from the 14 th edition, as it has been
greatly improved.

The book is available in the Central Library and can also be purchased from the library’s
bookshop. A companion website to the textbook, with study guides, presentations, a glossary,
sample tests and quizzes is available at www.mhhe.com/pugel14e, click ‘Student edition’.

Alternatively, other standard textbooks may also be used, such as

 Paul R. Krugman and Maurice Obstfeld (2008): International Economics: Theory and
Policy, 8th ed., Addison Wesley.
 Dominick Salvatore (2009): International Economics, 10th ed., Wiley.
 Steven Husted and Michael Melvin (2009): International Economics, 8th ed., Prentice
Hall.

If you do decide to use one of the alternative textbooks, you do so at your own risk, and it is up
to you to find the material covered in class in the book. We will not be held liable for any
misunderstandings arising from the usage of alternative textbooks.

The lecture slides will be uploaded to www.uni-corvinus.hu/~gvigvar, click ‘International

Students’. We will always try to upload lecture slides a day before class.

Recommended readings:
Goldin, Ian – Reinert, Kenneth (2006): Globalization for Development: Trade, Finance, Aid,
Migration and Policy. Washington D.C.: Worldbank and Palgrave-MacMillan
Szentes Tamás (2002): World Economics 1. Comparative Theories and Methods of
International and Development Economics. Budapest: Akadémiai Kiadó

Grading:
Grading will be done according to the standard Faculty of Business Administration ISP grading
table, which is repeated here for convenience.

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 Percentage Hungarian Grade ECTS ISP Explanation
achieved Grade Grade
97-100 5 A A+ Excellent
94-96 5 A A Excellent
90-93 5 A A- Excellent
87-89 5 B B+ Very good
84-86 4 C B Good
80-83 4 C B- Good
77-79 4 C C+ Good
74-76 3 D C Satisfactory
70-73 3 D C- Satisfactory
67-69 3 D D+ Satisfactory
64-66 2 D D Low pass/Sufficient
60-63 2 E D- Low pass/Sufficient
0-59 1 FX/F F Fail, 0 credit
N N No grade received,
0 credit

Grades are non-negotiable. Please take into account that any complaints concerning the points
of the midterm and final written exams (except for obvious adding mistakes) will result in a re-
evaluation of the entire test.

It is in our interest that you receive the best possible grade on this course. Due to this, we will
both be available throughout the semester for consultation, either by e-mail, during our office
hours or by appointment.