International Economics

by

Andrea Fracasso

• LAST REVIEWED: 11 July 2019
• LAST MODIFIED: 22 April 2013
• DOI: 10.1093/obo/9780199743292-0144

Introduction

The closed economy framework—where people, firms, financial intermediaries, and public institutions interact as if the nation in which they are resident is isolated from the rest of the world—is used by economists for the explanatory advantages of such a simplified representation. Economic agents in almost all nations interact with foreign citizens and institutions. These interactions occur through a number of channels: exchanges of goods and services, transactions of currencies, flows of financial funds, transmission of ideas, and movement of persons. Moreover, private agents and institutions in different nations make decisions taking into account what foreigners decide and choose to either cooperate or compete with them. International economics is concerned with the interactions of nations through this wide range of economically relevant channels and studies their economic, social, and institutional determinants and consequences. Accordingly, international economics can be divided into subdisciplines: international trade, international finance (including the macroeconomic aspects of international trade and finance), and international factor movements. Each of these subdisciplines can be (and has been) approached from historical, theoretical, empirical, and political economy viewpoints. The study of the historical process of economic integration among nations, also known as economic globalization, borders these subdisciplines and bridges them with noneconomic disciplines with a view to producing a comprehensive interpretation of the waves of integration between nations as well as of international trade and financial institutions. The public debate on globalization, although often more ideological than informed by theoretical and empirical evidence, mirrors the large number of works in the various subfields of international economics that analyze the controversial aspects and consequences of free international exchanges and high economic integration. International economics covers those strands of the literature concerned with international financial and lending crises, global imbalances, and global inequality as well as with the implications of cross-border interactions for domestic economic phenomena (such as growth, financial stability, inequality, and welfare systems). Notably, to account for the complexity of the current economic relationships between nations, a consensus is emerging on the need of comprehensive approaches bridging the subdisciplines. Important phenomena, such as the process of European economic integration, the emergence of less developed countries, the propagation of financial crises, and the persistence of global imbalances, must be analyzed by taking into account that trade, monetary arrangements, financial flows, and migration are strongly related to one another. Acknowledgments: During the realization of this long article I accumulated enormous debts of gratitude to friends and colleagues who commented on its preliminary versions. In particular, I would like to thank Luigi Bonatti, Emanuela Ceva, Giorgio Fodor, Stefano Schiavo, Maria Luigia Segnana, Chiara Tomasi, Paola Villa, and Giuseppe Vittucci Marzetti. All mistakes, omissions, and oversights remain entirely mine.

General Overviews and Textbooks

No single contribution provides a general overview of all the subdisciplines in international economics. However, most textbooks in international economics addressed to undergraduate students offer a more or less technical treatment of the main topics. Among the most popular textbooks adopted around the world, it is worth mentioning Carbaugh 2012 (for showing the relevance of theory to real-world economic phenomena), Feenstra and Taylor 2012 (for its emphasis on empirical evidence), Krugman, et al. 2012 (with a new chapter on the role of firms in international trade), Pugel 2012 (because of its orientation to policy), and Salvatore 2010 (for the attention devoted to globalization and for the numerous real-world case studies). Three volumes of the Handbook of International Economics are an essential (although dated) reference in the field as they offer technical analyses while accounting for the evolution of economic thought. In particular, the first two volumes, Jones and Kenen 1984–1985, reflect the state of the art in the mid-1980s, and the third volume (Grossman and Rogoff 1995) updates and expands previous theoretical and empirical findings. Durlauf and Blume 2012– and Reinert, et al. 2009 contain short and accessible but at the same time rigorous and informative articles on various issues in international economics; they represent good starting points for further readings.

• Carbaugh, Robert J. International Economics. 14th ed. Mason, OH: South-Western, 2012.

  A top-selling textbook in undergraduate international economics. It covers several hot issues in current debate.

• Durlauf, Steven N., and Lawrence E. Blume, eds. The New Palgrave Dictionary of Economics Online. Basingstoke, UK: Palgrave Macmillan, 2012–.

  This collection of short articles, written by influential economists in their fields, provides informative overviews of various topics and represents a good starting point for further readings. Articles are available online by subscription. Updated regularly. A print version is also available (2d ed., Basingstoke, UK: Palgrave Macmillan, 2008).

• Feenstra, Robert C., and Alan M. Taylor. International Economics. 2d ed. New York: Worth, 2012.

  Written by leading economists in their fields, this revised and updated edition covers all classic topics in international trade and finance, attributing particular emphasis to empirical evidence regarding both developed economies and emerging markets.

• Grossman, Gene M., and Kenneth S. Rogoff, eds. Handbook of International Economics. Vol. 3. Amsterdam: North-Holland, 1995.

  Building on the two previous volumes of the Handbook (Jones and Kenen 1984–1985), this volume updates previous discussions and offers an exhaustive treatment of most of the issues in international economics according to the then-current state of the art of the literature. Available online for purchase or by subscription, by chapter. Also see International Macroeconomics.

• Jones, Ronald W., and Peter B. Kenen, eds. Handbook of International Economics. 2 vols. Amsterdam: North-Holland, 1984–1985.

  These volumes of the Handbook collect surveys of all major topics in international trade and macroeconomics. They represent an essential reference of the state-of-the-art literature in the mid-1980s. Volume 1 and Volume 2 are available online for purchase or by subscription, by chapter. Also see International Macroeconomics (Volume 2).

• Krugman, Paul R., Maurice Obstfeld, and Marc Melitz. International Economics: Theory and Policy. 9th ed. Boston: Pearson Addison Wesley, 2012.

  Written by worldwide-known scholars, the book covers both theoretical and empirical topics in international trade and finance. This last edition explores the role of firms in international trade and covers some of the hottest issues in the current economic debate (such as the financial crisis and unconventional monetary policies).

• Pugel, Thomas. International Economics. 15th ed. Boston: McGraw-Hill Irwin, 2012.

  This classic textbook, whose past editions were coauthored by Peter Lindert, covers the various areas of international economics with an emphasis on (national and global) policy implications and a particular care for history.

• Reinert, Kenneth A., Ramkisken S. Rajan, Amy Jocelyn Glass, and Lewis S. Davis, eds. The Princeton Encyclopedia of the World Economy. 2 vols. Princeton, NJ: Princeton University Press, 2009.

  A collection of short articles, written by field experts, devoted to explaining three hundred topics in international economics ranging from theoretical concepts to empirical phenomena of the world economy. International trade, international finance, international production, and international economic development are the main areas addressed. Key references are provided.

• Salvatore, Dominick. International Economics: Trade and Finance. 10th ed. New York: Wiley, 2010.

  This undergraduate textbook covers both international trade and finance, discusses a number of real-life case studies, and addresses consequences and challenges (in particular for the United States) of the recent wave of globalization.