IR 292 January 25 Lecture Notes
IR 292 January 25 Lecture Notes IR 292
Popular in Fundamental International Economics
Popular in INTERNATIONAL RELATIONS
This 3 page Class Notes was uploaded by Maritt Nowak on Wednesday January 27, 2016. The Class Notes belongs to IR 292 at Boston University taught by James Baldwin in Spring 2016. Since its upload, it has received 24 views. For similar materials see Fundamental International Economics in INTERNATIONAL RELATIONS at Boston University.
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Date Created: 01/27/16
IR 292 Lecture: Tuesday, January 26, 2016 Finishing Up Ch. 1 Capital & Labor Mobility Then and Now: 1. savings and investments are highly correlated in a closed economy, savings=investment 2. tech. improvements increase capital flows communication transportation more things to buy Important quality differences: more financial instruments (things with purchasing power) different roles of foreign exchange transactions costs of foreign transactions is WAY lower *note: cost is not the same as price. Price is the dollar/etc amount to obtain something, cost includes anything you lose from a certain choice Contemporary International Economic Relations: deeper integration multilateral organizations more RTAs Deeper Integration: lower trade barriers “made in” labels carry less meaning products can travel all over the world over the course of production Shallow Integration: reducing tariffs, no quotas deep integration is more difficult changes in domestic policy Regional Trade Agreements (RTAs) NAFTA, EU, etc. Trade & Economic Growth benefits of trade > costs 1. historical evidence 2. economic models 3. statistical comparisons Chapter 2: International Institutions & Issues since WWII Baldwin: WWII is the most important event International Institutions: rules & organizations that govern behavior formal institutions: written rules, law informal institutions: customs & traditions, no legal enforcement IMF, World Bank & WTO IMF established at Mt. Washington Hotel Breton Woods Conference, 1944 188 members today’s central monetary institution provides money to countries in distress (like insurance) funding comes from a membership fee/quota quota is determined by the size of a nation’s economy and the importance of their currency to the global economy LENDER OF LAST RESORT (the IMF helps only if no one else will) ex: a country imports more than they export and runs out of foreign exchange Why do we need exchange reserves? if things are going poorly in an economy, others will not want that currency What happens if you run out? other countries won’t take your currency, so you might not be able to purchase the things you need Foreign exchange reserves are powerful currencies such as the dollar, yen, pound, euros or even gold because these are typically accepted internationally IMF conditionality: borrowers must carry out reforms to obtain a loan controversial Arguments against: “the sequester”/(austerity): spending cuts not what rich countries do bad for lowincome people (losses in government services) this sparks arguments between developing countries and wealthy countries who operate very differently in order to serve their populations effectively but have to follow the same rules when it comes to IMF conditionality privatization — cronyism water should be public since it is basic for human life, if privatized, it ends up being owned by multinational corporations threat to sovereignty lower protective tariffs bad for domestic industries Arguments for: what you were doing obviously didn’t work change will be good IMF currency: SDR (special drawing right) can be exchanged for other currencies based on a member’s quota part of a country’s international reserves World Bank also founded at Bretton Woods (goal was to reconstruct Europe) same membership as the IMF voting rights are proportional to shares owned Why? (then) US needs to sell stuff from booming industry Europe needs stuff because their industry was destroyed in the war if there is no reconstruction (think postWWI) there will be extreme ideals, crisis, more war, or y’know…communism Today: help develop nonindustrial nations humanitarian sharing of resources markets are good, give people money so they can buy your stuff (Fordism Henry Ford) “rising tide lifts all ships” to be continued…
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