COPYRIGHTED MATERIAL. Subject Index

Transcription

1 Subject Index A Absence of trade, 58 Absolute advantage, illustration of, 33 Absolute disadvantage, 36 Absolute factor price equalization, , 134 Absolute purchasing-power parity (PPP) theory, 402 in real world, 403 Absorption approach, Accenture, 4 Accounting balances and U. S. balance of payments, 351 and international transactions, Accounting exposure, 381 Adjustable peg systems, 577, 578 with gold standard, IMF members and, Adjustment. See also Monetary adjustments in balance-of-payments, 13 Bretton Woods system and, 601 defined, 590 income adjustment mechanism, 438 price adjustment mechanism, 438 Adjustment policies, 493 Administrative regulations, 232 Ad valorem tariffs, 197 minimum ad valorem rate, 211 Advanced nations complete trade liberalization, benefits of, 242 Doha Round, gains from, exchange controls of, growth in, income inequality in, (FDI), manufacturing employment in, 66 nonagricultural products, tariffs on, 198 population, economic and health indicators in, structural imbalances in, 15, tariff escalation in, 208 terms of trade of, 89, 90 trade imbalances in, 616 Uruguay Round, gains from, 253 Afghanistan, Environmental Performance Index (EPI) ranking, 162 Africa. See also Sub-Saharan Africa; specific nations current account balance of, 477 Heckscher Ohlin theory and, 125 (FDI), Lomé Convention and, 272 multinational corporations (MNCs) of U.S., employment by, 330 population, economic and health indicators in, regional trade agreements in, 285 Aggregate demand in closed economy, economic shocks, effect of, fiscal policies in open economies and, 542 fixed exchange rates, demand under, flexible exchange rates, demand under, macroeconomic policies, effect of, monetary policies in open economies and, 542 monetary shocks and, 541 in open economy, real-sector shocks and, short-term capital flows and, 541 Aggregate demand (AD) curve, Aggregate supply in closed economy, in long run and short run, Aggregate supply (AS) curve, Agriculture. See also Arable land common agricultural policy (CAP) (EU), 236 in developing nations, 290 problem of tariffs and subsidies, 254 Smoot-Hawley Tariff Act, 246 Airbus subsidies, 236 strategic trade policy, two-firm competition and, Aircraft. See Airbus subsidies; Boeing Air pollution, 161 Albania. and European Union (EU), 281 Algeria, and European Union (EU), 276 Allfirst Bank case, 384 Allied Irish Banks, 384 American Automobile Labeling Act of 1992, 3 American options, 377 Anchor argument for fixed exchange rates, 561 Andean Community (CAN), 277, 279, 286 Angola in South Africa Development Community (SADC), 277 Antidumping, 233 G20 countries, investigations by, 235 international price discrimination, on steel, trigger-price mechanism and, 233 Uruguay Round provisions, 251 COPYRIGHTED MATERIAL 641

2 642 Subject Index Antiglobalization, 4 5, 255 Antiglobalization movement, 4, 255 Antigua in CARICOM, 277 Antitrade consumption, 176 Antitrade growth, 176 Antitrade production, 176 Appreciation defined, 370 effective exchange rate and, 372 of Japanese yen, monetary approach to the balance of payments and, portfolio balance model and, time path to new equilibrium exchange rate and, Arable land factor endowments of various countries, factor intensity of, 113 Heckscher Ohlin theory with, 125 in regions of recent settlement, 289 Arab Maghreb Union (AMU), 285 Arbitrage, See also Interest arbitrage; Uncovered interest arbitrage efficiency of foreign exchange markets and, Eurocurrency market and, 393 Architecture of the present international monetary system, 612 Argentina. See also G-20 countries; Mercosur (Southern Common Market) antidumping investigations by, 235 capital deepening and output per worker, 179 currency board arrangements (CBAs) in, 574 current account balance of, 477 efficiency change and output per worker, 179 foreign debt burden of, 307 manufactures exports in, 305 output per worker, growth in, 179 peso, devaluation of, 575 technical progress and output per worker, 179 trade reforms in, 304 Turkey, Aruba, exchange rate arrangements of, 580 ASEAN (Association of Southeast Asian Nations), 277, 279, 286 Japan, free trade agreement (FTA) with, 277 Asia. See also Central Asia; East Asia; South Asia current account balance of, 477 direct investments by U.S. in, 319 Heckscher Ohlin theory and, 125 high-performance Asian economies (HPAEs), 292 (FDI), multinational corporations (MNCs) of U.S., employment by, 330 trade agreements, 286 trade bloc problem, 254 Uruguay Round, gains from, 253 Asian Financial Crisis of 1997, 292, OECD (Organization for Economic Cooperation and Development) countries, effect on, Asian Infrastructure Investment Bank (AIIB), 594 Asia-Pacific Economic Cooperation (APEC), 286 Asia Pacific Trade Agreement (APTA), 286 Asset market approach. See Portfolio balance model Association of Coffee Producing Countries, 301 Association of Southeast Asian Nations (ASEAN). See ASEAN (Association of Southeast Asian Nations) Australia agricultural subsidies in, 237 antidumping investigations by, 235 Asian Financial Crisis of 1997, effect of, Big Mac prices in, 404 Environmental Performance Index (EPI) ranking, 162 import tariff in, 208 inflation targeting in, 546 labor migration in, 334 pass-through elasticities for, 453 Uruguay Round, gains from, 253 U.S., free trade agreement (FTA) with, 252, 276 Austria. See also EFTA (European Free Trade Association); European Union (EU) Environmental Performance Index (EPI) ranking, 162 Euro ( ), conversion rates for, 571 government debts and budget deficits of, 573 intra-industry trade, growth of, 150 Maastricht convergence indicators, 569 Autarky, 58. See also Closed economy prohibitive tariffs and, 211 Automatic monetary adjustments. See Monetary adjustments Automobiles American car case study, 3 intra-industry trade in automobile products, 147 voluntary export restraints (VERs) on Japanese automobiles to U.S., Autonomous transactions foreign repercussions and, in government expenditures, of small open economy, Average cost curve (AC) external economies and, monopolistic competition and, Average propensity to import (APM), 470

3 Subject Index 643 B Bahamas in CARICOM, 277 Bahrain in Gulf Cooperation Council, 276 U.S., free trade agreement (FTA) with, 252, 276 Balanced growth, Balance of international indebtedness, 356 Balance of payments, 13. See also Deficits; Gold standard; Monetary approach to the balance of payments absorption approach, accounting balances and, 351 adjustable peg systems and, 577, 578 adjustment in balance-of-payments, 13 BP curve and, current account and capital account, direct controls aimed at, 495 double-entry bookkeeping, financial account, 347 flexible exchange rates, balance-of-payments adjustments with, foreign exchange rate and, gold standard and, 455 international capital transfers and, 326 international investment position of United States, international transactions, Mundell-Fleming model and, official settlements balance, 351 postwar balance of payments in U.S., protectionism and, 240 residents, defined, 345 summary statements, 345 surplus in, 351 synthesis of automatic adjustments and, transfer problem, Balance of Payments Statistics Yearbook, 24 Balassa-Samuelson effect, 405 Baltic Free Trade Agreement (BAFTA), 281 Banana imports, restrictions on, 234 Bancor units, 593 Bangladesh, 566 Environmental Performance Index (EPI) ranking, 162 Bank for International Settlements (BIS), 367 Banking Union, 574 Bank of Japan, inflation targeting and, 546 Bank rate, 591 Banks. See also Central banks; Eurocurrency market; Foreign exchange markets central bank independence and inflation, 545 of emerging markets, 612 global banks, 11 legal reserve requirement (LRR), 408 as lenders of last resort, 366 subprime mortgage crisis, 612 Barbados in CARICOM, 277 Barbuda in CARICOM, 277 Bargaining tariffs, 241 Barter trade and bilateral agreements, Basis for trade, 29 Beachhead effect, 453 Beggar-thy-neighbor policies, 582 protectionism, argument for, 240 Smoot-Hawley Tariff Act and, 246 Belgium. See also European Union (EU) Belize in CARICOM, 277 Benelux, 264 and currency crisis of , 567 Euro ( ), conversion rates for, 571 exchange controls by, 519 government debts and budget deficits of, 573 intra-industry trade, growth of, 151 Maastricht convergence indicators, 569 Benign neglect, 603 Benin in West African Economic and Monetary Union (WAEMU), 277 Big Mac Index, Bilateral agreements and CMEA economies, Bilateral trade, 247 Blocs. See Trading blocs BMW Group, as multinational corporation (MNC), 329 Boeing aircraft subsidies by, 236 Dreamliner jet, 2 Foreign Sales Corporations (FSC) provisions of U.S. tax code and, strategic trade policy, two-firm competition and, Bolivia. See also Mercosur (Southern Common Market) in Andean Community, 277 Bonds. See Stocks and bonds Border taxes, 232 Bosnia and Herzegovina currency board arrangements (CBAs) in, 574 European Union (EU), negotiations with, 281 Botswana in South Africa Development Community (SADC), 277 BP curve, See also IS-LM-BP model mathematical derivation of, summary in mathematical terms, 529 Brain drain, 4, 334

4 644 Subject Index Brazil. See also G-20 countries; Mercosur (Southern Common Market) antidumping investigations by, 235 Big Mac prices in, 404 capital labor ratio of, 108, 175 comparative advantage of, 59 cotton subsidies in U.S., action against, 236 currency crisis in, 442, current account balance of, 477 factor abundance of, factor intensity of trade, 113 foreign debt burden of, 307 GNI (gross national income) in, 184 growth in trade in, 184 import tariff in, 208 inflation in, 442, 546 International Monetary Fund (IMF) balance-of-payments summary for, (FDI), 324 manufactures exports in, 305 multinational corporations (MNCs) of U.S., employment by, 330 nonagricultural products, tariffs on, 199 purchase power parity (PPP) in, 184 as trade partner of U.S., trade reforms in, 304 traditional and purchasing-power parity (PPP) per capita incomes in, 312 as unfair trader, 249 Bretton Woods system, 519, 519, as adjustable peg system, 577, 594 collapse of, evolution of, fixed exchange rates under, 561 operation of, 596 BRICS, growth in trade among, 184 British Commonwealth Preference Scheme, 263 British pound depreciation of, relative international importance of, 368 Broadcom, 2 Brunei in ASEAN (Association of Southeast Asian Nations), 277 Budget deficit, 355 Buffer stocks, 300 Bulgaria in Council of Mutual Economic Assistance (CMEA or COMECON), 280 currency board arrangements (CBAs) in, 574 and European Union (EU), 273, 281 Bulk purchasing, 280 Bundesbank, 567 Burkina Faso in West African Economic and Monetary Union (WAEMU), 277 Burma. See Myanmar Burundi, traditional and purchasing-power parity (PPP) per capita incomes in, 312 Business Week, 25 Buy American Act of 1933, 232 C Call options, 377 Cambodia in ASEAN (Association of Southeast Asian Nations), 277 Canada. See also Canadian dollar; G-7 countries; G-20 countries; NAFTA (North American Free Trade Agreement) absolute advantage and, agricultural subsidies in, 237 antidumping investigations by, 235 Asian Financial Crisis of 1997, effect of, automobile products, intra-industry trade in, 147 Big Mac prices in, 404 capital deepening and output per worker, 179 capital labor ratio of, 108, 175 direct investments by U.S. in, 319 dollar, appreciation of, efficiency change and output per worker, 179 export volume in, 187 factor abundance of, factor intensity of trade, free trade agreements (FTAs) of, 276 GDP (gross domestic product) growth in, 187 import tariff in, 208 hourly compensation in manufacturing in, 120 income elasticity of imports, 471 industrial products, tariffs on, 207 inflation rate in, 413, 546 International Monetary Fund (IMF) balance-of-payments summary for, intra-industry trade, growth of, 150 (FDI), labor migration in, 334 as major trade partner, 9 monetary growth in, 413 multinational corporations (MNCs) of U.S., employment by, 330 nonagricultural products, tariffs on, 198 output per worker, growth in, 179 pass-through elasticities for, 453

5 Subject Index 645 per capita GDP changes in, 187 pervasiveness of nontariff trade barriers (NTBs) in, 237 price elasticities for imports and exports, 449 private sector balances of, 472 Quebec, secession threat by, 566 technical progress and output per worker, 179 terms of trade changes in, 187 trade imbalances in, 616 as trade partner of U.S., traditional and purchasing-power parity (PPP) per capita incomes in, 312 Uruguay Round, gains from, 253 voluntary export restraints (VERs) on Japanese automobiles, 231 Canadian dollar appreciation of, U.S. dollar and, 426 Capital. See also International capital flows; Perfect capital mobility aggregate demand, short-term capital flows and, 541 developing nations, trade and, 291 elastic capital flows, fiscal/monetary policies with, factor endowments of various countries, human capital and Leontief paradox, 123 IS-LM-BP model with imperfect capital mobilities, perfect capital mobilities, input-output table and, 121 international flow of, labor growth and capital accumulation, major net exporters and importers of, 11 output per worker, capital deepening and, 179 in regions of recent settlement, 289 specific-factors model and, U.S. trade, requirements in, 122 Capital account, Capital intensity commodities, capital intensive, 102, 104 products, factor intensity of, 113 protectionism and, 303 subsidies and, 303 Capital-intensive commodity, 102, 104, 113 Capital labor ratios changes in selected countries, 175 in Heckscher Ohlin theory, 102 of various countries, 108 Capital-saving technical progress, 173 graphical analysis of, Capital stock per worker, growth in, 175 Caribbean Community and Market (CARICOM), 286 Caribbean Free Trade Association (CARIFTA), 277 Caribbean nations. See also specific nations foreign debt burden of, (FDI), 324 Lomé Convention and, 272 population, economic and health indicators in, 306 CARICOM, 277 Carry trade, Cartels centralized cartels, 233, international cartels, maximization of total profits of, 259 Cascading tariff structure, 207 Catcher Technologies, 2 Caterpillar Corporation, 235 Central America. See Latin America Central American Common Market (CACM), 277, 286 Central American Free Trade Agreement (CAFTA), 286 Central and Eastern European Countries (CEEC), Central Asia foreign debt burden of, population, economic and health indicators in, 306 Central banks. See also European Central Bank (ECB) independence and inflation, 545 swap arrangements by, 597, 604 Central Europe current account balance of, 477 economic integration in, Uruguay Round, gains from, 253 Central European Free Trade Association (CEFTA), 281 Centralized cartels, 233, Centrally planned economies, 280 Chicago Tribune, 25 Child mortality. See Infant/child mortality Chile. See also Mercosur (Southern Common Market) in Andean Community, 277 capital deepening and output per worker, 179 currency depreciation in, 442 efficiency change and output per worker, 179 EU, free trade agreement (FTA) with, 276 inflation in, 442, 546 manufactures exports in, 305 output per worker, growth in, 179 Pacific Alliance, 277 technical progress and output per worker, 179 trade reforms in, 304 U.S., free trade agreement (FTA) with, 252, 276

6 646 Subject Index China. See also G-20 countries antidumping investigations by, 235 capital labor ratio of, 108, 175 comparative advantage of, 59 current account balance of, 477 export subsidies by, 236 factor abundance of, factor intensity of trade, 114 GNI (gross national income) in, 184 growth in trade in, 184 as high-performance Asian economy (HPAE), import tariff in, 208 International Monetary Fund (IMF) balance-of-payments summary for, (FDI), 324 jobs moving to, 1 as leading world economic power, challenges arising from, as major trade partner, 9 multinational corporations (MNCs) of U.S., employment by, 330 nonagricultural products, tariffs on, 199 population, economic and health indicators in, purchase power parity (PPP) in, 184 renminbi currency, trade deficit between U.S. and, as trade partner of U.S., trade reforms in, 304 traditional and purchasing-power parity (PPP) per capita incomes in, 312 trigger-price mechanism and, 234 Uruguay Round, gains from, 253 variety gains with international trade and, 148 yuan currency, Chrysler. See Daimler-Chrysler CIAM (covered interest arbitrage margin), CIAP (covered interest arbitrage parity), CIAP line, Citigroup, 4 Clearinghouses for foreign exchange, 366 Clearing unions, 593 Climate change, 16 international monetary system and, Closed economy aggregate demand in, aggregate supply in, equilibrium national income in, multiplier in, CMEA or COMECON, Cobb-Douglas production function, 72, 139 Cocoa Ghana, marketing board of, 300 International Cocoa Agreement, 300 Coffee and International Coffee Agreement, 300 Cold War, Eurocurrency market and, 393 Colombia. See also Mercosur (Southern Common Market) in Andean Community, 277 Pacific Alliance 277 Canada, free trade agreement (FTA) with, 276 EU, free trade agreement (FTA) with, 276 inflation targeting in, 546 U.S. free trade agreement (FTA) with, 276 Commercial policies, Commodities. See also Comparative advantage; Equilibrium relative price with trade; Heckscher Ohlin (H O) theory buffer stocks, 300 equilibrium relative commodity price in isolation, 59 factor intensity and, inferior goods, 178 international commodity agreements, international trade, commodity composition of, magnification effect, 172 normal goods, 178 prices, changes in, production theory with two commodities, Rybczynski theorem and, Commodity terms of trade, 88, 293 deterioration in developing nations, reasons for, of developing nations, historical movement in, structural breaks and, Common agricultural policy (CAP), 236, Common market intra-industry trade and, 148 Trade Expansion Act of 1962 and, 248 Common Market for Eastern and Southern Africa (COMESA), 285 Common markets, 263 Commonwealth of Independent States (CIS), 281, 286 Commonwealth of Independent States Free Trade Area (CISFTA), 281, 286 Community indifference curves, compensation principle and, 57 difficulties with, 57 illustration of, 56 marginal rate of substitution (MRS) and, 57 Comparative advantage, 29 52, 101. See also Heckscher Ohlin (H O) theory defined, 34 factor endowments and, 125 gains from trade and, 34 36

7 Subject Index 647 inter-industry trade and, 149 and labor theory of value, of largest advanced and emerging economies, 59 with money, with more than two commodities, with more than two nations, 52 no comparative advantage, 36 opportunity costs and, Comparative disadvantage, 34 Comparative statics, Compensation principle, 57 Competition. See also Heckscher Ohlin (H O) theory imperfect competition, international competitiveness, 159 monopolistic competition, perfect competition in Heckscher Ohlin theory, 103 strategic trade policy, two-firm competition and, Complete specialization in production, 44 Complete trade liberalization, benefits of, 242 Compound tariffs, 197 Computers foreign manufacturing of parts for, 2 subsidies in Japan, 236 Confidence Bretton Woods system and, 601 defined, 590 Constant costs, gains from trade under, Constant elasticity of substitution (CES) production function, 139 Constant opportunity costs, Constant returns to scale, 72 in Heckscher Ohlin theory, 103 Consumer price index (CPI), 484 Consumer surplus, Consumption function, general equilibrium of, effect of a tariff, 200 Contract curves, Contractionary fiscal policy, Corporate inversion, 328 Corporations. See Multinational corporations (MNCs); specific corporations Costa Rica Canada, free trade agreement (FTA) with, 276 in Central American Common Market (CACM), 277 dollarization by, 575 DRCAFTA (Dominican Republic Central American Free Trade Agreement) with, 252, 276 Cote d Ivoire in West African Economic and Monetary Union (WAEMU), 277 Cotonou Agreement, 272 Cotton subsidies in U.S., 236 Council of Ministers, 272 Council of Mutual Economic Assistance (CMEA or COMECON), Countertrade and bilateral agreements, 280 Countervailing duties (CVDs), 236 Court of Justice of EU, 272 Covered interest arbitrage, covered interest arbitrage margin (CIAM), derivation of formula for, covered interest arbitrage parity (CIAP), Covered interest arbitrage margin (CIAM), derivation of formula for, Covered interest arbitrage parity (CIAP), CPI (consumer price index), 484 Crawling peg system, IMF members and, 581 Credits and debits credit tranches, 595 foreign exchange market, credit function of, 367 Credit tranches, 595 Credit transactions, 346 Croatia and European Union (EU), 281 Cross-exchange rate, arbitrage and, Cuba in Council of Mutual Economic Assistance (CMEA or COMECON), 280 Curacao, exchange rate arrangements of, 580 Currency. See also Financial crises; specific currencies autonomous increase in value, intervention currency, 594 pass-through, Currency board arrangements (CBAs), , 603 dollarization and, Currency convertibility, 594 Current account importance of, transactions, Current account balance. See also United States Asian Financial Crisis of 1997, effect of, autonomous increase in, in developing nations, 477 European Financial Crisis and, 452 for G-7 countries, 494 pass-throughs and, private sector balances, 472 Current account deficit, 355 Current account surplus, 355 Current events sources, 25

8 648 Subject Index Customs unions, 263. See also Trade-creating customs unions; Trade-diverting customs unions dynamic benefits from, static welfare effects of, theory of the second best and, Cyprus, and European Union (EU), 273 Czechoslovakia in Council of Mutual Economic Assistance (CMEA or COMECON), 280 EU, free trade association (FTA) agreement with, 281 Czech Republic in Central European Free Trade Association (CEFTA), 281 current account balance of, 477 Environmental Performance Index (EPI) ranking, 162 European Union (EU) and, 273, 281 inflation targeting in, 546 restructuring economy of, 281 D Daimler-Chrysler, 3, 231 as multinational corporation (MNC), 329 Darussalam in ASEAN (Association of Southeast Asian Nations), 277 Data Quality Assessment Framework, 612 Deadweight loss of tariff, 202 Death. See Infant/child mortality Debit transactions, 346 Debt. See also Deficits developing nations, burden in, of Eurozone countries, 573 Maastricht Treaty and, of United States, De facto classification of exchange rate arrangements, Deficits, 351 budget deficits and current account of U.S., relationship between, 505 China, U.S. trade deficit with, current account, 355 external deficit, 502 fiscal policies for unemployment and external deficit, 502 Maastricht Treaty and, monetary policies for unemployment and external deficit, 502 United States balance-of-payments deficits, 351, 505, Deindustrialization, 65 factors responsible for, 66 Delivery lag, 447 Dell Computers, 2 Demand curve flexible exchange rates and, identification problem and, price elasticities and, 446 Demand for money, demand curve, 498 extended portfolio balance model and, 419 speculative demand for money, 499 Democratic Republic of Congo, Environmental Performance Index (EPI) ranking, 162 Democratic Republic of Congo in South Africa Development Community (SADC), 277 Denmark. See also EFTA (European Free Trade Association); European Union (EU) and currency crisis of , 567 Exchange Rate Mechanism II (ERM II) and, 571 Maastricht convergence indicators, 569 Depreciation absorption approach, beachhead effect, 453 current account balance of United States and, 451 defined, 370 in developing nations, domestic prices, effect on, East Asia, currency depreciation in, 442 effective exchange rate and, 372 of Euro ( ), European Financial Crisis and, 453 Latin America, currency depreciation in, 442 monetary approach to the balance of payments and, portfolio balance model and, synthesis of automatic adjustments and, time path to new equilibrium exchange rate and, Depression. See Great Depression Derived demand, 106 Desired or planned investment, Destabilizing speculation, 384 crawling peg system and, fixed exchange rates and, managed floating exchange rate system and, Devaluation, 438 absorption approach, crawling peg system and, currency crises and, domestic prices, effect on, fixed exchange rate and, 497 international macroeconomic policy coordination and, 582 supply curve and, 441 of United States dollar, 600

9 Subject Index 649 Developing nations. See also Trade liberalization buffer stocks, 300 classification of countries as, 287 commodity terms of trade of, contributions of trade to, current account balance in, 477 deprecation of currency in, 442 deterioration of terms of trade in, Doha Round, gains from, endogenous growth theory, engine of growth, trade as, exchange controls of, export instability and, foreign debt burden of, Generalized System of Preferences (GSP) and, 249 globalizing developing nations, immiserizing growth and, 182 import substitution and, income inequality in, income terms of trade of, 297 industrialization and, inflation in, 442 insufficient restructuring in, 15, international commodity agreements and, (FDI), manufactures in total exports of, 305 marketing boards, 300 New International Economic Order (NIEO) and, nonagricultural products, tariffs on, 199 poverty in, 16, , 617 purchase contracts, 301 supply and demand in, 290 tariff escalation in, 208 terms of trade of, 90, trade integration among, trade problems of, traditional trade theory and, Uruguay Round, gains from, 253 Differentiated products, Direct controls, 495, international cooperation and, 521 Direct investments, 317 fluctuations in foreign direct investments flows to U.S., foreign direct investments (FDI), investments abroad by area by U.S., 319 (FDI), long-term private international investments by U.S., 319 motives for, Direction of Trade Statistics (IMF), 24, 594 Direct price of foreign currency, 371 Dirty floating, 579 Dirty industries, 162 Discount rate, 591 Discrimination GATT (General Agreement on Tariffs and Trade) and, 247 international price discrimination, Disease. See also HIV/AIDS and Millennium Development Goals (MDGs), 309 Disequilibrium under foreign exchange rates, 374 Distribution of income. See Income distribution Division of labor in developing nations, 291 Doha Round, 227, benefits from, as development round, 308 Dollar. See Canadian dollar; United States dollar Dollar glut, 602 Dollarization, , 603 benefits and costs of, 575 Dollar overhang, 607 Dollar shortage, 599 Dollar standard, 601 Domestic distortion and protectionism, Domestic goals, tariffs vs. subsidies and, Domestic value added, 205 Dominica in CARICOM, 277 Dominican Republic, free trade agreements (FTAs) with, 252 Double-entry bookkeeping, Double factoral terms of trade, 294 DRCAFTA (Dominican Republic Central American Free Trade Agreement), 252, 276, 277, 286 Drought in Sub-Saharan Africa, 309 Dumping, See also Antidumping international price discrimination, Dutch disease, 443 Dutiable imports, U.S. average tariff rates on, 250 Duty-free zones, 263 Dynamic analysis, Dynamic external economies, 167 specialization and, E Early-warning financial indicators, 612 East African Community (EAC), 277, 285

10 650 Subject Index East Asia currency depreciation and inflation in, 442 foreign debt burden of, GDP growth in, inflation in, 442 population, economic and health indicators in, 306 Eastern Europe Council of Mutual Economic Assistance (CMEA or COMECON) and, economic integration in, East Germany in Council of Mutual Economic Assistance (CMEA or COMECON), 280 rebuilding of, 582 Easy monetary policy, 495 Economic and Monetary Community of Central Africa (ECCAS), 285 Economic Community of West African States (ECOWAS), 285 Economic Cooperation Organization (ECO), 286 Economic crises. See Financial crises Economic exposure, 381 Economic integration, 263 in Central and Eastern Europe, with developing nations, European Union (EU) and, in Former Soviet Republics, intra-regional-trade-agreement (RTA) exports, 279 trade pattern changes with, 279 Economic nationalism, 31 The Economic Report of the President, 24 Economic unions, 264 Economies of scale customs unions and, 269 in developing nations, 291 endogenous growth theory and, 291 external economies compared, 145 and international trade, intra-industry trade and, 149 multinational corporations (MNCs) and, new international economies of scale, 145 offshoring and, outsourcing and, The Economist, 25 Ecuador. See also Mercosur (Southern Common Market) in Andean Community, 277 dollarization by, 575 Edgeworth box diagram, factor price equalization theorem and, Education immigration and levels of, 335 Millennium Development Goals (MDGs) and, 309 EE curve, Effective exchange rate, 372 Efficiency flexible exchange rates and market efficiency, of foreign exchange markets, output per worker and, 179 EFTA (European Free Trade Association), 286 Canada and, 276 current members of, 272 as free trade area, 263 trade integration and, Uruguay Round, gains from, 253 Egypt EU, free trade agreement (FTA) with, 276 manufactures exports in, 305 trade reforms in, 304 Elasticities. See also Price elasticities approach, 437, 480, 482 capital flows, fiscal/monetary policies with, optimism, 446 pessimism, 446 Elasticity of substitution, 126 and factor intensity reversal, 138 Leontief paradox and, 139 Electronic transfers and foreign exchange market, 367 El Salvador in Central American Common Market (CACM), 277 dollarization by, 575 DRCAFTA (Dominican Republic Central American Free Trade Agreement) with, 252, 276 Emerging markets, strengthening, 612 Employment. See also Labor; Outsourcing; Unemployment expansionary fiscal policy and full-employment level, foreign investments and, 326 of multinational corporations (MNCs), offshoring, prices and full employment, 515 tight monetary policy and full-employment level, 501 Endogenous growth theory, Engine of growth, trade as, England. See United Kingdom England s Treasure by Foreign Trade (Munn), 30 Enterprise for the American Initiative (EAI), 276 Entire industry output expands, 145 Environment. See also Climate change degradation of, 16 Environmental Performance Index (EPI), 162 globalization and, 5 international monetary system and degradation of,

11 Subject Index 651 international trade and standards for, labor and environmental standards, 255 pollution, 161 standards for, Environmental Performance Index (EPI), 162 Equilibrium, in closed economy, Mundell-Fleming model and, producers in, Equilibrium foreign exchange rates, Equilibrium in isolation, equilibrium relative commodity price in isolation, 59 illustration of, Equilibrium level of national income, 466, 467, Equilibrium national income, in closed economy, foreign repercussions and, 478 in small open economy, Equilibrium relative commodity prices, in isolation, 59 with trade, Equilibrium relative price with trade general equilibrium analysis, with partial equilibrium analysis, Escape clause, 248 Estonia in Baltic Free Trade Agreement (BAFTA), 281 currency board arrangements (CBAs) in, 574 European Union (EU), membership in, 273 Exchange Rate Mechanism II (ERM II) and, 571 restructuring economy of, 281 Euler s theorem, 134 Eurasian Economic Community (EEC), 286 Eurex, 377 Euro ( ). See also Eurocurrency market; Foreign exchange rates balance of payments and, conversion rates for, 571 creation of, , depreciation of, exchange rate policy for, 572 forecasting exchange rate for, 427 foreign exchange risks and, 379 relative international importance of, 368 United States demand for, 369 Eurobonds, EUROBOR, 395 Eurocredits, 395 Eurocurrency, See also Eurocurrency market Eurocurrency market, 596 arbitrage and, 393 dollar overhang and, 607 effects of, growth of, 393 operation of, reasons for development and growth of, size of, 392 Eurodeposits, 391 Eurodollars, 391 Euro Mediterranean Free Trade Area (EMFTA), 276 Euronext, 377 Euronotes, European Central Bank (ECB), 568 Eurozone crisis and, 573 inflation targeting and, 546 international macroeconomic policy coordination and, 582 monetary policy and, rapid growth, interest rates and, European Commission (EC), 273 European Common Market. See Common Market European Currency Unit (ECU), 566 European Economic Area (EEA), 274, 286 European Free Trade Association (EFTA). See EFTA (European Free Trade Association) European Monetary Cooperation Fund (EMCF), 566 European Monetary Institute (EMI), 568 European Monetary System (EMS), currency crisis of , 567 formation of, 603 monetary union goal, 568 European Monetary Union (EMU), 367, 368, 369, 569 European options, 377 European Parliament, 272, 572 European snake, 601 European System of Central Banks (ESCB), 572 European Union (EU), 263, 286. See also Euro ( ); Eurozone; Maastricht Treaty agricultural subsidies in, aircraft subsidies by, 268 antidumping investigations by, 235 Asian Financial Crisis of 1997, effect of, automobile products, intra-industry trade in, banana imports, restrictions on, 234 benefits and costs of, Big Mac prices in, 404 common agricultural policy (CAP), 236 comparative advantage of, 59 Cotonou Agreement and, 272 deindustrialization in, direct investments by U.S. in, 319 economic integration and,

12 652 Subject Index European Union (EU), 263, 286. See also Euro ( ); Eurozone; Maastricht Treaty (Continued) economic profile of, 271 export stability, scheme for, 301 factor intensity of trade, 113 fiscal policy of U.S., effect of, free trade agreements (FTAs) of, 276 gains from single EU market, 273 GNI (gross national income) in, 184 import tariff in, 208 industrial products, tariffs on, 207 international macroeconomic policy coordination and, 582 intra-regional-trade-agreement (RTA) exports and, 279 Lomé Convention and, 272 multinational corporations (MNCs) of U.S., employment by, 330 new partnership agreements (NPAs), 272 nonagricultural products, tariffs on, 198 pervasiveness of nontariff trade barriers (NTBs) in, 237 population, economic and health indicators in, 306 purchase power parity (PPP) in, 184 recession and, 14 structural imbalances in, tariffs, economic effect of, 204 temporary labor migration in, 334 trade agreements, 286 trade bloc problem, 254 Trade Expansion Act of 1962 and, 248 transition economies and, 617 Uruguay Round and, 252, 253 U.S., imports from, 31 voluntary export restraints (VERs) on Japanese automobiles, 231 Eurosterling, 391 Eurozone, , countries as of, 570 crisis, 573 Exchange controls, 518, multiple exchange rates, Exchange rate, 369, 395 Exchange rate bands, 576, 578 Exchange Rate Mechanism (ERM), 567 Exchange Rate Mechanism II (ERM II), 571 Exchange rate overshooting, Exchange rates. See Foreign exchange rates Exercise price, 377 Expansionary fiscal policy, 494 full-employment level and, from natural level of output and recession under fixed exchange rates, 543 policy mix and, 512 Expansion paths, 72 Expectations monetary approach to the balance of payments and, portfolio balance model and, 417 for prices, 535 spot rate, expected change in, Taylor monetary rule and, 426 Expected change in the spot rate, 418 Expected prices, Expenditure-changing policies, 493 internal and external balance with, Expenditure-switching policies, 495 internal and external balance with, Export controls, 300 Export function, 471 Export-Import Bank, 235 Export instability cause and effects of, and developing nations, international commodity agreements and, measurements of, Export-oriented industrialization, 302 Export pessimism, 308 Export productivity index, 294 Exports. See also Imports capital, major net exporters and importers of, 11 commercial services, leading importers and exporters of, geographical destination of, index of export to import prices for U.S., 82 industrialization, export-oriented, 302 major goods exports and imports of U.S., 350 merchandise, leading importers and exporters, overlapping demands hypothesis, 146 preference similarity hypothesis, 146 small open economy, export function of, value, for United States, 152 Export subsidies, analysis of, countervailing duties (CVDs) and, 236 pervasiveness of, 237 Export tariffs, 197 optimum tariff and, Extended Credit Facility (ECF), 604 Extended Fund Facility (EFF), 604 Extended portfolio balance model, External balance, 493, fiscal policy from unemployment and, monetary policy from unemployment and,

13 Subject Index 653 Mundell-Fleming model and, policy mix and, External deficit fiscal policies for unemployment and, 502 monetary policies for unemployment and, 502 External economies dynamic external economies, 167 economies of scale compared, 145 and pattern of trade, specialization and, Extraterritorial income provisions of U.S. tax code, 235 F Factor abundance, defined, 105 and production frontiers, of various countries, Factor endowments, 109 Factor-endowment theory, 109 comparative advantage and, 125 Factor intensity, See also Heckscher Ohlin (H O) theory of major product categories, 113 of trade of various countries, Factor intensity reversal, elasticity of substitution and, 138 empirical tests of, 139 illustration of, Factor price equalization theorem, 109. See also Real wage rate of labor absolute factor price equalization, , 134 convergence of real wages in industrial countries, 120 Edgeworth box diagram and, empirical relevance of, factor intensity reversal and, and income distribution, relative factor price equalization, , specific-factors model and, Factor prices and Rybczynski theorem, Factor-proportions theory, 109 Famine. See Hunger and starvation Fast track of president to negotiate trade agreements, 252 Federal Reserve Bank central bank independence and inflation, 545 inflation targeting and, 546 rapid growth, interest rates and, Federal Reserve Board international macroeconomic policy coordination and, 582 monetary policy and, 515 Multi Country Model of, 484, 511 Regulation Q, 392 Federal Reserve Bulletin, 24, 25 Fiat Chrysler, as multinational corporation (MNC), 329 FIAT Corporation, 231 Financial account, 351 transactions, 347 Financial capital. See Capital Financial crises chronology of, in emerging market economies, of Group of Twenty (G-20) economies, Mexican peso, collapse of, 610 original sin and, 612 Financial derivatives, 347 Financial Times, 25 Finland. See also EFTA (European Free Trade Association); European Union (EU) Euro ( ), conversion rates for, 571 Maastricht convergence indicators, 569 First-credit tranche, 604 Fiscal policies, See also Monetary policies; Policy mix and aggregate demand in open economies, 542 with elastic capital flows, from external balance and unemployment, from external deficit and unemployment, 502 flexible exchange rates and, 557 government of U.S. determining, 514 Mundell-Fleming model and, open-economy trilemma, with perfect capital mobility, United States fiscal policies, , 517 Fixed exchange rates. See also Gold standard adjustable peg systems and, 577, 578 aggregate demand under, case for, currency board arrangements (CBAs) and, devaluation and, 497 exchange rate bands, 576, 578 expansionary fiscal policies from natural level of output and recession under, 543 flexible exchange rate vs., IS-LM-BP model with, macroeconomic performance and, 563, 598 open-economy trilemma, optimum currency areas and, perfect capital mobility with fixed exchange rates, fiscal/ monetary policies with, price discipline and, speculation and,

14 654 Subject Index Fixed exchange rates. See also Gold standard (Continued) trade problem and, 490 uncertainty, avoidance of, Flexible Credit Line (FCL), 604 Flexible exchange rates, 369, 370 adjustments with, aggregate demand under, balance-of-payments adjustments with, case for, demand curve, derivation of, domestic prices, effect on, economic shocks affecting aggregate demand in open economies with, fixed exchange rates vs., freely flexible exchange rate system, 374 gold standard and, 455 macroeconomic performance, 563, 598 aggregate demand and, market efficiency with, Marshall-Lerner condition, open-economy trilemma, optimum currency areas and, policy advantages with, stability/instability of foreign exchange markets and, supply curve, derivation of, synthesis of automatic adjustments and, terms of trade, effect on, United States dollar, effective exchange rate of, 450 Floating exchange rate system, 374. See also Managed floating exchange rate system IMF members and, 580 Footloose industries, transportation costs of, 161 Forbes, 25 Ford Motor Co. as multinational corporation (MNC), 329 Probe, 3 Forecasting exchange rates. See Foreign exchange rates Foreign bonds, 394 Foreign debt, 307 Foreign direct investments (FDI), Foreign exchange brokers, 366 Foreign exchange futures, hedging and, Foreign exchange markets, 13 Bank for International Settlements (BIS), 367 credit function of, 367 currencies of, 378 defined, 365 efficiency of, electronic transfers and, 367 functions of, geographic distribution of, 378 levels of participants in, 366 Marshall-Lerner condition, risks of, size of, 378 stability/instability of, Foreign exchange options, hedging and, Foreign exchange rates, See also Fixed exchange rates; Flexible exchange rates; Monetary approach to the balance of payments; Portfolio balance model; Purchasing-power parity (PPP) theory arbitrage and, and balance of payments, carry trade, cross-exchange rate, de facto classification of exchange rate arrangements, disequilibrium under, 374 domestic prices, effect on, effective exchange rate, 372 efficiency of foreign exchange markets and, equilibrium foreign exchange rates, excessive fluctuations/misalignment in, 15 with flexible exchange rate system, 369, 370 fluctuations of, forecasting, empirical tests of, freely floating exchange rate system, 558 hedging and, inflation differentials and, 406 international capital flows and, 437 macroeconomic performance and, 598 multiple exchange rates, overshooting, current problems with, 605 of U.S. dollar, 424 pass-throughs, quotations for, 371 speculation and, spot rates, time path to new equilibrium exchange rate, Foreign exchange risk, covered interest arbitrage and, 386 hedging, speculation and, Foreign exchange swaps, 376 Foreign investments, 317. See also Direct investments; International capital flows; Portfolio investments direct investments, 318

15 Subject Index 655 long-term private international investment positions of U.S., 319 portfolio investments, 317 Foreign repercussions, foreign trade multipliers with foreign repercussions, derivation of, Foreign Sales Corporations (FSC) provisions of U.S. tax code, 235 Foreign trade multiplier, foreign repercussions and, mathematical derivation of, Formal derivation of offer curves, outline of, Former Soviet Republics. See also specific nations Central and Eastern European Countries (CEEC), economic integration in, Fortune, 25 Forward contracts, 377 Forward discounts (FD), 376 Forward premiums (FP), 376 Forward rates, , 426 Fragmentation, 145 Franc. See Swiss franc France. See also European Union (EU); G-7 countries; G-20 countries capital deepening and output per worker, 179 capital labor ratio of, 108, 175 central bank independence and inflation, 545 and currency crisis of , 567 current account balance in, 452 effective exchange rates in, 452 efficiency change and output per worker, 179 Environmental Performance Index (EPI) ranking, 162 Euro ( ), conversion rates for, 571 exchange controls by, 519 export volume in, 187 factor abundance of, GDP (gross domestic product) growth in, 187 gold standard and, 592 government debts and budget deficits of, 573 hourly compensation in manufacturing in, 120 income elasticity of imports, 471 inflation rate in, 413 international macroeconomic policy coordination and, 582 International Monetary Fund (IMF) balance-of-payments summary for, intra-industry trade, growth of, 150 (FDI), labor migration in, 334 Maastricht convergence indicators, 569 monetary growth in, 413 multinational corporations (MNCs) of U.S., employment by, 330 output per worker, growth in, 179 pass-through elasticities for, 453 per capita GDP changes in, 187 price elasticities for imports and exports, 449 private sector balances of, 472 technical progress and output per worker, 179 terms of trade changes in, 187 trade imbalances in, 616 as trade partner of U.S., 354 traditional and purchasing-power parity (PPP) per capita incomes in, 312 U.S. companies, manufacturing for, 2 war damage reparations paid by, 338 Free economic zones, 264 Freeloader nations, 247 Freely floating exchange rate system, 374, 558 fluctuation in rates with, 559 reserves with, Free trade, 244 GATT (General Agreement on Tariffs and Trade) and, Free trade agreements (FTAs), 252, with U.S., 252, 276 Free Trade Area of the Americas (FTAA), 276 Free trade areas, 263 Frictional unemployment, 493 Full-employment. See Employment Fundamental disequilibrium, 594 Futures. See Foreign exchange futures G Gains from exchange, Gains from specialization, Gains from trade, 29, constant costs and, exchange, gains from, illustration of, with increasing costs, illustration of, relative commodity prices and, specialization and, Game theory, GATT. See General Agreement on Tariffs and Trade (GATT) GDP (gross domestic product). See also International trade complete trade liberalization, benefits of, 242 developing nations, growth in, 477 Eastern Asia, growth in, 292 European Union (EU) and, 273

16 656 Subject Index GDP (gross domestic product). See also International trade (Continued) extended portfolio balance model and, 419 factor endowments of various countries, globalizers, growth of GDP in, gravity model and, 8 10 growth of, 6, 7 imports and exports and, 5 interdependence and, 5 6 nonglobalizers, growth of GDP in, per capita GDP, portfolio balance model and, 419, 420 rich countries, growth of GDP in, short-run outputs in United States, United States, growth in, , 476 variety gains with international trade and, 148 world GDP, growth of, 476 Gender equality and Millennium Development Goals (MDGs), 309 General Agreement on Tariffs and Trade (GATT), Kennedy Round and, 596 trade liberalization and, trade rounds sponsored by, General Arrangements to Borrow (GAB), 519, expansion of, 604 General Data Dissemination System (GDDS), 612 General Electric, 329 General equilibrium analysis, 85 86, 90. See also Tariffs Heckscher Ohlin theory and, Meade, James and, partial equilibrium analysis and, of production, consumption, and trade, stable and unstable equilibria, trade-diverting customs unions, static welfare effects of, of transportation costs, 160 General equilibrium model, 90 Generalized System of Preferences (GSP), 249 General Motors (GM), 231 Geography and composition of international trade, 20, 22 and export destination, German mark devaluation in crisis of , 567 exchange rate indices for U.S. dollar and, 414 interest rate differentials and exchange rate index for, 415 Germany. See also East Germany; European Union (EU); G-7 countries; G-20 countries capital deepening and output per worker, 179 capital labor ratio of, 108, 175 central bank independence and inflation, 545 current account balance in, 452 effective exchange rates in, 452 efficiency change and output per worker, 179 Environmental Performance Index (EPI) ranking, 162 Euro ( ), conversion rates for, 571 exchange controls by West Germany, 519 export volume in, factor abundance of, GDP (gross domestic product) growth in, government debts and budget deficits of, 573 income elasticity of imports, 471 inflation rate in, 413 international macroeconomic policy coordination and, 582 International Monetary Fund (IMF) balance-of-payments summary for, intra-industry trade, growth of, 150 (FDI), labor migration in, 334 Maastricht convergence indicators, 569 as major trade partner, 8 9 monetary growth in, 413 multinational corporations (MNCs) of U.S., employment by, 330 output per worker, growth in, 179 pass-through elasticities for, 453 per capita GDP changes in, price elasticities for imports and exports, 449 private sector balances of, 472 real hourly wage in manufacturing in, 120 technical progress and output per worker, 179 temporary labor migration in, 334 terms of trade changes in, trade imbalances in, 616 as trade partner of U.S., 353 traditional and purchasing-power parity (PPP) per capita incomes in, 312 voluntary export restraints (VERs) on Japanese automobiles, 231 war damage reparations paid by, 338 Zollverein, 263 Ghana cocoa marketing board of, 300 inflation targeting in, 546 Global economy, 1 2 Global financial crisis ( ), 613 globalization before and after, Globalization, 2 5 antiglobalization movement, 255 before and after global financial crisis, 11 12