Economics for Managers

Transcription

1 Economics for Managers G.M. AGIOMIRGIANAKIS M. VLASSIS VOLUME 1 International Economic Environment

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3 To the children of the World ( including ours) (by Minas Vlassis and George M. Agiomirgianakis) also to my mother Eleftheria and my sisters Marika and Marina (by George M. Agiomirgianakis)

4 Note The figures that have been included in this volume are used strictly for educational purposes and take the place of visual materials that would be presented during a lecture. They are provided only for personal use by students of the Hellenic Open University (HOU), and are accompanied by a reference to their source and/or the person who created them. The figures have been reproduced at a size that facilitates comprehension of the words and symbols in them, as well as their content in general. Reprinting or any other form of reproduction of this volume is prohibited. The volume is intended for the purposes of teaching and examination of HOU students. It is distributed free of charge only to those who created the teaching materials, to students enrolled at HOU, and to the relevant teaching personnel; it is not available for purchase.

5 ECONOMICS FOR MANAGERS International Economic Environment Note The Hellenic Open University is responsible for the editing of this publication and the development of the text in accordance with the Methodology of Distance Learning. The scientific accuracy and completeness of the written materials are the exclusive responsibility of the authors, scientific reviewers, and academic supervisors who undertook this project.

6 Copyright 2005 For Greece and the world HELLENIC OPEN UNIVERSITY 16, Sahtouri Str. & Ag. Andreou Str., Patras el: (2610) , / Fax: (2610) PREPARATION OF THE TEACHING MATERIAL of the Volume International Economic Environment Academic Supervisor for the Development of the Program and the Textbooks George M. Agiomirgianakis Author Scientific Reviewer George M. Agiomirgianakis Nicholas Apergis Minas Vlassis Nicholas Apergis Supervision of the Methodology of Distance Learning Antonia-Maria Chartofylaka Language Editing Joan Stefan Artistic Layout Artemis Glarou Layout / Production Artemis Glarou Coordination of the development of the educational material and overall supervision of the publications HOU PROJECT TEAM / ISBN: In accordance with Law 2121/1993, the partial or total republishing, or reproduction by any means, of this book is prohibited without the permission of the publisher.

7 SCHOOL OF SOCIAL SCIENCES PROGRAM OF STUDIES Masters in Business Administration (MBA) MODULE Economics for Managers VOLUME 1 INTERNATIONAL ECONOMIC ENVIRONMENT PATRAS 2005

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9 CONTENTS Preface 15 Introduction 16 CHAPTER 1 G.M. Agiomirgianakis Markets in the global economy 19 The Scope of the Chapter...19 Learning Objectives...19 Key Words...19 Introductory Comments Markets and market clearing in the global economy Consumers Producers Market clearing and market intervention Markets are international Imports: An excess demand Exports: An excess supply Determining the international equilibrium of traded good T: Excess supply vs excess demand Balance of trade, the pattern of production and trade Balance of trade The pattern of production and trade...28 Synopsis - Conclusions...32 Appendix

10 Bibliography...34 Recommended Reading...34 CHAPTER 2 G.M. Agiomirgianakis International trade with constant cost 35 The Scope of the Chapter...35 Learning Objectives...35 Key Words...35 Introductory Comments The production possibility frontier under constant cost The pattern of production and trade Gains acquired via international trade Labor productivity, wages and real exchange rate in the global economy Labor productivity and international trade Exchange rate and international trade...45 Synopsis - Conclusions...47 Appendix...48 Bibliography...50 Recommended Reading...50 CHAPTER 3 M. Vlassis International trade and trade policy 51 The Scope of the Chapter...51 Learning Objectives...51 Key Words...51 Introductory Comments The production possibilities frontier Increasing marginal opportunity costs Autarky equilibrium and real income

11 3.2 Specialization with international trade Response to international prices Economic development Trade policies...61 Synopsis - Conclusions...63 Appendix...64 Bibliography...65 Recommended Reading...65 CHAPTER 4 M. Vlassis Protectionism 67 The Scope of the Chapter...67 Learning Objectives...67 Key Words...67 Introductory Comments Tariffs Non-tariff barriers Quotas Voluntary export restraints and legal trade restrictions Production distortions Political economy considerations...75 Synopsis - Conclusions...78 Appendix...79 Bibliography...80 Recommended Reading...80 CHAPTER 5 M. Vlassis International prices and the terms of trade 81 The Scope of the Chapter

12 Learning Objectives...81 Key Words...81 Introductory Comments Terms of trade, offer curves and international equilibrium Terms of trade and offer curves International equilibrium Shifting offer curves and adjustments in the international equilibrium Improving the terms of trade with tariffs Optimal tariffs and tariff wars Tariff games and equilibrium tariffs Trade of resources in limited stock...95 Synopsis - Conclusions...97 Appendix...98 Bibliography...99 Recommended Reading...99 CHAPTER 6 M. Vlassis Production, international trade and income distribution 101 The Scope of the Chapter Learning Objectives Key Words Introductory Comments The specific factors model The market for shared labor International trade and the distribution of income in the SFM The factor proportions model The fundamental theorems of international trade Synopsis - Conclusions Appendix Bibliography Recommended Reading

13 CHAPTER 7 M. Vlassis Industrial structure and international trade 117 The Scope of the Chapter Learning Objectives Key Words Introductory Comments Firms with market power and international markets International monopolies International price discrimination A dominant exporter and many fringe domestic firms Product differentiation, quality variation and monopolistic competition Oligopoly and international trade The nature of oligopoly Price and output stability in oligopolistic industries Competition versus collusion in international oligopolies Technology and income in international trade Synopsis - Conclusions Appendix Bibliography Recommended Reading CHAPTER 8 G.M. Agiomirgianakis International mobility of labor and capital 137 The Scope of the Chapter Learning Objectives Key Words Introductory Comments International migration Types of international migration

14 8.1.2 Modeling international migration International trade and migration International capital mobility Foreign direct investment and foreign portfolio investment Factors friends, factors enemies and distribution of income Specific factors model and migration of a factor Synopsis - Conclusions Appendix Bibliography Recommended Reading CHAPTER 9 M. Vlassis Multinational enterprises and international economic integration 153 The Scope of the Chapter Learning Objectives Key Words Introductory Comments The economics of multinational enterprises International marketing and multinational firms Gains and losses with multinational enterprises Multinational horizontal integration Multinational vertical integration International externalities and policy coordination Externalities and public goods International externalities and need for policy coordination International economic integration Synopsis - Conclusions Appendix Bibliography Recommended Reading

15 CHAPTER 10 G.M. Agiomirgianakis The balance of payments 165 The Scope of the Chapter Learning Objectives Key Words Introductory Comments Balance of payments Current account Capital account Twin deficits and macroeconomic policies Twin deficits and the role of fiscal policy Current account deficit and monetary policy Synopsis - Conclusions Appendix Bibliography Recommended Reading CHAPTER 11 G.M. Agiomirgianakis The foreign exchange market 179 The Scope of the Chapter Learning Objectives Key Words Introductory Comments Exchange rate determination Foreign exchange market Exchange rate changes and trade balance Fixed exchange rate regime Other definitions of exchange rate Expectations, stability and trading in the forex market Expectations in the forex market

16 Speculation and stability in the forex market Demand and supply in the forex market and stability Arbitrage Expected inflation, value of a currency and nominal versus real interest rates Synopsis - Conclusions Appendix Bibliography Recommended Reading CHAPTER 12 G.M. Agiomirgianakis International finance 197 The Scope of the Chapter Learning Objectives Key Words Introductory Comments Financial system Lenders, borrowers and financial institutions Cost-benefit analysis and project selection The market for loanable funds (credit market) International interest rate and exchange rate International money The role of money Money market Purchasing power parity Synopsis - Conclusions Appendix Bibliography Recommended Reading