International trade and finance, second year: fall 2018

The objective of the course is to offer students an introduction to two key dimensions of globalization:  international trade and international finance. The course will cover both theoretical and empirical contributions and will often refer to current policy issues in both international trade and macroeconomics. Using theoretical and empirical tools, we will consider a wide range of questions such as: what are the gains of international specialization? what is the effect of trade on inequality? How does market power of firms affect international trade? What are the consequences of trade policies? How to understand international financial flows? What is the relation between exchange rates and monetary policy? How does globalization affect the conduct of macroeconomic policies?  Is the euro an optimal currency area? Why so many international financial crises?
The prerequisite for this course is the core economics course in the first year. Although not very formalized (we will mostly use graphs to explain theoretical mechanisms), this course will use some basic mathematical tools that are common in any modern economic course.



One mid-term and one final exam (2 hours each)
Participation in class (Conférence de Méthode)

Past final exams (on the international finance part) are here.

2014 exam with answers


Textbook: International Economics: Theory and Policy, 10/e by Paul R. Krugman, Maurice Obstfeld and Marc Melitz (KOM), Pearson

Required readings are marked by an asterisk *.


Trade Section

1) Globalization : some stylized facts, historical comparisons, gravity equations and comparative advantage (course 1 and 2)

Slides part 1 ; Slides part 2

  • The measures of trade and financial globalization
  • The geography of trade (the rise of China and Global value chains, the gravity equation)
  • The present and the past of financial globalization
  • Ricardian Theory of Comparative Advantage

* KOM Chapter 2 and 3

Further readings:

- US-China trade war prompts rethink on supply chains, FT article Sept. 2018.

- Alan Taylor, 2004, Global Finance:Past and Present

- Kevin H. O'Rourke and Jeffrey G. Williamson Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy, MIT press, 1999.

- The Age of Global Value Chains: Maps and Policy Issues, João Amador, Filippo di Mauro 09 July 2015

- Richard Baldwin and Philippe Martin, Two Waves of Globalisation: Superficial Similarities, Fundamental Differences ", NBER working paper 6904. Published in Globalization and Labor, edited by H. Siebert, 1999.


2) Globalization, employment, inequality and wages (course 2)


  • HOS Theory
  • Trade and Inequalities
  • The "China shock"

* KOM: chapter 5

* Autor, D. H., Dorn, D., & Hanson, G. H. (2016). The china shock: Learning from labor-market adjustment to large changes in trade. Annual Review of Economics, 8, 205-240.
- Malgouyres, C. (2017). The impact of chinese import competition on the local structure of employment and wages: Evidence from france. Journal of Regional Science, 57(3), 411-441.
- Jan Reenen, J. “Wage Inequality, Technology and Trade: 21st Century Evidence.” Labour Economics (December 2011), pp. 30–741.

3) International trade and market power (course 3 and 4)


  • Trade and Imperfect Competition
  • Product Differentiation
  • Market size and European integration

* KOM : chapter 8

- Charlotte Emlinger & Sophie Piton, World Trade Flows Characterization:
Unit Values, Trade Types and Price Range
s, Cepii No 2014-26 – December Working Paper

- Feenstra, Robert C. 2018. "Alternative Sources of the Gains from International Trade: Variety, Creative Destruction, and Markups." Journal of Economic Perspectives, 32 (2): 25-46.
- Johnson, R. 2014, “Five  Facts  about  Value-Added  Exports  and  Implications  for  Macroeconomics  and  Trade  Research,”  Journal  of  Economic  Perspectives,  Vol.  28,  No.  2,  Spring  2014.
- Trésor-Éco n° 207 - Le commerce de la France en valeur ajoutée  24 octobre 2017.
- Trésor-Éco n° 212 - Potentiels de commerce : quelle stratégie pour le commerce extérieur ? 20 décembre 2017.

4). The decision to export and/or invest abroad (course 4)

  • Why are exporter firms different?
  • How does trade affect different firms differently?

* KOM: chapter 8

• Mayer, T. and Ottaviano, G. “The Happy Few: The Internationalisation of European Firms: New Facts Based on Firm-Level Evidence.” Intereconomics 43 (May/June 2008), pp. 135–148.
- Melitz M. and Trefler D. “Gains from Trade When Firms Matter.” Journal of Economic Perspectives 26 (2012), pp. 91–118.
- Trésor-Éco n° 122 - Quel positionnement « hors-prix » de la France parmi les économies avancées ? 7 janvier 2014.

5). Trade policies (course 5 and 6)

  • Trade policy instruments (tariffs, quotas and regulations)
  • Strategic trade policies
  • The return of protectionnist policies and its impact
  • Brexit

* KOM: chapters 9 and 10

* Jean S., Martin P. and Sapir, A., (2018), CAE note, International Trade Under Attack: What Strategy for Europe?

- Baldwin, Richard. 2016. "The World Trade Organization and the Future of Multilateralism." Journal of Economic Perspectives, 30 (1): 95-116.
- Dhingra, Swati; Hanwei Huang; Gianmarco Ottaviano; João Paulo Pessoa; Thomas Sampson (2017).  « The costs and benefits of leaving the EU: trade effects » Economic Policy, Volume 32, Issue 92 : 651–705.
- Boz, E., Gopinath, G. and Plagborg-Møller, M, (2017). Global Trade and the Dollar. International Monetary Fund.
- Bureau, D., Lionel Fontagné and Katheline Schubert, 2017, CAE Note, Trade and Climate: Towards Reconciliation