Chapter 5: International Trade and Capital Flows

In this section

• Comparative Advantage and Gains from Trade
  Explore how comparative advantage, rooted in opportunity cost, drives specialization, international trade, and mutual economic gains—even if one nation has an absolute advantage in all goods.
• Tariffs, Quotas, and Other Trade Barriers
  Explore the mechanics, impacts, and strategic considerations of imposing tariffs, quotas, and other trade barriers in a global marketplace, with emphasis on efficiency, resource allocation, and implications for portfolio management.
• Trading Blocs and Regional Integration
  Discover how trading blocs reduce barriers, foster deeper regional cooperation, and shape global economic policies, while delving into key forms of integration and real-world examples.
• Current Account, Capital Account, and Balance of Payments Composition
  Explore the structure of the balance of payments, focusing on the current and capital accounts and their impact on global financial flows and portfolio management decisions.
• Marshall-Lerner Condition and J-Curve
  Explores how currency depreciation affects trade balances under the Marshall-Lerner condition and illustrates why trade balances may initially worsen before improving in the J-Curve phenomenon.
• Levels of Economic Integration
  Explore the sequential stages of economic integration—from preferential trading areas to monetary unions—understanding their economic impact and implications for capital markets.
• Terms of Trade
  Explore how a nation’s Terms of Trade ratio influences competitiveness, living standards, and global trade dynamics. Understand key drivers like commodity price shifts, currency fluctuations, and domestic productivity changes.
• Trade in Services and Global Value Chains
  Explore how intangible services and complex global production networks shape modern international trade, highlighting the challenges, policy dimensions, and financial implications in cross-border transactions.