International Economics Book

International economics deals with economic and financial interdependence among countries of the world. It explains the flow of goods, services, capital and labour between a country and the rest of the world. It examines policies directed at regulating these flows, and their effects on the well-being of a country. The economic and financial interdependence affects political, social, cultural and military relations among countries. Specifically, international economics deals with international trade, international business and international finance.

Trade, internal and external, is as old as human civilization. Nations have been trading with each other since times immemorial. Trade is the foundation of modern economic activity and has been rightly termed as the engine of growth. Hence, international trade is an important element of world economy. International trade theory analyzes the basis and the gains from trade. According to traditional trade theory, if each nation specializes in the production of the commodity of its comparative advantage, world output will be greater and, through trade, each nation will share in the gain.

The wave of liberalization and globalization sweeping across the world has opened many national markets for international business. Global private investment, in most part, is now made by multinational corporations (MNCs) also referred to as transnational corporations (TNCs). Clearly, these transnational organisations play a major role in world trade and investments because of their demonstrated management skills, technology, financial resources and related advantages. The study of international business raises awareness of the inter-relatedness of a country's economic policies and practices with another.

International finance is the study of monetary transactions between two or more countries, focusing on areas such as foreign investment, foreign borrowings and foreign aid. Increased globalization has magnified the importance of international finance. In the wake of globalization, capital has become more mobile across national boundaries as nations are increasingly relying on savings of other nations to supplement the domestic savings. Technological developments in electronic payment and communication systems have substantially reduced the arbitrage opportunities across financial centres, thereby aiding the cross-border mobility of funds.

The study of international economics is important to understand the dynamics of global economy, to help domestic public authorities and business entities.

This book explains various aspects of international economics in simple, lucid and non-technical language. It would connect teachers and students of the subject to the basic concepts, components and processes of international economics.
The book contains 32 chapters which have been organized into 3 parts.

Part I (chapters 1 to 13) is titled International Trade. It explains and examines various theories of international trade propounded by economists from time to time, viz. absolute advantage theory of trade by Adam Smith, comparative advantage theory of trade by David Ricardo, and Heckscher-Ohlin theory of trade by Eli Heckscher and Bertil Ohlin. Other topics included in this part are balance of payments, theories of exchange rate determination, foreign exchange market, foreign exchange reserves, terms of trade, tariff and non-tariff trade barriers, regional and mega multilateral trade agreements, World Trade Organization (WTO) and trade and environment.

Part II (chapters 14 to 23) is titled International Business. It includes the following topics: globalization and the rejection of decoupling hypothesis, growth of multinational corporations (MNCs), location of industry, mergers and acquisitions (M&A), intellectual property rights (IPRs), international migration of labour, internet and industry, corporate social responsibility (CSR), industrial activities and environmental pollution and international economic problems and challenges.

Part III (chapters 24 to 32) is titled International Finance. It deals with financial system and financial economics, international financial crises, regional and international financial integration, foreign direct investment (FDI), tax incentives to attract FDI, portfolio theory and foreign portfolio investment, foreign borrowings and foreign aid, World Bank and its affiliates and International Monetary Fund (IMF).