BMP:SEM 4:PAPER 3/4:SPECIALIZATION ECONOMICS:INTERNATIONAL TRADE

  Module 1: Theory of International Trade

The pure theory of international trade – Theories of absolute advantage, comparative

advantage and opportunity costs - Modern theory of international trade; Theorem of

factor price equalization; Empirical testing of theory of absolute cost and comparative

cost – Heckscher-Ohlin theory of trade - Kravis and Linder theory of trade; Role of

dynamic factors, i.e., changes in tastes, technology and factor endowments in explaining

the emergence of trade; The Rybczynski theorem – Concept and policy implications of

immiserizing growth; Causes of emergence and measurement of intra-industry trade and

its impact on developing economies.

Module 2: Measurement of Gains and Theory of Interventions

Measurement of gains from trade and their distribution; Concepts of terms of trade, their

uses and limitations; Hypothesis of secular deterioration of terms of trade, its empirical

relevance and policy implications for less developed countries; Trade as an engine of

economic growth; Welfare implications – Empirical evidence and policy issues; Theory

of interventions (Tariffs, Quotas and Non Tariff Barriers); Economic effects of tariffs and

quotas on national income, output, employment, terms of trade, income distribution;

Balance of payments on trading partners both in partial and general equilibrium analysis;

The political economy of non-tariff barriers and their implications; Nominal, effective

and optimum rates of tariffs – their measurement, impact and welfare implications; Trade

under imperfectly competitive market.

Module 3: Balance of Payments

Meaning and components of balance of payments; Equilibrium and disequilibrium in the

balance of payments; Process of adjustment under systems of gold standard, fixed

exchange rates and flexible exchange rates; Expenditure-reducing and expenditureswitching policies and direct controls for adjustment; Policies for achieving internal and

external equilibrium simultaneously under alternative exchange rate regimes; A critical

review of the monetary approach to the theory of balance of payments adjustment;

Foreign trade multiplier with and without foreign repercussions and determination of

national income and output; Relative merits and demerits of fixed and flexible exchange

rates in the context of growth and development in developing countries.

Module 4: The theory of Regional Blocks

Forms of economic cooperation; Reforms for the emergence of trading blocks at the

global level; Static and dynamic effects of a customs union and free trade areas;

Rationale and economic progress of SAARC/SAPTA and ASEAN regions; Problems

and prospects of forming a customs union in the Asian region; European Union; Rise

and fall of gold standard and Bretton-Woods system; Need, adequacy and determinants

of international reserves; Conditionality clause of IMF; International Monetary System;

India and developing countries; Theory of short-term capital movements and East Asian

crisis; Functions of GATT/WTO (TRIPS/TRIMS), UNCTAD, IMF, World Bank and

Asian Development Bank – Their achievements and failures.

Module 5: Trade policies in India

Trade problems and trade policies in India during the last five decades; Recent changes in

the direction and composition of trade and their implications; Rationale and impact of

trade reforms since 1991 on balance of payments, employment and growth. Problems of

India’s international debt; Working and regulations of MNCs in India; Instruments of

export promotion and recent import and export policies and agenda for future.