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.
