International Trade and Finance
CEU, Economics Department

Lecturers: Prof. Péter Benczúr
Course: 2 credits

The course examines alternative theories and models of how international trade influences the workings of national
economies. For obtaining a broad picture of international economics, students are strongly encouraged to take the
course “International Finance” as well (for first year MA students, it refers to their second year choice). Another complement
is the course on European Integration, which takes a more policy-oriented approach.

1. Trade and Technology – The Ricardian Model of Trade (4)

* Dornbusch, R., S. Fischer and P.A. Samuelson: Comparative Advantage, Tradeand Payments in a Ricardian Model
with a Continuum of Goods, American Economic Review, 1977.

* Young, A.: Learning-by-doing and the Dynamic Effects of International Trade, Quarterly Journal of Economics, 1991.

* Krugman, P.R.: The Narrow Moving Band, the Dutch Disease, and the Competitive Consequences of Mrs.Thatcher:
Notes on Trade in the Presence of Scale Dynamic Economies, Journal of Development Economies, 1987.

o Brezis, E., P.R. Krugman and D. Tsiddon: Leapfrogging in International Competition, American Economic Review, 1993.

* Grossman, G.M. and E. Helpman: Innovation and Growth in the Global Economy, chapters 3 and 9.

2. Trade and Factor Endowments: The Heckscher-Ohlin Model (3.5)

* Helpman, E. and P.R. Krugman: Market Structure and Foreign Trade, chapter 1.

* Davis, D.R.: Intraindustry Trade: A Heckscher-Ohlin-Ricardo Approach, Journal of International Economics, 1995.

o Stiglitz, J.: Factor-Price Equalization in a Dynamic Economy, Journal of Political Economy, 1970.

* Ventura, J.: Growth and Interdependence, Quarterly Journal of Economics, 1997.

o Trefler, D.: The Case of the Missing Trade and Other HOV Mysteries, American Economic Review, 1995.

o Trefler, D. and S. Chun Zhu: Beyond the Algebra of Explanation: HOV for the Technology Age, mimeo, University
of Toronto, 2000. ( downloadable as

o Leamer, E.E. and J. Levinsohn: International Trade Theory: The Evidence, Handbook of International Economics III.

3. Trade and Increasing Returns (3)

o Helpman, E. and P.R. Krugman: Market Structure and Foreign Trade, chapter 3.

* Krugman, P.R.: Rethinking International Trade, chapters 1-3.

* Romalis, J. : Factor Proportions and the Structure of Commodity Trade, American Economic Review, forthcoming

* Krugman, P.R.: Increasing Returns and Economic Geography, Journal of Political Economy, 1991.

* Melitz, M. J.: The Impact of Trade on Intra-industry Reallocations and Aggregate Industry Productivity, Econometrica, 2003.

4. Trade Policy (1.5)

* Helpman, E. and P.R. Krugman: Trade Policy and Market Structure, chapter 2.

* Krugman, P.R.: Rethinking International Trade, chapter 14.

o Brander, J.A.: Strategic Trade Policy, Handbook of International Economics III.

o Rodrik, D.: Political Economy of Trade Policy, Handbook of International Economics III.

o Bagwell, K. and R.W. Staiger: An Economic Theory of the GATT, American Economic Review, 1999.

o Levy, P.I.: A Political-Economic Analysis of Free-Trade Agreements, American Economic Review, 1997.

Starred articles are required readings, available in the reading package at the Department Headquarters.
Grading will be based on a written final exam, and two or three problem sets. The problem sets will contribute 20-25%
altogether to the total score.