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International economics EC3016

This course is an analytical course in international trade and international finance.

Students are introduced to the theories with which to understand international trade patterns, examine trade policies, analyse the determinants of exchange rates and financial crises and address topical issues of international economic interdependence between states.

Prerequisites/ exclusions 

If you are studying for this course as part of a BSc degree, you must have already passed:

  • EC2065 Macroeconomics
  • MN2028 Managerial economics or EC2066 Microeconomics.

Topics covered

International trade: 

International trade covers the reasons for trade and explanation of trade patterns and the gains accruing from trade or from restricting trade. These are core areas and call for extensive coverage. Linked to this core are a number of specific issues which must also be studied: increasing returns and trade; international factor movements; growth and trade; income distribution and trade; economic integration; multinational enterprises; and ‘North-south’ issues. Empirical evidence supplements the theoretical treatment. The European Union (EU), World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD) are institutionally involved in trade policy issues and their major concerns are included in the subjects to be studied.

International finance: 

International finance covers the balance of payments, exchange rates and open-economy macroeconomics. Linked to this core are a number of specific issues which must also be studied: national income accounting; spot and forward markets; parity conditions; exchange rate determination; exchange rate regimes; exchange rate stability and currency crises; and currency unions. Empirical evidence, though often inadequate and conflicting, is relevant in many areas. Issues associated with the European Monetary System (EMS), the International Monetary Fund (IMF) and, in general, with international monetary relations are also included in the syllabus.

Learning outcomes

If you complete the course successfully, you should be able to:

  • Discuss and explain specific policy issues such as ‘environmentalism as protectionism’; international dumping; the choice of exchange rate regime; the desirability of free capital flows
  • Apply a specific framework to illustrate the connection between a variety of models and approaches. Explain the connections between Ricardian, Heckscher-Ohlin and the specific factors models in trade theory, or between the ‘monetary approach’ and the ‘asset approach’ in exchange rate theory
  • Explain how international economic theory has been shaped by real world events.


Unseen written exam (3 hrs).

Essential reading

  • Krugman, P., M. Obstfeld and M. Melitz. International Economics: Theory and Policy. Boston, Mass.; London: Pearson/Addison-Wesley, 2014. Pearson global edition; tenth edition [ISBN 9781292019550].
  • Copeland, L. Exchange Rates and International Finance. Harlow: Prentice Hall, 2014. Sixth edition [ISBN 978-0273786047].

Course information sheets

Download the course information sheets from the LSE website.