Global Economic Environment



Igor N. Baranov, Associate Professor,
Department of Public Administration





45 contact hours; 139 student work hours






Managerial Economics



Aim of the Course:   


The aim of this course is to provide master students, specializing in international business, with the knowledge of what the major issues affecting the global economy are and likely to be in the next decade. Rather than delivering a standard course in international economics for economists, the goal is to understand the broad factors that shape the global economy. We will cover traditional topics in international economics, such as trade and trade policy as well as open-economy macroeconomics, but also discuss some issues related to economic growth and its differentiation across countries, political economy of development, and economics of emerging markets. As well as providing a deeper insight into policy and market issues, the course aims to give you greater experience in applying analytical tools developed during basic economics course as well as extending your existing theoretical toolkit. It should be of use and of interest to anyone who intends to work in an international corporation, in financial markets or intending to move into government or policymaking.




Course Content:       


Topic 1. The Global Landscape of Growth and Development

  • Measuring welfare of nations. Income vs wealth vs subjective measures (Stiglitz-Sen Report).
  • Economic Growth. The Effects of Labor Supply and Demography. Foreign Aid and Economic Development. Technological Change and Economic Growth. Human Capital and Economic Development.
  • Policies for economic growth. Growth Diagnostics.
  • Case of the “East Asia miracle”. Case of the Russian economic growth.


Topic 2. Foreign exchange market and exchange rate policy. Macroeconomic equilibrium in an open economy

  • Introduction to open-economy macroeconomics. Balance of payments and its components. Trade balance. The current, capital and financial accounts. Assets and liabilities of countries.
  • The organization of the foreign exchange market. Interest parity. The equilibrium exchange rate.
  • Good Market Equilibrium (Short Run). Foreign Exchange Market Equilibrium (Short Run). Money Market Equilibrium (Short Run). Equilibrium in The Short Run IS - LM –FX Model for an Open Economy.


Topic 3. Monetary and fiscal policy in an open economy

  • Goals of macroeconomic policy in an open economy. Macroeconomic policies in the short run. The Impossibility Trilemma and its empirical verification.


Topic 4. International monetary system and financial crises

  • The evolution of the international monetary system and options for macroeconomic policies.
  • Open currency areas. Eurozone: fiscal and monetary policies.
  • Capital flows and global imbalances. Global Imbalances and the Financial Crisis.
  • The 2007 financial crisis, leverage cycles, and policy responses.


Topic 5. International trade and trade policy

  • Review of trade theory. Gains from Trade. Ricardian model – the very long run. Specific factors model – the short run. Heckscher-Ohlin – the long run.  Gains from trade over time. Standard trade model. New trade theory. Imperfect competition, economies of scale, and the like.
  • Trade Policy: Voluntary Export Restraints, Antidumping and Countervailing Duties. Measuring degree of protection. Political Economy of Trade. Infant Industries. Preferential Trading Arrangements. The case of the Custom Union of Russia, Belarus and Kazakhstan.
  • The Impact of Trade on Growth: Was Export Promotion the Cause of the East Asian Miracle?
  • World Trade Organization and its role in trade regulation. Russia’s accession to WTO: costs and benefits. First consequences of Russia’s accession to WTO: protection, government support, and change in profitability of industries.


Topic 6. Foreign direct investments

  • International factor movements: Multinationals and International Capital Movements. The firm’s decision making regarding FDI. Empirical estimations of FDI drivers. FDI inflows and outflow in Russia.
  • Investment climate and its definitions. Investment climate and FDI inflows. Investment climate in Russia: current state, roadmaps on improving the climate and their possible impact on business.


Topic 7. Globalization, new business opportunities, and economic development

  • Waves of globalization. “World is flat” debate. Which industries can be globalized: manufacturing vs services.
  • Benefits of globalization. Limits of globalization: The Walmart case.





Teaching methods:   


Lectures, case discussions in groups, group presentations (debates), discussion of assignments, individual essay.





  • Miles D., Scott A., Breedon F. Macroeconomics: Understanding the Global Economy (3rd ed.). Wiley, 2012.
  • Feenstra R., Taylor A. International Economics (2nd ed.). Worth Publishers, 2011.
  • Krugman P., Obstfeld M. International Economics: Theory and Policy (8th or 9th editions). Boston: Pearson, 2009, 2011.



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