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【Report】March 2nd ,2013. The Second international economics study meeting"World Trade: An Overview

We held the Second study meeting about International Economics using International Economics written by Kruguman, etc.Details are as follows.

  • Date:March 2nd, 2013(Sat) 18:00〜21:00
  • Place:Bunkyo Civic Center
  • Participants:29 people
  • Text:International Economics
  • Material
  • Twitter
  • pages:Chapter2 P40〜53

International Economics: Theory & Policy: Global Edition

International Economics: Theory & Policy: Global Edition

  • 作者: Paul R. Krugman,Maurice Obstfeld,Marc J. Melitz
  • 出版社/メーカー: Prentice Hall
  • 発売日: 2011/08/19
  • メディア: ペーパーバック
  • 購入: 2人 クリック: 9回
  • この商品を含むブログを見る

In last chapter, we overviewed the whole contents of this text. From this 2nd chapter, the main topic of international trade theory starts.A learning goals of this chapter is as follows(P40).

  • Describe how the value of trade between any two countries depends on the size of these countries economies
  • Discuss how distance and borders reduce trade.
  • Describe how the share of international production that is traded has fluctuated over time and why there have been two ages of globalization
  • Explain how the mix of goods and services that are traded internationally has changed overtime

The main topic of this chapter is the gravity model which can explain that the value of trade between any two countries is proportional to the products of the two countries GDPs, and diminish with the distance between the two countries.Gravity model was not derived from theorical background but, empirical back ground.You can easily understand that Gravity model would be applied for the real economy if you check the JETRO' homepage which show the international trade ranking of both exports and imports with Japan. According to this ranking, Japan's largest trade countries is China. It is obvious that China has the 2nd largest countries and is near to Japan.

Gravity model teaches us that Japan has a strong advantage regarding international trade because of its geographic. Japan is located in between USA which has the largest GDP and China which has the 2nd largest GDP and is one of the strongest economics performance recently(Of course,at the same time, China faces the potential problem for bubble economy and has the environmental problem because of recent rapid industrialization).If USA and China's consumption will keep strong, Japan has a huge opportunity to export products toward both countries. In fact, Japan's boom in 2002 to 2006 was boosted by exports and yen depreciation and at that time, Japan's exports heavily depended on USA's strong consumption supported by the rising real estate prices.

In discussion time, some participants asked how this gravity model was lead by theory. Actually, this model is strongly founded on the empirical results not theory and it is very natural that Gravity model is no longer adapted to the real economy in the situation that circumstance are changing dramatically thanks to a development of Technology and . Especailly, in the world of internet, country's location is almost meaningless. I use the Skype English speaking service and talk with Filipino. This service is not related with Gravity model at all. In addition to Skype English service, there are many call(help) center of multinational companies in asia countries like India and Philippine and these countries take advantage of low wages, English speaking skills and IT.

The latest version of text 9th edition quoted the data of "the composition of world trade,2008" sourced from WTO. According to this statistics, the composition of world trade are Manufactures 54.7%, Fuels and Mining 18.48%, Agriculture 7.02%, services 19.77. As expected, manufactures are occupied in the world trade and it is inevitable to carry manufactured goods physically and necessity of physical transfer cannot utilize the internet transfer. So, Gravity model still has a power to explain the mechanism of volume of trade. However, Technology is now developing and someday the day Gravity model cannot explain the volume of trade may come in the near future.

In the next several chapter, we will learn tools to help us to understand how differences between countries give rise to trade between them and why trade is mutually beneficial.