• Countries are linked via trade (goods and services) and capital (international lending and borrowing, foreign direct investment). In the last decade we have observed the emergence of a ‘Global Economy’

• It is a discipline that deals with economic interactions between sovereign (independent) countries. Governments regulate: trade, investment, the movement of capital (and other factors of production) and the supply of currency (exchange rate).

Main areas:

• International Trade (gains from trade, pattern of trade, how much trade, protectionism)

• International Monetary (open economy macroeconomics and policy): balance of payments, exchange rate determination, international capital markets, international policy coordination)