Customer Reviews

International Economics: Theory And Policy (7th Edition)

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I used several times the fifth edition of Krugman and Obstfeld's book to teach International Finance to undergraduates in economics, and I found it comprehensive, understandable and very didactic. True, the book does not follow a rigorous mathematical approach, even less a dynamic one, but I think that is not the authors' intention. On the contrary, they use simple equations, basic graphical analysis, empirical data illustrations and some economic history to show the main issues they want to. And I must say that they clearly succeed in explaining virtually every topic an undergraduate student should know about international economics.

There are several essential topics that should be part of the backbone of a course in international finance, and they are included in this book:

- the asset approach to exchange rates;
- the crucial role of expectations;
- the relationship between money, interest rates and the exchange rates in the short run;
- the long run relationship between prices and exchange rates;
- the internal and external equilibrium for small open economies;
- the interaction of fiscal and monetary policies in an international context;
- inflation bias and other policy formulation problems;
- fixed exchange rates and foreign intervention;
- A description of the evolution of the international monetary system;
- floating exchange rates; macroeconomic policy and international coordination;
- optimum currency areas;
- recent topics on the global capital markets; and
- growth, crisis and reform in developing countries.

In sum, the book by Krugman and Obstfeld is a pretty good undergrad textbook to learn for the first time the core of monetary issues in international economics.

Regarding Gerald Senarclens de Grancy's comments: The idea of Krugman as a Bush administration cheerleader is pretty funny. At first I thought this was a joke but then I realised it wasn't. Granted, the book doesn't mention the Tobin Tax, but there's only so much you can pack into a superficial survey text like this. Overall, I think the authors are pretty unbiased and mainstream. (Haven't used the web supplements, so can't comment on that).

Having seen this book evolve over several editions, I can honestly say that the current one represents a distinct improvement, with the new introductory chapter on the gravity model providing some much needed perspective at the start. However, it's not an ideal book to learn trade theory and open econonmy macro from. My favorite (although slightly more rigorous) is "The International Economy" by Kenen. And if you are only interested in trade theory, "International Trade, Theory and Evidence" by Markusen et. al. is superior.

Verbose! The authors spend pages upon pages wasting trees trying to explain a concept that could be explained using one paragraph. The authors go in circles in my opinion, sometimes i feel that they forget what they had initially started. And the shyness to use math and write out what could be written as a single equation makes the book about 600 pages when it should only be 200.

I'm really unhappy with both the book and the services provided that come with the book. This has several reasons of which I'd like to point out a few here (though I have to note that I only read the second part - the one about international monetary policy):
o) the book follows a pure neclassical approach and seems very biased against everything else
o) it sometimes reads like propaganda for some republican presidents
o) it doesn't discuss (or even mention) very important contemporary concepts such as the tobin tax which could have a deep impact on international monetary policy
o) the web applications are not provided for users of any other software than the core Microsoft systems, which makes them unusable by those who like eg. Apple, Firefox or Linux
o) even running in Internet Explorer the web exercises have some major problems (some of the suggested answers are simply wrong)
o) the web applications refer to graphs that do not appear in the newest edition
o) the explanations are sometimes not very clear, in my point of view there are even contradictions
o)...

concluding I have to say that this book represents to me both a waste of money and a waste of time.