Our book follows the traditional division of international economics into the trade and monetary sides of the subject. Although the primary audience for the book will be students in upper-level economics courses, we think that the material can effectively reach a broad, diversified group of students including those in political science, international studies, history, and business who may have fewer economics courses in their background. Having taught international economics ourselves in specific nonmajors' sections and Master's of Business Administration sections as well as in the traditional economics department setting, we are confident that the material is accessible to both noneconomics and economics students. This broad audience will be assisted in its learning through the fact that we have included separate, extensive review chapters of microeconomic (Chapter 5) and macroeconomic (Chapter 25) tools.

International Economics presents international trade theory and policy first. Introductory material and data are found in Chapter 1, and Chapters 2 through 4 present the Classical model of trade, including a treatment of pre-Classical Mercantilism. A unique feature is the devotion of an entire chapter to extensions of the Classical model to include more than two countries, more than two goods, money wages and prices, exchange rates, and transportation costs. The analysis is brought forward through the modern Dornbusch-Fischer-Samuelson model including a treatment of the impact of productivity improvements in one country on the trading partner. Chapter 5 provides an extensive review of microeconomic tools used in international trade, and can be thought of as a "short course" in intermediate micro. Chapters 6 through 9 present the workhorse neoclassical and Heckscher-Ohlin trade theory, including an examination of the assumptions of the model. Chapter 6 focuses on the traditional production possibilities-indifference curve exposition. We are unabashed fans of the offer curve because of the nice general equilibrium properties of the device and because of its usefulness in analyzing trade policy and in interpreting economic events, and Chapter 7 extensively develops this concept. Chapter 8 explores Heckscher-Ohlin in a theoretical context, and Chapter 9 is unique in its focus on testing the factor endowments approach, including empirical work on the trade-income inequality debate in the context of Heckscher-Ohlin. This chapter has been simplified in this new edition.

Continuing with theory, Chapters 10 through 12 treat extensions of the traditional material. Chapter 10 discusses various post-Heckscher-Ohlin trade theories that relax standard assumptions such as international factor immobility, homogeneous products, constant returns to scale, and perfect competition. An important focus here is upon imperfect competition and intra-industry trade. In this edition, treatments of the reciprocal dumping model and the gravity model have been introduced. Chapter 11 explores the comparative statics of economic growth and the relative importance of trade, and it includes material on endogenous growth models and on the effects of growth on the offer curve. Chapter 12 examines causes and consequences of international factor movements, including both capital movements and labor flows. We have included material on the economic impact of immigration, focusing on the United States, and have also added a discussion of the "brain drain" from developing countries.

Chapters 13 through 18 are devoted to trade policy. Chapter 13 is exclusively devoted to presentation of the various instruments of trade policy. Chapter 14 then explores the welfare effects of the instruments, including discussion of such effects in a "small-country" as well as a "large-country" setting. The chapter's treatment of the large-country case has been simplified, with the more difficult material having been shifted to an appendix. Chapters 15 and 16 subsequently work systematically through various arguments for protection. The presence of externalities as a potential reason for protection is now considered in Chapter 15, and a new feature of Chapter 16 is that it includes discussion of tariff reaction functions of governments. This two-chapter treatment of the arguments for protection (one for traditional arguments and one for newer approaches) is more extensive than the coverage in many competing texts. Chapter 17 begins with a discussion of the political economy of trade policy, followed by a review of various trade policy actions involving the United States as well as issues currently confronting the WTO. Chapter 18-unlike the treatment in some texts-is a distinct, separate chapter on economic integration. We have updated the discussion of the transition economies, the European Union, and the North American Free Trade Agreement. The trade part of the book concludes with Chapter 19, which provides an overview of how international trade influences growth and change in the developing countries.

The international monetary material begins with Chapter 20, which introduces balance-of-payments accounting. In contrast to the approach in some texts, balance-of-payments accounting is discussed prior to the foreign exchange market, which is considered in Chapter 21. We think this sequence makes more sense than the reverse, since the demand and supply curves of foreign exchange reflect the debit and credit items, respectively, in the balance of payments. A differentiating feature of the presentation of the foreign exchange market is the extensive development of various exchange rate measures, for example, nominal, real, and effective exchange rates. Chapter 22 then describes characteristics of "real-world" international financial markets in detail, and discusses a (we hope not too-bewildering) variety of international financial derivative instruments. Chapter 23 presents in considerable detail the monetary and portfolio balance (or asset market) approaches to the balance of payments and to exchange rate determination. We have shifted the difficult discussion of empirical testing of these approaches to an appendix. The chapter concludes with an examination of the phenomenon of exchange rate overshooting. In Chapters 24 and 25, our attention turns to the more traditional price and income adjustment mechanisms. In Chapter 24, we have included a greater discussion of the "pass-through" of exchange rate changes that appeared in previous editions. Chapter 25 is in effect a review of basic Keynesian macroeconomic analysis.

Chapters 26 through 28 are concerned with macroeconomic policy under different exchange rate regimes. As noted earlier, we continue to utilize the IS/LM/BP Mundell-Fleming approach rather than employ exclusively the asset market approach. The value of the IS/LM/BP model is that it can embrace both the current and the capital/financial accounts in an understandable and perhaps familiar framework for many undergraduates. This model is presented in Chapter 26 in a manner that does not require previous acquaintance with it but does constitute review material for most students who have previously taken an intermediate macroeconomic theory course. The chapter concludes with an analysis of monetary and fiscal policy in a fixed exchange rate environment. These policies are then examined in a flexible exchange rate environment in Chapter 27, and the analysis is broadened to the aggregate demand-aggregate supply framework in Chapter 28.

The concluding chapters, Chapters 29 and 30, focus on particular topics of global concern. Chapter 29 considers various issues related to the choice between fixed and flexible exchange rates. Chapter 30 then traces the historical development of the international monetary system from Bretton Woods onward and examines proposals for reform such as target zone proposals. In this new edition, we have updated our discussion of the Economic and Monetary Union (EMU) in Europe and have also addressed the Asian financial crisis of 1997-1998. This final chapter concludes with an overview of the external debt problems of developing countries.

Because of the length and comprehensiveness of the International Economics text, it is not wise to attempt to cover all of it in a one-semester course. For such a course, we recommend that material be selected from Chapters 1 to 3, 5 to 8, 10, 13 to 15, 20 and 21, 23 to 27, and 30. If more emphasis on international trade is desired, additional material from Chapters 16 to 18 can be included. For more emphasis on international monetary economics, we suggest the addition of selected material from Chapters 22, 28, and 29. For a two-semester course, the entire International Economics book can be covered. Whatever the course, occasional outside reading assignments from academic journals, current popular periodicals, and a readings book can further help to bring the material to life. The "References for Further Reading" section at the end of the book, which is organized by chapter, can hopefully give some guidance. If library resources are limited, the text contains, both in the main body and in case studies, summaries of some noteworthy contributions.