Int. Economics deals with those int. forces which influence the domestic economic conditions as well as those which shape the economic relationship between countries. The scope of this subject is bery broad and the elements are very intricate. Int. Economics, which emerged as a ‘specialistic’ field of economics long ago, has developed in depth and width over time by a lot of theoretical, empirical and descriptive contributions.
The need for development of this branch of economics was justified by a number of important factors. Economic activities between countries are made different from those within the countries by the fact that factors of production are generally less mobile between countries than within the country. In fact, the int. trade theories have been based on the traditional assumption that factors of production are perfectly mobile within the country and completely immobile between countries. Simultaneously, it is assumed that goods are perfectly mobile both within and between countries but for government restrictions in some cases. Indeed, the impact of different types of government restrictions on trade, production. Consumption adn income distribution is an important area study in int. economics.
Int. Economics consists of theoretical and descriptive parts. The theoretical part tries to go beyond the phenomena to seek general principles and logical frameworks which can serve as a guide to the understanding of actual events. Theoretical Int. Economics has two components, viz., pure and monetary theories.
Pure theory which has a micro-economic nature covers a very wide area and the monetary theory which is of a macro economic nature deals with matters pertaining to balance of payments and int. monetary system.
Descriptive Int. Economics is concerned with the description of int. economic transactions just as they happen and of the institutional (including the policy) environment in which they take place.
Developing adn Developed Economies
Low income and middle income economies are developing economies. It may be noted that the term third world does not cover all developing economies — it covers only the low income economies. The developed economies as a group are sometimes referred as the North as they, with som exception such as Australia and New Zealand, are in the northern hemishere and the developing economies are referred to as the South as most of them are in southern hemisphere.
Classification by income does not necessarily reflect development status. In the group of high income economies, the industrial economies are developed economies. But, all the high incomeeconomies are not developed economies (e.g. Countries such as Kuwait and UAE, though high income economies, are regarded as developing economies). Besides income, some other criteria such as the sectoral distribution of income and employment generation, social development indicators, etc. are applied to consider whether economy is a developed or developing one.
Newly industrialising economies are those developing economies which have been experiencing rapid industralisation such as Hong Kong, South Korea, Singapore and Taiwan – the Asian Tigers. Over a long period, the newly industrialising economies have shown a very high growth rate of economiy and per capita income. They have also been presenting very impressive export performance.
The transition economies refers to those economies which are in a transition from centralised economic system to the market economy. The transition economies, thus, are the former communist/socialist economies like erstwhile CIS and East European countries which are undergoing an economic transition. They also represent a transition from authoritarianism to democracy.