This book details how an open economy functions. It explores the determinants of international flows of commodities and financial assets as well as examines the effects of these flows on the domestic and international economy and the possible policy actions at the national and international level. Particular attention is paid to the problems of international economic integration at both the commercial and monetary level.This highly accessible textbook introduces students to the subject as well as equips them for further study. Advanced undergraduates and graduates will learn to read and interpret the balance of payments of a country, explain the behavior of commercial flows, analyze flows of financial assets according to interest-rate differentials and other elements, evaluate the effects of national and international policies, study the forces that determine exchange rates and cause currency crises, and to understand the reasons behind international economic integration, such as the European Union.
