Trade Theory – Extension of Classical Model
Compare to Ricadian’s model and its assumptions, the real world is more complex. In this chapter, we make Ricardian model more realistic by incorporating wage rates and an exchange rate. This will permit us to analyze trade in terms of money and price and to examine rigorously the role of wages, productivity and the exchange rate in influencing trade patterns.
相較於李嘉圖的模型，現實世界更為複雜，這章將把薪水以及匯率加入模型討論，也就是是說，貿易的方向將把薪資、生產力以及匯率當作考慮因素。
The Classical Model in Money Terms
The domestic value of each good is found bymultiplying labor requirement per unit by the appropriate wage rate. The valuation won’t affect internal price under autarky, however, it will provide a set of money price in each country that can be used to determine the attractiveness of buying and selling abroad.
產品的價值由其單位勞動需要乘上薪資來決定，以錢來計算價值。
The money price can’t be used yet without the establish of a link between the two currency. Exchange rateis the number of units of one currency that exchange for one unit of a second currency.
如果沒有貨幣交換關係，以錢計算的的價值就還無法決定貿易方向。匯率就是某國貨幣一單位可以交換他國貨幣幾單位。
In the monetized version of Classical model, a country should export goods when it can produce it the most inexpensively.
Export Condition for country 1：
a1*W1*e<a2*W2
a1 = labor requirement of Country 1
a2 = labor requirement of Country 2
e = country2 currency/country 1 currency exchange rate
這邊匯率是在算多少單位1國貨幣可以換一單位2國貨幣。
W1 = wage rate of country 1.
W2 = wage rate of country 2.
可推導 a1/a2 < W2/(W1*e)
所以說 貿易方向有三決定因素1.相對勞動效率2.相對工資率3.匯率
當相對工資上漲–不利出口，當匯率升值–不利出口都可以從出口條件式看出
We can find Wage Rate Limit and Exchange Rate Limit from the export condition.
薪資上限下限，匯率上限下限，也可用出口條件式推導出來
Multiple Commodities
1.Calcualate the relative labor efficiency 2.Caluculate the relative wage rate
Wage Rate Limit and Exchange Rate Limit here is to make sure a country can export at least one good.
Transaction Cost
Assumption 1. Transaction cost are paid by importer 2. Transaction cost are measure in terms of labor content
a1*W1*e + tr*W1*1 < a2*W2
可推導(a1+ tr)/a2 < W2/(W1*e)
When the Transaction Cost is too high, there will be no trade for that good, and the production of that good is only for domestic consumption.
The Dornbusch-Fischer-Samulson Model (DFS Model)
A model uses the concepts of supply and demand to determine the relative wage rate and the trade pattern between the two countries in Classical model.
DFS 模型從供給需求的角度來決定兩國間相對薪資率以及貿易方向
Supply side
All commodities indexed by A=a1/a2
a1=country1’s labor requirement
Demand side
National income and relative wage will depend on the no. of commodities produced based on world demand. The higher the demand in one country will leads to the higher relative wage rate.
