GLOBAL EDITION International Finance \ Theory and Policy ELEV EN TH ED ITIO N Paul R Krugman Maurice Obstfeld Marc J Melitz 'P Pearson THE PEARSON SERIES IN ECONOMICS Abel/Bernanke/Croushore Macroeconomics *+ Froyen Macroeconomics: Theories and Policies Acemoglu/Laibson/List Fusfeld Economics*f The Age o f the Economist Bade/Parkin Gerber Foundations o f Economics *f International E conomics *+ Gordon Berck/Helfand M acroeconomics*f The Economics o f the Environment Greene Econometric Analysis Bierman/Fernandez Game Theory with Economic Applications Gregory/Stuart Russian and Soviet Economic Performance and Structure Blanchard M acroeconomics* Hartwick/Olewiler Boyer Principles o f Transportation Economics The Economics o f Natural Resource Use Heilbroner/Milberg Branson The M aking o f the Economic Society M acroeconomic Theory and Policy Heyne/Boettke/Prychitko Bruce The Economic Way o f Thinking Public Finance and the American Economy Hubbard/O'Brien Carlton/Perloff Economics* M odern Industrial Organization InEcon Case/Fair/Oster Principles o f Economics* Money, Banking, an d the Financial S ystem * Hubbard/O'Brien/Rafferty Chapman Environmental Economics: Theory, Application, and Policy Daniels/VanHoose International M onetary & Financial Economics Downs Macroeconomics Hughes/Cain American Economic H istory H usted/Melvin International Economics Jehle/Reny An Economic Theory o f Democracy Advanced Microeconomic Theory Farnham Keat/Young/Erfle Economics fo r M anagers + ‘ den otes M anagerial Economics Klein M athem atical M ethods fo r Economics Krugman/Obstfeld/Melitz International Economics: Theory & Policy *+ Laidler The Dem and fo r M oney Lynn Economic Development: Theory an d Practice fo r a D ivided World Miller Economics Today * Miller/Benjamin The Economics o f M acro Issues Miller/Benjamin/North The Economics o f Public Issues Mishkin The Economics o f Money, Banking, an d Financial M a rkets *f The Economics o f Money Banking, and Financial M arkets, Business School E dition* Macroeconomics: Policy a n d Practice* Murray Econometrics: A M odern Introduction O ’Sullivan/Sheffrin/Perez Economics: Principles A pplications a n d Tools** Parkin Econom ics *+ Perlofl'/Brander M anagerial Economics and Strategy *+ Pindyck/Rubinfeld M icroeconomics *+ Riddell/Shackelford/Stamos/ Schneider Economics: A Tool fo r Critically Understanding Society Roberts The Choice: A Fable o f Free Trade an d Protection Scherer Industry Structure, Strategy, an d Public Policy Schiller The Economics o f Poverty and Discrimination Sherman M arket Regulation Stock/Watson Introduction to Econometrics* Sludenmund A Practical Guide to Using Econometrics* Todaro/Smith Economic Development Walters/Walters/Appel/ Callahan/Centanni/Maex/ O ’Neill Econversations: Today's Students Discuss Today 's Issues Williamson Macroeconomics + Perloff M icroeconom ics *+ Microeconomics: Theory an d Applications with Calculus *+ Pearson MyLab Economics in titles +d en otes availability o f G lobal Edition titles L og onto ww w m veconlab.com to learn more International Finance THEORY & POLICY ELEV EN T H EDITION G LO BAL EDITION Paul R Krugman P r in c e to n U n iv e rs ity M aurice Obstfeld U n iv e rs ity o f C a lifo rn ia , B erk eley M arc J M elitz H a rv a rd U n iv e rsity Pearson Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney • Dubai • Singapore • Hong Kong Tokyo • Seoul • Taipei • New Delhi • Cape Town • Sao Paulo • Mexico City • Madrid • Amsterdam • Munich • Paris • Milan F o r R o b in — P.K F o r m y f a m ily — M O F o r C lair, B e n j a m in , a n d M ax — M M Vice P resident, B usiness P ublishing: D o n n a B attista D ire c to r o f P o rtfo lio M an a g em en t: A drienne D ’A m brosio Portfolio M an a g er: A shley B ryan A ssociate A c q u isitio n s E ditor, G lo b al Edition: A n a n y a Srivastava A ssociate P roject E ditor, G lo b al E dition: P aro m ita Banerjee E ditorial A ssistant: N icole N edw idek Vice P resident, P ro d u c t M arketing: R oxanne M cC arley D ire c to r o f S trategic M arketing: B rad P arkins S trategic M ark etin g M anager: D e b o rah S trickland P ro d u ct M arketer: T ricia M u rp h y M an a g er o f F ield M arketing: A d a m G oldstein Field M ark etin g M an a g er: C arlie M arvel Field M ark etin g A ssistan t: K risten C o m p to n P ro d u ct M ark etin g A ssistan t: Jessica Q uazza Vice P resident, P ro d u c tio n a n d D igital S tudio A rts a n d Business: E ta in O ’D ea D ire cto r o f P ro d u c tio n , Business: JelT H olcom b M an a g in g P roducer, Business: A lison Kalil C o n te n t Producer: N ancy Freihofer C o n te n t Producer, G lobal Edition: N ikhil R akshit Senior M an u factu rin g C ontroller, G lo b al Edition: Kay H olm an O p e ratio n s Specialist: C arol M elville C reative D irector: B lair Brown M anager, L earning Tools: B rian S urette M anaging Producer, D igital S tudio, A rts a n d Business: D iane L o m bardo D igital S tudio Producer: M elissa H onig D igital S tudio P roducer: A lan a C oles D igital C o n te n t Team Lead: N oel L otz D igital C o n te n t Project Lead: C o u rtn e y K a m a u f M anager, M edia P roduction, G lo b al E dition: V ikram K u m ar Full-Service Project M anagem ent a n d C om position: SPi G lobal In terio r Design: SPi G lobal C over Design: L um ina D atam atics C over A rt: Liu zishan/S hutterstock A cknow ledgm ents o f th ird -p a rty co n te n t a p p e a r on th e a p p ro p riate page w ithin the text o r on page 464, w hich co n stitu tes an extension o f th is c o p y rig h t page F R E D ® is a registered tra d e m a rk a n d the F R E D ® L ogo a n d ST L O U IS F E D are trad e m ark s o f the F ederal Reserve B ank o f St Louis, http ://re search stlo u isfe d o rg /fred / P E A R S O N , ALW AYS L E A R N I N G , an d P E A R S O N M Y L A B E C O N O M IC S ® are exclusive tra d e m a rk s ow ned by P earson E d u ca tio n , Inc o r its affiliates in th e U.S a n d /o r o th e r countries Pearson Education Limited K A O Two K A O P ark H arlow CM 179N A U nited K ingdom and A ssociated C o m p a n ies th ro u g h o u t th e w orld Visit us on the World Wide Web at: w w w pearsonglobaleditions.com © P earso n E d u c a tio n L im ited 2018 T h e rig h ts o f P aul R K ru g m a n , M aurice O bstfeld, an d M arc J M elitz, to be identified as the a u th o rs o f this w ork, have been asserted by them in ac c o rd a n c e w ith the C o p y rig h t, D esigns an d P aten ts A ct 1988 Authorized adaptation from the United States edition, entitled International Finance: Theory