国际金融(英文版第二版)Chapter 1 Balance of Payment
国际金融(英文版)Chapter 1 Balance of Payment[精]
![国际金融(英文版)Chapter 1 Balance of Payment[精]](https://img.taocdn.com/s3/m/08c27207eefdc8d377ee321c.png)
The trade account and current account
These two accounts derive much of their importance because estimates are published on a monthly basis by most developed countries.
The basic balance
This is the current account balance plus the net balance of long-term capital flows.
The official settlement balance
The official settlements balance focuses on the operations that the monetary authorities have to undertake to finance any imbalance in the current and capital accounts.
1.3 Economic forces and the balance of payments
Conditions for equilibrium
Governments may restrict domestic economic activity to achieve a better overall balance on external accounts. We refer to this restriction as the unemploymentayments surplus and deficit
国际金融中英文版答案)
国际金融中英文版Chapter 2:Payments among NationsSingle-Choice Questions1.A country’s balance of payments records：一个国家的国际收支平衡记录了 Ba.The value of all exports of goods and services from that countryfor a period of time.b.All flows of value between that country's residents and residentsof the rest of the world during a period of time.在一定时间段里,一个国家居民的资产和其它世界居民资产的流动c.All flows of financial assets that cross that country’s bordersduring a period of time.d.All flows of goods into that country during a period of time。
2.A credit item in the balance of payments is：在国际收支平衡里的贷项是 Aa.An item for which the country must be paid.一个国家必须收取的条款b.An item for which the country must pay.c.Any imported item.d.An item that creates a monetary claim owed to a foreigner。
3.Every international exchange of value is entered into thebalance-of-payments accounts __________ time（s)。
国际金融：Balance of Payment
国际金融：Balance of Payment（定义、组成、不平衡的原因）；汇率（种类（spot&forward）、两种标价法、汇率的影响因素（利率、通胀率、对经济增长的预期）、几种常见的汇率制度（定义、特点））；国际金融体系的演变（一战前的金本位制（种类、特点）、二战后的布雷顿森林体系（特点、特里芬两难）、1971之后的牙买加协定（黄金非货币化、浮动汇率制、特别提款权（重点）））；货币危机（定义、原因（Paul Krugman、Obstfeld、银行体系的问题）这里有一个小窍门是，面试官是不知道我们某门课到底学了什么的，所以我们可以自由发挥，只要不是太离谱就行。
举个例子，楼主有门课叫“国际经济合作” （International Economic Cooperation）。
楼主很不喜欢这门课的老师，而且最后是开卷考，所以几乎没有印象了，只记得大致是讲加工贸易、技术合作等等内容。
楼主发现这些内容在维基上没有很对应的英文解释，即使有也是没形成定论的那种，楼主觉得整理起来很困难，就大胆把这门课的内容换成了“经济一体化”和几大国际经济组织等比较好整理的内容。
结果面谈时果然问到了这一门，楼主就按自己准备的说了，大妈也没有说楼主说的不对。
The infant industry argument is an economic rationale for trade protectionism. The core of the argument is that nascent industries often do not have the economies of scale that their older competitors from other countries may have, and thus need to be protected until they can attain similar economies of scale.is the branch of financial economics broadly concerned with monetary and macroeconomic interrelations between two or more countries. International finance examines the dynamics of the global financial system, international monetary systems, balance of payments, exchange rates, foreign direct investment, and how these topics relate to international trade.The balance of payments (BOP) of a country is the record of all economic transactions between the residents of a country and the rest of the world in a particular period (over a quarter of a year or more commonly over a year). These transactions are made by individuals, firms and government bodies. Thus the balance of payments includes all external visible and non-visible transactions of a country during a given period, usually a year. It represents a summation of country's current demand and supply of the claims on foreign currencies and of foreign claims on its currency.Causes of BOP imbalancesThere are conflicting views as to the primary cause of BOP imbalances, with much attention on the US which currently has by far the biggest deficit. The conventional view is that current account factors are the primary cause[17] – these include the exchange rate, the government's fiscal deficit, business competitiveness, and private behaviour such as the willingness of consumers to go into debt to finance extra consumption.[18] An alternative view, argued at length in a 2005 paper by Ben Bernanke, is that the primary driver is the capital account, where a global savings glut caused by savers in surplus countries, runs ahead of the available investment opportunities, and is pushed into the US resulting in excess consumption and asset price inflation.[19]1 Components2 V ariations in the use of term "balance of payments"2.1 The IMF definition of Balance of Payment3 Imbalances3.1 Causes of BOP imbalances3.2 Reserve asset3.3 Balance of payments crisis4 Balancing mechanisms4.1 Rebalancing by changing the exchange rate4.2 Rebalancing by adjusting internal prices and demand4.3 Rules based rebalancing mechanisms5 History of balance of payments issues5.1 Pre-1820: mercantilism5.2 1820–1914: free trade5.3 1914–1945: deglobalisation5.4 1945–1971: Bretton Woods5.5 1971–2009: transition, Washington Consensus, Bretton Woods II5.6 2009 and later: post Washington Consensus5.6.1 Competitive devaluation after 2009Foreign-exchange reserves (also called forex reserves or FX reserves) are assets held by a central bank or other monetary authority, usually in various reserve currencies, mostly the United States dollar, and to a lesser extent the euro, the pound sterling, and the Japanese yen, and used to back its liabilities—e.g., the local currency issued, and the various bank reserves deposited with the central bank by the government or by financial institutions.汇率决定理论(Exchange Rate Determination Theory)是国际金融理论的核心内容之一，主要分析汇率受什么因素决定和影响。
国际金融英文版习题
Chapter1 balance of paymentsBalance of Payments Accounting1Balance of paymentsa)is defined as the statistical record of a country’sinternational transactions over a certain period of timepresented in the form of a double-entry bookkeepingb)provides detailed information concerning the demand and supplyof a country’s currencyc)can be used to evaluate the performance of a country ininternational economic competitiond)all of the aboveAnswer: d2Generally speaking, any transaction that results in a receipt from foreignersa)Will be recorded as a debit, with a negative sign, in the .balance of paymentsb)Will be recorded as a debit, with a positive sign, in the .balance of paymentsc)Will be recorded as a credit, with a negative sign, in the .balance of paymentsd)Will be recorded as a credit, with a positive sign, in the .balance of paymentsAnswer d3 Generally speaking, any transaction that results in a payment to foreignerse)Will be recorded as a debit, with a negative sign, in the .balance of paymentsf)Will be recorded as a debit, with a positive sign, in the .balance of paymentsg)Will be recorded as a credit, with a negative sign, in the .balance of paymentsh)Will be recorded as a credit, with a positive sign, in the .balance of paymentsAnswer a4 Suppose the McDonalds Corporation imports 100 tons of Canadian beef, paying for it by transferring the funds to a New York bank account kept by the Canadian Beef Conglomerate.i)Payment by McDonalds will be recorded as a debitj)The deposit of the funds by the seller will be recorded as a debitk)Payment by McDonalds will be recorded as a creditl)The deposit of the funds by the buyer will be credit Answer: a5Since the balance of payments is presented as a system of double-entry bookkeeping,a)Every credit in the account is balanced by a matching debitb)Every debit in the account is balanced by a matching creditc) a and b are both trued)None of the aboveAnswer c6 A country’s international transactions can be grouped into thefollowing three main types:a)current account, medium term account, and long term capitalaccountb)current account, long term capital account, and officialreserve accountc)current account, capital account, and official reserveaccountd)capital account, official reserve account, trade account Answer: c7Invisible trade refers to:a)services that avoid tax paymentsb)underground economyc)legal, consulting, and engineering servicesd)tourist expenditures, onlyAnswer: c8The current account is divided into four finer categories:a)Merchandise trade, services, income, and statisticaldiscrepancy.b)Merchandise trade, services, income, and unilateraltransfersc)Merchandise trade, services, portfolio investment, andunilateral transfersd)Merchandise trade, services, factor income, and directinvestmentAnswer: b9Factor incomea)Consists largely of interest, dividends, and other incomeon foreign investments.b)Is a theoretical construct of the factors of production,land, labor, capital, and entrepreneurial ability.c)Is generally a very minor part of national income accounting,smaller than the statistical discrepancy.d)None of the aboveAnswer: aUSE THE FOLLOWING INFORMATION TO ANSWER THE NEXT TWO QUESTIONS10 The entries in the “current account” and the “capital account”, combined together, can be outlined in alphabetic order as: i- direct v- other capitalinvestmentii- factor income iii- merchandise iv- official transfer vi- portfolio investmentvii- private transferviii- services11Current account includesa)i, ii, and iiib)ii, iii, and viic)iv, v, and viid)i, v, and viAnswer: b12Capital account includesa)i, ii, and iiib)ii, iii, and viic)iv, v, and viid)i, v, and viAnswer: d13The difference between Foreign Direct Investment and Portfolio Investment is that:a)Portfolio Investment mostly represents the sale and purchaseof foreign financial assets such as stocks and bonds that do not involve a transfer of control.b)Foreign Direct Investment mostly represents the sale andpurchase of foreign financial assets such as stocks whereas Portfolio Investment mostly involves the sales and purchase of foreign bonds.c)Foreign direct investment is about buying land and buildingfactories, whereas portfolio investment is about buying stocks and bonds.d)All of the aboveAnswer: a14In the latter half of the 1980s, with a strong yen, Japanese firmsa)Faced difficulty exportingb)Could better afford to acquire . assets that had become lessexpensive in terms of yen.c)Financed a sharp increase in Japanese FDI in the United Statesd)All of the aboveAnswer: d15International portfolio investments have boomed in recent years, as a result ofa)A depreciating . dollarb)Increased gasoline and other commodity prices.c)The general relaxation of capital controls and regulation inmany countriesd)None of the aboveAnswer: cAnswer: c16The capital account measuresa)The sum of . sales of assets to foreigners and . purchases offoreign assets.b)The difference between . sales of assets to foreigners and .purchases of foreign assets.c)The difference between . sales of manufactured goods toforeigners and . purchases of foreign products.d)None of the aboveAnswer: b page 6417When Honda, a Japanese auto maker, built a factory in Ohio,a)It was engaged in foreign direct investmentb)It was engaged in portfolio investmentc)It was engaged in a cross-border acquisitiond)None of the above.Answer: a page 64.18The capital account may be divided into three categories:a)Cross-border mergers and acquisitions, portfolio investment,and other investmentb)Direct investment, portfolio investment, and Cross-bordermergers and acquisitionsc)Direct investment, mergers and acquisitions, and otherinvestmentd)Direct investment, portfolio investment, and other investment Answer: d19When Nestlé, a Swiss firm, bought the American firm Carn ation, it was engaged in foreign direct investment. If Nestlé had only boughta non-controlling number of shares of the firma)Nestlé would have been engaged in portfolio investmentb)Nestlé would have been engaged in a cross-border acquisitionc)It would depend if they bought the shares from an American ora Canadiand)None of the above.Answer: a20Foreign direct investment FDI occursa)when an investor acquires a measure of control of a foreignbusinessb)when there is an acquisition, by a foreign entity in the ., of10 percent or more of the voting shares of a businessc)with sales and purchases of foreign stocks and bonds that donot involve a transfer of controld)a and bAnswer: d21Statistical discrepancy, which by definition represents errors and omissionsa)Cannot be calculated directlyb)Is calculated by taking into account the balance-of-paymentsidentityc)Probably has some elements that are honest mistakes, it can’tall be money laundering and drugs.d)All of the aboveAnswer: d22The statistical discrepancy in the balance-of-payments accountsa)Arise since recordings of payments and receipts are done atdifferent times, in different places, possibly using different methods.b)Arise since some transactions illegal transactions occur “offthe books”.c)Represents omitted and misrecorded transactions.d)All of the aboveAnswer: d23Regarding the statistical discrepancy in the balance-of-payments accountsa)There is some evidence that financial transactions may be mainlyresponsible for the discrepancy.b)The sum of the balance on the capital account and the statisticaldiscrepancy is very close to the balance of the current accountin magnitude.c)It tends to be positive one year and negative in others, so it’ssafe to ignore itd)a and bAnswer: d24When a country must make a net payment to foreigners because ofa balance-of-payments deficit, the central bank of the countrya)Should do nothingb)Should run down its official reserve assets . gold, foreignexchanges, and SDRsc)Should borrow anew from foreign central banks.d)b or c will workAnswer: d25Continued . trade deficits coupled with foreigners’ desire to diversify their currency holdings away from . dollarsa)could further diminish the position of the dollar as thedominant reserve currencyb)could affect the value of . dollar . through the currencydiversification decisions of Asian central banksc)Could lend steam to the emergence of the euro as a crediblereserve currencyd)All of the aboveAnswer: d26Currently, international reserve assets are comprised ofa)gold, platinum, foreign exchanges, and special drawing rightsSDRsb)gold, foreign exchanges, special drawing rights SDRs, andreserve positions in the International Monetary Fund IMFc)gold, diamonds, foreign exchanges, and special drawing rightsSDRsd)reserve positions in the International Monetary Fund IMF, only Answer: b27International reserve assets include “foreign exchanges”. These area)Special Drawing Rights SDRs at the IMFb)reserve positions in the International Monetary Fund IMFc)Foreign currency held by a country’s central bankd)None of the aboveAnswer: c28The most important international reserve asset, comprising 94 percent of the total reserve assets held by IMF member countriesisa)Goldb)Foreign exchangesc)Special Drawing Rights SDRsd)Reserve positions in the International Monetary Fund IMF Answer: b29The vast majority of the foreign-exchange reserves held by central banks are denominated ina)Local currenciesb). dollarsc)Yend)EuroAnswer: b30The . Trade Deficita)Is a capital account surplusb)Is a current account deficitc)Is both a capital account surplus and a current account deficitd)None of the aboveAnswer: c31Over the last several years the . has run persistenta)Balance-of-payments deficitsb)Balance-of-payments surplusesc)Current Account deficitsd)Capital Account deficitsAnswer: c32More important than he absolute size of a country’sbalance-of-payments disequilibriuma)is the nature and cause of the disequilibriumb)is whether it is a trade surplus or deficitc)is whether the local government is mercantilist or notd)Nothi ng is more important than he absolute size of a country’sbalance-of-payments disequilibriumAnswer: aThe Relationship between Balance of Payments and National Income Accounting For questions in this section, the notation isY = GNP = national incomeC = consumptionI = private investmentG = government spendingX = exportsM = imports33National income, or Gross National Product is given by:a)GNP = Y = C + I + G + X + Mb)GNP = Y = C + I + G + X – Mc)GNP = I = C + Y + G + X – Md)GNP = Y = C + I + X + M – GAnswer: b34Which of the following is a true statementa)BCA ≡ X – Mb)BKA ≡ X – Mc)BKA –BCA ≡ X – Md)BKA ≡ X – MAnswer a35There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays forgovernment expendi tures. This relationship is given by BCA ≡ X –M ≡ S – I + T – G. Given this, which of the following is a true statementa)If S –I < 0, it implies that a country’s domestic savingsis insufficient to finance domestic investment.b) If T –G < 0, it implies that a country’s tax revenue isinsufficient to finance government spendingc)both a and b are trued)none of the aboveAnswer c36There is an intimate relationship between a country’s BCA and howthe country finances its domestic investment and pays forgovernment expenditures. This relationship is given by BCA ≡ X –M ≡ S – I + T – G. Given this, which of the following is a true statementa)If S –I < 0, it implies that a country’s domestic savingsis insufficient to finance domestic investment.b) If T –G < 0, it implies that a country’s tax revenue isinsufficient to finance government spendingc)when BCA is negative, it implies that government budget deficitsan/or part of domestic investment are being finance withforeign-controlled capitald)all of the above are trueAnswer d37There is an intimate relationship between a country’s BCA and how the country finances its domestic investment and pays forgovernment expenditures. This relationship is given by BCA ≡ X –M ≡ S –I + T –G. Given this, in order for a country to reducea BCA deficit, which of the following must occura)For a given level of S and I, the government budget deficit T– G must be reducedb)For a given level of I and T – G, S must be increasedc)For a given level of S and T – G, I must falld)All of the above would work to reduce a BCA deficitAnswer dExplain how each of the following transactions will be classified and recorded in the debit and credit of the . balance of payments:1 A Japanese insurance company purchases . Treasury bonds and paysout of its bank account kept in New York City.2 A . citizen consumes a meal at a restaurant in Paris and pays withher American Express card.3 A Indian immigrant living in Los Angeles sends a check drawn onhis . bank account as a gift to his parents living in Bombay.4 A . computer programmer is hired by a British company for consulting andgets paid from the . bank account maintained by the British company.In contrast to the ., Japan has realized continuous current account surpluses. What could be the main causes for these surpluses Is it desirable to have continuous current account surpluses。
国际金融中英文版(带解析)
国际金融中英文版Chapter 2:Payments among NationsSingle-Choice Questions1. A country’s balance of payments records：一个国家的国际收支平衡记录了 Ba.The value of all exports of goods and services from that country for a periodof time.b.All flows of value between that c ountry’s residents and residents of the restof the world during a period of time。
在一定时间段里，一个国家居民的资产和其它世界居民资产的流动c.All flows of financial assets that cross that country’s borders during a periodof time.d.All flows of goods into that country during a period of time。
2.3. A credit item in the balance of payments is: 在国际收支平衡里的贷项是 Aa.An item for which the country must be paid。
一个国家必须收取的条款b.An item for which the country must pay。
c.Any imported item。
d.An item that creates a monetary claim owed to a foreigner。
4.Every international exchange of value is entered into the balance—of—paymentsaccounts __________ time(s）。
国际金融(英文版第二版)Chapter 2 Theories of Balance of Payment
Transforming equation (2.2) into difference form yields:
dCA=dY-dA (2.3)
Thus the change in total absorption, dA, is given by:
dA=adY+dAd (2.4)
Chapter 2 Theories of bala
2.1 The elasticity approach to the balance of payments
This
approach provides an analysis of what happens to the current account balance when the country devalues its currency. The central message of the elasticity approach is that there are two direct effects of a devaluation on the current balance.
Taking the equation for national income:
Y=C+I+G+X-M (2.1)
2.2 The absorption approach to the balance of payments And defining domestic absorption as A=C+I+G, then we can get:
Figure 2.2 The money supply and reserves
Monetarists observe that the overall balance of payments can be thought of as consisting of the current account balance, the capital account balance, and change in the authorities’ reserves. That is: BP=CA+K=dR=0 So that:
国际金融英文版
1.国际收支（balance of payments，BOP）是一国居民与外国居民在一定时期内各项经济交易的货币价值总和。
BOP: Reflects the total monetary value of all sorts of the economical transactions between residents and non-residents of a given country over a specified time.the balance of payments is the record of the economic and financial flows that take place overa specified time period between residents and non-residents of a given country.2.国民收入是反映一国一定时期内（通常为一年）投入的生产资源所产出的最终产品和服务的市场价值或由此形成的收入的一个数量指标。
国民收入是一个流量概念，可用收入法和支出法来衡量。
Reflects the total productive input or the total value of the final production of a country in course of time. 反映一国在一定时期内所有的生产性的投入或者最终产品的总价值。
一、NI Equality in Closing Economy：1.Expenditure：Ｙ≡Ｃ＋Ｉ＋Ｇ=A2.Income：Ｙ≡Ｃ＋Ｓp+Ｔbecause expenditure equals to income, so: Ｃ＋Ｉ＋Ｇ≡Y ≡Ｃ＋Ｓp+Ｔ二、NI Equality in Opening Economy：Ｙ＝Ｃ＋Ｉ＋Ｇ＋Ｘ－Ｍ3.CA=Ｘ－ＭCA>0, surplus；CA<0, deficit；CA=0, balanced4.CA=Y-ACA>0, surplus；CA<0, deficit；CA=0, balanced5..Ｙ＝Ｃ＋Ｉ＋Ｇ＋Ｘ－Ｍ=Ｃ＋Ｓp+Ｔ；CA=S －ICA>0, surplus, capital outflow ；CA<0, deficit, capital inflow6.Ｙ＝Ｃ＋Ｉ＋Ｇ＋Ｘ－Ｍ=Ｃ＋Ｓp+Ｔ；CA=(Ｓp －Ｉ)+(T －G)7.The Current Account includes all international economic transactions with income orpayment flows occurring within one year, the current period. It consists of the following four subcategories：1.Goods trade (Balance of Trade)：Import and export of goods2.Services trade (Balance of Services)3. Income (Balance of Income)：Income associated with prior investment（Say, a dividendpaid by an Australian subsidiary of a US firm to the parent）；Salaries and wages paid to nonresident workers4.Current transfers: Any one-way transfer of a gift or grant, say, US aid to a developingcountry ；Must be financial; transfers a real (fixed) assets is in another account, the Financial/Capital AccountThe Current Account is typically dominated by the first component which is known as the Balance of Trade (BOT) even though it excludes service trade.8.The Capital/Financial Account of the balance of payments measures all internationaleconomic transactions of real and financial assets. It is divided into two major components: The Capital Account（资本帐户）；The Financial Account（金融帐户）The Capital Account is minor (in magnitude), while the Financial Account is significant.9.The Capital Account includes：Acquisition/disposal of nonproduced/nonfinancial assets ；Transfer of fixed assetsNon-financial assets, for example, a physical asset such as landNon-produced assets, which are needed for production but have not been produced, for example, a mine used for the extraction of diamonds.10.The Financial Account, however, uses a third method. This focuses on the degree ofinvestor control over the assets or operations.The Financial Account consists of three components;Direct Investment –in which the investor exerts some explicit degree of control over the assets（直接投资）Portfolio Investment – in which the investor has no control over the assets（证券投资）Other Investment –consists of various short-term and long-term trade credits, cross-border loans, currency deposits, bank deposits and other A/R and A/P related to cross-border trade （其他投资）11.12.The Official Reserves Account is the total reserves held by official monetary authoritieswithin the country.These reserves are normally composed of the major currencies used in international trade and financial transactions (hard currencies).The significance of official reserves depends generally on whether the country is operating under a fixed exchange rate regime or a floating exchange rate systemUnder a fixed exchange regime, these reserves are important in defending the value of a depreciating currencyChanges in the official reserves represents cash in- or outflows that are capture in the Official Reserves AccountThe Net Errors and Omissions account ensures that the BOP actually balances due to measurement errorsThe errors and omissions in balance of payments accounting arise in large part from the statistical difficulties involved in gathering balance of payments data. Because officials do not have the necessary information to make the double entries they make single entries based on the information available to them. This information often comes from multiple sources that vary in coverage and reliability.13.Reserves include monetary gold, special drawing rights (SDRs), the reserve position in theFund and foreign exchange.14.Fundamentals of BOP Accounting：Credits: real resources exported ------ Positive SignDebits: real resources imported ------ Negative SignTwo empirical rules:All transactions that arouses foreign exchange income should be credited in BOP;All transactions that arouses foreign exchange expenditure should be debited in BOP.Autonomous Transaction：- credit > debit, surplus; - credit < debit, deficit.Accommodating Transaction: - credit > debit, deficit; - credit < debit, surplus.15.X –M = the current account balance16.In theory the BOP must always balance, but statistical errors and misreporting result insubstantial imbalances17.The net errors and omissions account ensures that the BOP actually balances due tomeasurement errors18.Foreign Exchange:Dynamic usage: International exchange transaction in market for shortStatic usage: It means the money of a foreign country and includes:Foreign currency bank balances；Banknotes；Checks and drafts；Currency19. A foreign exchange transaction is an agreement between a buyer and a seller that a fixedamount of one currency will be delivered for some other currency at a specified date20.The spot where handles goods is goods market, while the place where deals ForeignExchange is Foreign Exchange Market.21.Functions of the Foreign Exchange Market：Permit the transfer of purchasing power denominated in one currency into another currency and thereby facilitate transactions；Provide credit for international trade transactions；Minimize exposure to the risks of exchange rate changes22.Speculators and Arbitrageurs：Speculators and arbitrageurs seek to profit from trading in the market itself, not for conducting trade or other forms of businessThey operate in their own interest, without a need or obligation to serve clients or ensure a continuous marketSpeculators seek to profit from their view of exchange rate changesArbitrageurs seek to profit from simultaneous exchange rate differences in different markets23. A foreign exchange rate is the price of one currency expressed in terms of another currencyA foreign exchange quotation (or quote) is a statement of willingness to buy or sell at an announced rate.24. A direct quote is a home currency price of a unit of foreign currency ；An indirect quote is a foreign currency price of a unit of home currencyThe form of the quote depends on what the speaker regards as “home ”25. Measuring a change —depreciation of appreciation of a foreign currency —in the spot rate forquotations expressed in home currency terms:Direct quotations:Example: Suppose the Swiss franc is recently quoted in the spot market at SF1.5625/$ (or, equivalently, $0.6400/SF) but then suddenly appreciates to SF1.2800/$ (or, equivalently, $0.78125/SF). What is the percent appreciation of the SF relative to the dollar?26. Measuring a change —depreciation of appreciation of a foreign currency —in the spot rate forquotations expressed in foreign currency terms:Indirect quotations: All our formulas have been in Indirect terms with the US$ as the home currencyExample (continued): The same rate of appreciation for the Swiss Franc relative to the US Dollar! 27.Spot rate: adopt a Spot transaction ；Forward rate: adopt a forward transaction 28.A Spot transaction in the Interbank market is the purchase of foreign exchange with delivery and payment between banks to take place, normally, on the second following business day. The date of settlement is referred to as the value date. 29.An Outright Forward transaction (usually just called a Forward) requires delivery at a future date of a specified amount of one currency for a specified amount of another currency. The exchange rate is established at the time of the agreement, but payment and delivery are not required until maturity. Forward exchange rates are usually quoted for value dates of one, two, three, six and twelve months. 30. Arbitrage ：seek to profit from simultaneous exchange rate differences in different marketsDirect arbitrage: operate between two foreign marketsIndirect arbitrage: operate in three foreign marketsInterest Arbitrage: seek to profit from simultaneous interest rate differences in different marketsClass Drill 1：1、Assumption:the basic rate between US dollars and the RMB is normally stated: $1=￥8.2500, the basic rate between US dollars and the J ￥ is normally stated: $1=J ￥100.0000Calculation: what ’s the cross rate between RMB and J ￥ ?2、Assumption:%07.22/6400.0$/6400.0$/78125.0$+=-SFSF SF%07.22$/2800.1$/2800.1$/5625.1+=-SF SF SFone day, an American exporter dates a contract with a Germany importer for some goods worthy of DM1,500,000. The counting currency is DM. They will pay off after three months. The rate is $1=DM1.5000 when they signed the treaty.Questions:- What does the rate belong to when they are dating?-Which country wouldn’t suffer the risk of foreign exchange?-How to avoid it?3、Assumption:One day------ first day in May, a speculator anticipates the exchange rate between US dollar and DM is $1=DM1.4580 on first day in Augest, while the three-month exchange rate between US dollar and DM is stated $1=DM1.4500 on first day in Augest.Questions:-What’s the former rate and latter rate respectively?-How can get the profit?4、Assumption:At 10 am. on one business day, the exchange rate between US dollar and DM is stated $1=DM1.4500 in New York, while simultaneously the exchange rate between US dollar and DM is stated $1=DM1.4600 in Frankfurt.Questions: How to arbitrage?5、Assumption:At 10 am. on one business day, the exchange rate between US dollar and DM is stated $1=DM1.5100 in New York, simultaneously the exchange rate between Pound and DM is stated £1 =DM3.0000 in Frankfurt, while the exchange rate between Pound and US dollar is stated £1 =$2.8000 in London.Questions: How to arbitrage?6、Assumption:The one-year periodic interest rate of US dollar in U.S is 12%, while the one-year periodic interest rate of UK pound in U.S is 16%. £1=$2.0000, $1,000,000Questions:-If the exchange rate between US dollar and UK pound is fixed after 3 months, how to invest?-If the exchange rate between US dollar and UK pound is floating after 3 months, how to invest?31.The Typical Dynamics of a Currency Crisis：1.Currency crises begin with foreign investors or speculators deciding—for whatever reason—that at the pegged rate, the country’s currency is overvalued；2.Foreign investors respond by selling their real and financial assets in the country, hence,selling that countries currency；ernments sell their foreign reserves and buy their own currency to defend the peg；Speculators observe the declining foreign reserves and increase their short positions in the country’s financial assets or currency；4.Panic selling ensues；5.The government abandons the peg and devalues the currency—typically by more thanwould have been required at earlier stages of the crisis32.Currency Crises: Effects of Devaluation：1.Real prices for imports rise;2.Output falls:Production (aggregate supply) falls when the economy relies heavily on imported inputs, for example, oil；Consumption (aggregate demand) falls when the country relies heavily on imports for necessities such as food stuffs. (Higher prices for necessities means lower disposable income)3. The net worth of firms and individuals fall4.The banking system is severely weakened (details):Assets (denominated in the home currency) lose value relative to debt (often denominated ina foreign currency in emerging economies)；Credit is either rationed or available only at exorbitant rates；Lack of credit causes output to plummet even further!33.Contagion: It is formally defined as a situation in which a currency crisis in one countryincreases the probability of a currency crisis in another34.Hedge funds are unregulated investment institutions that specialize in short selling, use offinancial derivatives, and leveraged positions (purchasing assets with borrowed funds)：Despite the name, hedge funds speculate!The primary investors are pension funds, trust funds, university endowments, and accredited investorsThese funds tend to remain fairly liquid so that they can fully exploit profit opportunities when they ariseHedge funds have about $1.1 trillion in assets and account for one half of all trades in the US and UK stock markets35.Role of Hedge Funds：The focus of hedge funds on short selling has gained them much notoriety as they often do well when asset prices are falling and other funds are doing badly；Prime Minister Mahathir Mohamad of Indonesia has called hedge funds the “highwaymen of the global economy”；Why? Because of robbing from the poor, less developed and emerging economies where hedge funds do much of their business；In fact, hedge funds have been blamed for not just taking advantage of economic crises but for causing them!Summary：1.Capital mobility is a double-edged sword: Economic openness increases growth andefficiency, but also exposes economies to potential capital outflows that can destabilize the economy2.A currency crisis is a financial crash within the foreign exchange markets. Currency crisesare precipitated by ：Capital flight, that is, a large and rapid withdrawal of funds by foreign investors ；Speculative attack3.Currency crises are caused by：Correlated beliefs among international investors (self-fulfilling prophesies)；Poor economic fundamentals：A fragile and inefficient banking system；Inflationary monetary and fiscal policy4. The central bank responds to a currency crisis by devaluing the country’s currency. Theeffects on the economy are devastating:Real prices for imports rise；Output and consumption fall；The net worth of firms and individuals fall；Unemployment and poverty escalate；The banking system is severely weakened and credit intermediation nearly ceases5. Contagion is caused by：Correlated real shocks, trade linkages, and financial linkages；Correlated beliefs, herding, or wake-up calls6、Currency crises and contagion have become increasingly likely and increasingly severesince the 1990s due, largely, to a far greater level of international economic integration and capital mobility in particular7.Policies prescriptions that reduce the likelihood of a currency crisis and contagion are:Promote the soundness of the financial system—particularly banks；Balance budgets and conduct low inflation monetary policy；Implement short-term capital controls and establish a lender of last resort；Promote long-term—as opposed to hot money—investment;8.Emerging market countries must often choose between two extreme exchange rate regimes,either free-floating or fixed regime where the latter is often through a currency board or dollarization36.Goods market equilibrium in opening economyAssumption:Output is defined by demand totally.BOP refers to import and export of merchandise.One country only produce one product.Nominal variable and real variable.37.Trade balance and national incomeTN =XN – MN =PM* –eP*M ；T=TN /P =M* –(eP*/P) M=M *–qMTrade balance function:T= M*（q，Y*）- qM（q，Y）=T（q，Y*，Y）=T-mY-T: independent trade balance；-mY: dependent trade balance；-m: marginal import tendency38.Domestic absorb and national income：A=C+I+G（Domestic absorb ）C=C+aY -C: independent consumption；-aY: dependent consumption；-a: marginal consumption tendency A=G+I+C=G+I+C+aY=A+aY39.Hoard: H=Y-A H=Y-A=Y-（A+aY）=-A+（1-a）Y=-A+sY -s: marginal saving tendency40.The equilibrium of national income ：H＝T；H=-A+sY=T-mY=T；Y=（A+T）/（s+m）= （A+T）41.Goods market, currency market and foreign exchange market in opening economyAssumption:Output is defined by demand totally.BOP refers to import and export of merchandise.One country only produce one product.1. IS curve :It reflects equilibrium condition in goods market.For private investment: I ＝I （i ）＝I0－biFor domestic absorb: A ＝A （G ，i ，Y ）＝A ＋aY －biIn what condition, goods market would be balance?Y=A ＋T =A+aY-bi+T0-mY ； Y=a （A-bi+T0） ； a=1/（1＋m-a ）Economic analysis ：The slope is minus ；In what condition, the curve would move towards right? If I descends, in which condition (open economy & close economy) national income would increase more?2. LM curve ：It reflects equilibrium condition in currency market.Ms=Md; Ms/P=LD （i ，Y ）=kY-hi k>0，h>0） Y=1/k(hi+M0/P)3. CA curve: It reflects equilibrium condition in foreign exchange market .T=T-mY=0 Y=T/mThe equilibrium is irrelevant to i.For CA curve, Left------ surplus, Right------ deficitWhen it satisfies the Marshall- Lerner condition,q ,the curve moves towards right; q ,the curve moves towards left.42. Open economy equilibrium in fixed exchange system (equilibrium condition):1、如左图：In closing economy: equilibrium in both markets (goods market & currency market) A point2、如右图：In opening economy:equilibrium in three markets(goods market, currency market and foreign exchange market) A ’ point3、如左图：Income mechanism (short term)：Deficit in BOP(CA)：Decrease in foreign exchange ； reserve ； Decline in currency supply ； Descend in national income ；Dip in import expenditure ； Improve in CAi 0i 04、如右图：Currency-price mechanism (long term)：Deficit in BOP(CA)： Decrease in foreign exchange ； reserve ； Decline in currency supply ； Descend in Price level ；Devaluation in real exchange ； Improve in CA 43. Open economy equilibrium in floating exchange system ：1.price-specieflow mechanism ：Deficit in BOP(CA)：Decrease in foreign exchange ； Devaluation in nominal exchange ； Devaluation in real exchange ； Improve in CA44. 总结：Goods market equilibrium reflects only one market, while goods market, currency market and foreign exchange market balance reflect three markets, which is called general equilibrium model.Every curve in each market could be reflected by two variables ------Y&i.We should analyze the daily economic condition by those two models, especially in national finance.45. Monetary approach in BOP ：1.Assumption:Price is flexible in short term ；Real demand of currency is determined by Y&I;Goods' price and interest rate is defined by wordwide market.’i i L 0 0i i LM0’Y i i 0LMY 0 Y 0 ’ IS ’2. Equilibrium in currency markrt: Ms=Md; Ms=m （D+R ）; Md=pf （Y,i ）3. BP curve :For CA: CA=CA （q ，Y ）For KA: K=k （i ，i*）=k （i ）For BP: BP=CA+K=CA （q ，Y ）+K （i ）=0Economic analysis :Vertical axis ： -left------surplus ； -right------deficitHorizontal axis ： -above------ surplus ； -below------deficit46. Open economy equilibrium in fixed exchange system ：International funds move perfectly ：Deficit in BOP ： Decrease in foreign exchange ； reserve ； Decline in currency supply ； Ascend interest rate ； Capital inflow ； Improve in BOP47. Open economy equilibrium in floating exchange system ：YY i BP ’International funds move perfectly ： Deficit in BOP ； Own currency devaluation ； Increase in export ； Ascend interest rate ； Capital inflow ； Improve in BOP48. Mundell-Fleming model ：Assumption:Supply curve is horizontal.；PPP establish no longer.；Anticipated exchange is static.；International funds move perfectly.1. Fiscal policy & monetary policy in fixed exchange system ：Monetary policy (invalidation)； Fiscal policy (valid)2. Fiscal policy & monetary policy in floating exchange system ：Monetary policy (valid)； Fiscal policy (invalidation)49. Crugelm Paradox ：Y iBPYi=ia) Mudel-Fleme Model1.Assumption ：Supply curve is horizon ；PPP doesn't work ；FE rates is predicated be static ；Capital flows across the world without obstacles2. Fiscal policy and monetary policy in fixed FE system ：Fiscal policy (doesn ’t work)；Monetary policy (work )3. Fiscal policy and monetary policy in floating FE system: Fiscal policy (work);Monetary policy (doesn ’t work )4.结论:50. International Parity Conditions:1,Some fundamental questions managers of MNEs, international portfolio investors, importers, exporters and government officials must deal with every day are:What are the determinants of exchange rates?Are changes in exchange rates predictable?2,International parity conditions are most important to decision makers when they do not hold3,The decision to borrow in a currency, locate a plant in a country, and other financial decisions may boil down to a judgment as whether a parity condition is violated4,The economic theories that link exchange rates, prices, and interest rates together are called international parity conditionsFixed exchange systemFunds move perfectly Monetary policy is valid Static FE systemCapital is fluid wholly Independentmonetary currency5,These international parity conditions form the core of the financial theory that is unique to international finance6, Under conditions of free floating exchange rates, the expected rate of change in the spot rate, differential interest and inflation rates, and the forward rate are all interrelated7,International parity conditions are most easily developed under the assumption of perfect capital markets: No transaction costs; No taxes; Certainty8, Driver of the parity conditions: profit-maximizing “agents ” will act to eliminate all arbitrage opportunities9.There are three principal parity conditions:Purchasing power parity;Interest rate parity;International Fisher effect51. International Currency System:1.Gold Standard System: Mint parityGold Export Points ; Gold Import Points2. Paper Money SystemAssumption:1,Financial markets are perfect with no controls, taxes, transaction costs, etc2,Goods markets are perfect with international shipment of goods able to take place freely, instantaneously and without cost3,There is a single consumption good common to everyone4,The same commodities appear in the same proportions in each country ’s consumption basket.52. If the identical product or service can be sold in two different markets —and no restrictions orcosts exist on the sale or transportation of moving the product between markets —the products price should be the same in both markets. This is called the Law of One PriceA primary principle of competitive markets is that prices will equalize across markets if frictions (transportation costs) do not exist.53. If the Law of One Price is imposed between baskets of consumer goods in two countries,we have a condition known as Purchasing Power Parity (PPP) Where the basket or index price in US dollars is P$, the spot exchange rate is S (in ¥/$) and the basket or index price in yen is P¥By comparing the prices of identical baskets of products denominated in different currencies, we could determine the PPP exchange rate that should exist if markets were efficient: This is the absolute version of the PPP theoryIf the assumptions of the absolute version of the PPP theory are relaxed a bit more, we observe what is termed Relative Purchasing Power Parity (RPPP)RPPP holds that PPP is not particularly helpful in determining what the spot rate is today, but that the relative change in prices between two countries over a period of time determines ¥$tt t P e P =⨯the change in the exchange rate over that periodIf the spot exchange rate between two countries starts in equilibrium, any change in the differential rate of inflation between them tends to be offset over the long run by an equal but opposite change in the spot exchange rateWe can represent RPPP mathematically:54., and the spotexchange rate is S (in ¥/$)We can make the following approximate representation of RPPP:55. Two general conclusions can be made from these tests:1,PPP holds up well over the very long run but poorly for shorter time periods2,The theory holds better for countries with relatively high rates of inflation and underdeveloped capital markets56. The Use of PPP in Management Decisions:For example, when PPP holds, a firm might make itsinvestment and marketing decisions without great concern for exchange rate fluctuations/riskWhen PPP is violated and all other things are equal, managers prefer:To locate production in countries with undervalued currenciesTo earn revenues —market products —in markets with overvalued currencies57. Interest Rates, Spot Rates & Forward Rates:1.The theory of Interest Rate Parity (IRP) provides the linkage between the foreign exchange markets and the money markets in different countries :The difference in the national interest rates for securities of similar risk and maturity should move in the opposite direction relative to the forward rate premium for the foreign currency (except for transaction costs)2.IRP links: the current spot rate, the forward rate, and the interest rates in each country3. IRP differs from the International Fisher Effect, in that IRP relies on a pre-negotiated forward rate to reconvert currency at the future date —not an expected future spot rate —and avoids currency risk4.Unlike RPPP and the International Fisher Effect, IRP holds even if we relax the assumption of no uncertainty!Interest Rate Parity (IRP) states that an investor should be indifferent between:1. Investing in her home market for some period and2. Converting to a foreign currency at the spot rate, investing in the foreign market, and entering into a forward contract to reconvert from the foreign currency back into her homecurrency Or, more concisely (but still exactly), interest rate parity is:where F is the forward rate (SF/$) $/$/$1)1(1SF SFSF F i S i ⨯+⨯=+Or, in approximate form, interest rate parity is:58.be calculated for any specific maturity by adjusting the current spotratio of interest rates of the same maturity for the two subject currencies: Similarly we can use interest rate parity(in approximate form) to calculate premium, that is, the percentage and forwardstated in annual percentage termspremium and the yield curves in the home and foreign markets: 59.1,The spot and forward exchange rates are not, however, constantly in the state of equilibrium described by interest rate parity 2,For fleeting moments, the market is not in equilibrium, and the potential for (riskless) arbitrage profit exists 3.The arbitrageur will exploit the imbalance by investing in whichever currency offers the higher return on a covered basis This is known as Covered Interest Arbitrage (CIA) 60.Uncovered Interest Arbitrage: A deviation from covered interest arbitrage is Uncovered Interest Arbitrage (UIA) Essentially, investors believe that there is a violation of the International Fisher Effect not IRP In practice, investors are betting that the future spot rate will not be much different from the current spot rate —despite an interest rate differential In this case, investors borrow in countries and currencies exhibiting relatively low interest rates and convert the proceed into currencies that offer much higher interest rates The transaction is “uncovered” because the investor does not sell the higher yielding currency proceeds forward but plans to sell spot later on The investor chooses to remain uncovered and accept the currency risk of exchanging the higher yielding currency into the lower yielding currency at the end of the period 61.Predicting the Future Spot Rate: Some forecasters believe that forward exchange rates are unbiased predictors of future spot exchange rates. Intuitively this means that the distribution of possible actual spot rates in the future is centered on the forward rate. Unbiased prediction simply means that the forward rate will, on average, overestimate and underestimate the actual future spot rate in equal frequency and degree Forward rates can be valuable in multinational capital budgeting decisions 62. 总结：1、Parity conditions have traditionally been used by economists to help explain the long-run trends in exchange rates。
国际贸易与金融II(双语)课程国际金融1
FIGURE 10.1 International payments process
15
Balance-of-Payments Structure
Current account of the balance of payments
Monetary value of international flows:
residents
9
Double-Entry Accounting
U.S. debit transaction (-)
Merchandise imports Transportation and travel expenditures Income paid on the investments of foreigners Gifts to foreign residents Aid given by the U.S. government Overseas investment by U.S. residents
Deficit
Balance on a sub-account (sub-accounts) is negative
13
International payments process
In theory
Importers in a country pay the exporters in that same country in the national currency
Payments（Chapter 5） Exchange-Rate Systems and Currency Crises（Chapter 6） Macroeconomic Policy in an Open Economy （Chapter 7） International Banking: Reserves, Debt and Risk
- 1、下载文档前请自行甄别文档内容的完整性，平台不提供额外的编辑、内容补充、找答案等附加服务。
- 2、"仅部分预览"的文档,不可在线预览部分如存在完整性等问题,可反馈申请退款(可完整预览的文档不适用该条件!)。
- 3、如文档侵犯您的权益，请联系客服反馈,我们会尽快为您处理(人工客服工作时间：9:00-18:30)。
1.2 Balance of payments surplus and deficit
Distinguish: Autonomous items & Accommodating items
Autonomous receipts > autonomous payments = surplus
The final components of the current account are private unrequited transfers and official unrequited transfers.
The current account as an income statement
Autonomous receipts <autonomous payments = deficit
Chapter 1
Balance of payments
1.1 International transactions: the e of payments
The balance of payments is the record of the economics and financial flows that take place over a specified time period between residents and non-residents of a given country.
Counterpart items
They arise because of the double entry system in balance of payments accounting and refer to adjustments in reserves owing to monetization or demonetization of gold, allocation or cancellation of SDRs and revaluation of the various components of total reserves.
Net errors and omissions
The errors and omissions in balance of payments accounting arise in large part from the statistical difficulties involved in gathering balance of payments data.
Investment income
Investment income comprises income derived from the ownership of foreign financial assets.
The current account
Unrequited transfers
The current account
The trade balance
The trade balance comprises merchandise exports and imports fob.
Non-financial services
Non-financial services include such things as freight, insurance, passenger services and travel.
Table 1.1 Standard components of the balance of payments
Current account Exports fob - Imports fob = Trade balance + Exports of non-financial services - Imports of non-financial services + Investment income (credit) - Investment income (debit) +(-) Private unrequited transfers +(-) Official unrequited transfers = Current account balance Capital account +(-) Direct investment +(-) Portfolio investment +(-) Other long-term capital +(-) Other short-term capital +(-) Net errors and omissions +(-) Counterpart items +(-) Total change in reserves = Capital account balance
This completes the components of the current account.
The capital account
Direct investment and portfolio investment
The difference between direct investment and portfolio investment revolves around whether or not the investor intends to take an active role in the management of the enterprise the assets of which are being acquired
Other capital
Change in reserves
Reserves include monetary gold, special drawing rights (SDRs), the reserve position in the Fund and foreign exchange.