国际贸易与金融II(双语)课程国际金融4课件.ppt

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1、1,International Economics,Lectured by Yuanfen TuSchool of International Trade and Economics Email:,国际经济学,1International Economics Lectu,International EconomicsBy Robert J. Carbaugh13th Edition,Chapter 4:Mechanisms of International Adjustment,International EconomicsBy Rob,Adjustment Mechanisms,Adjust

2、ment mechanism Works for the return to equilibrium after the initial equilibrium has been disruptedCurrent-account adjustmentAutomatic adjustmentDiscretionary government policiesAutomatic adjustment of the current-accountUnder a fixed exchange-rate systemAdjustment variables: prices and income,3,Adj

3、ustment MechanismsAdjustmen,Balance of payments adjustments,Schools of thought on adjustment,Classical approach (1800s - early 1900s)Centered on gold standardEmphasized role of prices and interest ratesKeynesian approach (1930s onward)Emphasized income changes affecting adjustmentMonetarist approach

4、 (1960s-, Chicago school)Focus on role of money in changes and adjustment,Balance of payments adjustment,Balance of payments adjustments,Price adjustment,The original theory of current-account adjustment is credited to David Hume.Arose from concern with the prevailing mercantilist viewA nations curr

5、ent account tends to move toward equilibrium automatically.Price levels is the main factors.,Balance of payments adjustment,Price Adjustments,Gold standard, late 1800s to early 1900sConditions for each member nationMoney supply = gold or paper money backed by goldOfficial price of gold defined in te

6、rms of national currencyBuy and sell gold at that priceFree import and export of gold Money supply - directly tied to current account,6,Price AdjustmentsGold standard,Price Adjustments,Quantity theory of moneyEssence of the classical price-adjustment mechanismEquation of exchange: MV=PQ M money supp

7、lyV velocity of moneyP - average price at which each of the final goods is soldQ physical volume of all final goods produced,7,Price AdjustmentsQuantity theo,Price Adjustments,MV=PQ identityTotal monetary expenditures on final goods = monetary value of the final goods soldAmount spent on final goods

8、 = amount received from selling them,8,Price AdjustmentsMV=PQ identi,Price Adjustments,Classical economists AssumptionsQ is fixed at the full employment level in the long termV was constantA change in M must induce a direct and proportionate change in P,9,Price AdjustmentsClassical eco,Balance of pa

9、yments adjustments,Balance-of-Payments Adjustment,Deficit nationsWould be losing gold, therefore shrinking their money supply and causing prices to fallLower prices would make their exports more competitive and lessen demand for imports, restoring equilibriumSurplus nationsWould be gaining gold, inc

10、reasing money supply and price levelHigher prices would cut exports and encourage imports until the surplus was eliminated,Balance of payments adjustment,Balance of payments adjustments,Balance-of-Payments Adjustment,Balance of payments adjustment,Price Adjustments,Criticisms against the price-adjus

11、tment mechanismClassical linkage between changes in a nations gold supply and changes in its money supply no longer holdsFull employment doesnt always exist Prices and wages are inflexible in a downward directionStability and predictability of V - questioned,12,Price AdjustmentsCriticisms ag,Financi

12、al Flows and Interest-Rate Differentials,Factors affecting a nations capital and financial accountInterest-rate fluctuations in domestic and foreign marketsInvestment profitabilityNational tax policiesPolitical stability,13,Financial Flows and Interest-R,Balance of payments adjustments,In the classi

13、cal approach, another channel through which a BOP disequilibrium is corrected is through adjustments in the short-term interest rates.This factor, was not the central focus of the classical approach to BOP adjustment because financial markets were not advanced during this time.,Interest rate adjustm

14、ent,Balance of payments adjustment,Balance of payments adjustments,Inflows of gold expand the money supply, causing short-term interest rates to fall; outflows cause rates to riseInvestors in surplus nations would send gold abroad in search of higher rates; deficit nations would receive gold from ab

15、road for investment, restoring equilibrium,Interest rate adjustment,Balance of payments adjustment,Financial Flows and Interest-Rate Differentials,Interest-rate differentials Most important factor that causes financial assets to move across national borders Hypothetical capital and financial account

16、 schedules for the United StatesAssumes that interest-rate differentials are the basic determinant of financial flowsDiscouraging financial flowsInterest equalization taxForeign-credit-restraint program,Financial Flows and Interest-R,Interest-rate differentials between the United States and the rest

17、 of the world induce movements along the U.S. capital and financial account schedule. Relatively high (low) U.S. interest rates trigger net financial inflows (outflows) and an upward (downward) movement along the capital and financial account schedule. The schedule shifts upward/downward in response

18、 to changes in noninterest rate determinants such as investment profitability, tax policies, and political stability.,17,Capital and financial account schedule for the U.S.,FIGURE 4.1,Interest-rate differentials be,Income Adjustments,Income adjustment mechanismJohn Maynard Keynes, 1930sFocus on auto

19、matic changes in income to bring about adjustment in a nations current accountUnder fixed exchange ratesInfluence of income changes in nations with current-account surpluses and deficits would help restore equilibrium automatically,18,Income AdjustmentsIncome adjus,Income Adjustments,Income adjustme

20、nt mechanismUnder fixed exchange ratesPersistent current-account surplusRising income - Increasing importsCurrent-account deficit Fall in income - Declining importsEffects of income changes on import levels will reverse the disequilibrium in the current account,19,Income AdjustmentsIncome adjus,Bala

21、nce of payments adjustments,In the Keynesian Model：national income: Y=C+S total expenditure: Y=C+I Y=C+S=C+IThe basic equilibrium condition can thus be stated as S=I or S-I =0,Income determination in a closed economy,Balance of payments adjustment,国际贸易与金融II(双语)课程国际金融4,Balance of payments adjustments

22、,Income determination in a closed economy,Balance of payments adjustment,Balance of payments adjustments,Income determination in a closed economy,Examples: Given C=100+0.8Y and autonomous investment I=100,determine the equilibrium level of national income.Y=C+S S=Y-C I=SY-100-0.8Y=100 Y=1000,Balance

23、 of payments adjustment,Balance of payments adjustments,Multiplier process(乘数过程):Y=k I where k represents multiplierI= S=s Y where s represents the marginal propensity to save Y=(1/s) I,Income determination in a closed economy,Balance of payments adjustment,Balance of payments adjustments,Examples:

24、Given C=100+0.8Y and autonomous investment increases from I=100 to I=200,determine the new equilibrium level of national income.Y=(1/s) I=(1/0.2)*100=500Y=1000+500=1500,Income determination in a closed economy,Balance of payments adjustment,Balance of payments adjustments,The condition for equilibri

25、um income: S+M=I+X S-I=X-MM=m Y where m represents the marginal propensity to import,Income determination in a open economy,Balance of payments adjustment,Balance of payments adjustments,Foreign-trade multiplier(对外贸易乘数） S+ M= I + X S=s Y M=mY (s+m) Y= I + X,Income determination in a open economy,Bal

26、ance of payments adjustment,国际贸易与金融II(双语)课程国际金融4,Income Adjustments,The foreign repercussion effectIncome adjustment mechanismInclude the impact that changes in domestic expenditures and income levels have on foreign economiesBoth the rise in income of the surplus nation and the fall in income of th

27、e deficit nation are dampened,29,Income AdjustmentsThe foreign,Income Adjustments,Importance of the foreign repercussion effectDepends on the economic size of a countryA small nation that increases its imports from a large nationLittle impact on the large nations income levelMajor trading nationsSig

28、nificant foreign repercussion effect,30,Income AdjustmentsImportance o,Disadvantages of Automatic Adjustment Mechanisms,An efficient adjustment mechanism Requires central bankers to forgo their use of monetary policy To promote the goal of full employment without inflationEach nation must be willing

29、 to accept inflation or recession When current-account adjustment requires it,31,Disadvantages of Automatic Adj,Monetary Adjustments,Monetary approach to balance of paymentsBalance of payments - affected by discrepancies between The amount of money people desire to hold The amount supplied by the ce

30、ntral bankExcess demand for money - fulfilled by inflows of money from another countryExcess supply of money - eliminated by outflows of money to another country,32,Monetary AdjustmentsMonetary a,Balance of payments adjustments,Demand for money is: Md=PL (Y, i)Directly related to income and pricesIn

31、versely related to interest ratesSupply of money has two components:Domestic component - credit created by national government (D)International component - foreign exchange reserves (F)Ms=m (D+F) m: money multiplier When m=1, Ms=D+F,Payments Imbalances Under Fixed Exchange Rates,Balance of payments

32、adjustment,Balance of payments adjustments,When in a equilibrium Md=Ms=D+FF=Md-DPayments deficits are the result of an excess supply of money at homeExcess supply of money encourages imports, which results in foreign exchange reserves flowing overseas and reducing the money supply,Payments Imbalance

33、s Under Fixed Exchange Rates,Balance of payments adjustment,Balance of payments adjustments,Payments Imbalances Under Fixed Exchange Rates,Balance of payments adjustment,Balance of payments adjustments,Note: the BOP surplus or deficit is temporary and self-correcting automatically in the long-run. T

34、hat is after the excess demand for money or the excess supply of money is eliminated through an inflow of funds or out flow of funds, the BOP surplus or deficit is corrected.,Payments Imbalances Under Fixed Exchange Rates,Balance of payments adjustment,Balance of payments adjustments,Supply increase

35、s (decreases) Bop deficit (surplus) international reserve outflow (inflow) money market equilibrium Bop equilibrium,Payments Imbalances Under Fixed Exchange Rates,Balance of payments adjustment,Balance of payments adjustments,(1)国际收支是一种货币现象;(2)国际收支逆差，实际上就是一国国内的名义货币供应量(D)超过了名义货币需求量。由于货币供应不影响实物产量，在价格不

36、变的情况下，多余的货币就要寻找出路。对个人和企业来讲，就会增加货币支出，以重新调整它们的实际货币余额;对整个国家来讲，实际货币余额的调整便表现为货币外流，即国际收支逆差。,Payments Imbalances Under Fixed Exchange Rates,Balance of payments adjustment,Balance of payments adjustments,反之，当一国国内的名义货币供应量小于名义货币需求时，在价格不变的情况下，货币供应的缺口就要寻找来源。对个人和企业来讲，就要减少货币支出，以使实际货币余额维持在所希望的水平;对整个国家来说，减少支出维持实际货币

37、余额的过程，便表现为货币内流，国际收支盈余;,Payments Imbalances Under Fixed Exchange Rates,Balance of payments adjustment,Balance of payments adjustments,(3)国际收支问题，实际上反映的是实际货币余额(货币存量)对名义货币供应量的调整过程。当国内名义货币供应量与实际经济变量(国民收入、产量等)所决定的实际货币余额需求相一致时，国际收支便处于平衡。,Payments Imbalances Under Fixed Exchange Rates,Balance of payments ad

38、justment,Policy Implications,Theory focuses on domestic monetary policy as key to balance of paymentsPolicies that increase the supply of money relative to the demand will lead to: A payments deficit An outflow of foreign-exchange reservesA reduction in the domestic money supplyPolicies that increas

39、e the demand for money relative to the supply will trigger: A payments surplusAn inflow of foreign-exchange reservesAn increase in the domestic money supply,Balance of payments adjustments,Policy ImplicationsTheory focu,Policy Implications,Nonmonetary policies:Unnecessary: Disequilibria are self-cor

40、recting In the short run, such policies may speed up adjustment process Implications for growthIf domestic component of the money supply is not raised commensurate with demand:Excess demand will induce an inflow of funds from abroad and a payments surplus,Continued,Balance of payments adjustments,Policy ImplicationsNonmonetary,