国际金融复习提纲

1、Outline for Reviewing International Finance (2013)The Structure of Examination Paper1.Multiple Choice (301, 30 ×points)2.Definition of Terms(54, 20 points)×3.Short Answer (3 10,30× points)4.Calculation (2 10, 20×points)Outline for ReviewingMultiple ChoiceCover all ChaptersDefinit

2、ion of TermChapter 12: balance of payments accounting, current account balance， official settlementsbalance ， national savingbalance of payments accounting : 国际收支会计 accounting record of all monetary transactions between a country and the rest of the worldCurrent account balance (exports minus import

3、s): 经常项目差额 net expenditure by foreigners on domestic goods and services.The official settlements balance : 官方结算差额 is the negative value of official international reserve assets, and it shows a central bank s holdings of foreign assets relative to foreign centralbanks holdings of domestic assets.The

4、bookkeeping offset to the balance of official reserve transaction .Nationalsaving= nationalincome (Y)that is not spent on consumption (C)or governmentpurchases (G).Chapter 13: appreciation, exchange rate, real rate of return, forward exchange rate,spotexchange rate,interest parity condition,vehicle

5、currencyAppreciationis an increase in the value of a currency relative to another currency.Exchange rate:The price of one currency in terms of another is called an exchange rate.The realrate ofreturn :The expected rate of return that savers consider indeciding whichassets to hold is the expected rea

6、l rate of return, that is, the rate of return computed by measuring asset values in terms of some broad representative of products that savers regularly purchase.forward exchange rates:Foreign exchange deals sometimes specify a value date farther awaythan two days30 days, 90 days, 180 days, or even

7、several years. The exchange rates quoted in such trans-actions are called forward exchange rates.The foreign exchange transactions we have been discussing take place on the spot: two par-ties1/15agree to an exchange of bank deposits and execute the deal immediately. Exchange rates governing such &qu

8、ot;on-the-spot" trading are called spot exchange rates , and the deal is called a spot transaction.Interest parity condition: Interest parity implies that deposits in all currencies are equally desirable assets.Interest parity implies that arbitrage in the foreign exchange market is not possibl

9、e.vehicle currency: 周转货币 Because of its pivotal role in so many foreign exchange deals, thedollar is sometimes called a vehicle currencyChapter 14: aggregate money demand, money supply, exchange rate overshooting,Aggregate money demand: 货币总和需求aggregate money demand is the total demand formoney by al

10、l households and firms in the economy.is just the sum of all the economyidual s indivmoney demands.Moneysupply:the total stock of money inthe economy; currency held by the public plusmoney in accounts in banksExchange rateovershooting:the exchange rate is said to overshoot when itsimmediateresponse

11、to a disturbance is greater than its long-run response.Chapter 15: Fisher effect, law of one price, nominal interest rate, purchasing power parity(PPP), real exchange rate, relative PPPFisher effect:describes the relationship between nominal interest rates and inflation.Law of one price:the low of o

12、ne price states that in competitive markets free of transportationcosts and official barriers to trade(such as tariffs),identical goods sold in different countries mustsell for the same price when their prices are expressed in terms of the same currency.Nominalinterest rate: 名义利率 An interest rate is

13、 called nominal if the frequency ofcompounding (e.g. a month) is not identical to the basic time unit (normally a year).Purchasing power parity(PPP): the theory of purchasing power parity states that the exchangerate between two countries currencies equals the ratio of the countries price levels.Rea

14、l exchange rate: the rate of exchange forgoods and services across countriesRelativePPP:states that the percentage change in the exchange rate between twocurrenciesover any period equals the difference between the percentage changes in national price levels.Chapter16:AA schedule, inflation bias, agg

15、regatedemand, J-curve,DD schedule,pass-throughAA schedule:The schedule of exchange rate and output combinations that are consistent withequilibrium in the domestic money market and the foreignexchange market is called the AAschedule.inflation bias:Refers to the difference between the mean value and

16、the target value of inflationaccording to the circulation by the basic model.DD schedule:The curve shows all combinations of output and the exchange rate for which theoutput market is in short run equilibrium.pass-through:The percentage from the exchange rate to import prices by which import pricesr

17、ise when the home currency depreciates by 1 percent.Chapter17: balance of payments crisis, bimetallic standard, capital flight,devaluation,2/15gold exchange standard, gold standard, imperfect asset substitutability,managed floatingexchange rates, perfect asset substitutability, reserve currency,reva

18、luation, risk premium,self-fulfilling currency crises, sterilized foreign exchange intervention,balance of payments crisis:When a central bank does not have enough official internationalreserve assets to maintain a fixed exchange rate, a balance of payments crisis results.bimetallic standard:the val

19、ue of currency is based on both silver and gold.capital flight: financial capital is quickly moved from domestic assets to foreign assetsdevaluation:a devaluation occurs when the central bank raises the domestic currency price offoreign currencygold exchangestandard:halfwaybetween the gold standard

20、and a pure reserve currencystandard is the gold exchange standardgold standard:gold acts as official international reserves that all countries use to make officialinternational payments.imperfectasset substitutability:In general, foreign and domesticassets may differ in theamount of risk that they c

21、arry: they may be imperfect substitutes.managedfloatingexchange rates:system in which governments may attempt to moderateexchange rate movements without keeping exchange rates rigidly fixed .perfect asset substitutability:the key feature of our modelthat leads to these results is theassumption that

22、the foreign exchange market is in equilibrium only when the expected returns ondomestic and foreign currency bonds are the same.reserve currency:one currency acts as official international reserves.Revaluation:a revaluation occurs when the central bank lower the domestic currency price offoreign cur

23、rencyrisk premium:default risk and exchange rate riskself-fulfilling currency crises:Expectations of a balance of payments crisis only worsen thecrisis andhasten devaluationthat occur insuch circumstances oftenare calledself-fulfillingcurrency crises .sterilizedforeignexchangeintervention:central ba

24、nks sometimes carry ourequalforeignand domesticasset transactions in oppositedirections to nullify theimpact oftheirforeignexchange operations on the domestic money supply . this type of policy is called sterilized foreign exchange interventionChapter18:externalbalance,internalbalance,expenditure-ch

25、angingpolicy,price-specie-flow mechanism, expenditure-switching policyexternalbalance:A countrycurrents account is neither so deeply in deficit that the countrymay be unable to repay its foreign debts in the future nor so strongly in surplus that foreigners areput in that position.Internalbalance:Th

26、e fullemployment of a countryresources and domestic price levelstability.expenditure-changing policy:Changing social needs or total expenditure level of the nationaleconomy policy, whose purpose is to change aggregate demand to change the demand for foreign goods, services and financial assets, and

27、achieve the balance of payments adjustment.price-specie-flowmechanism:Underthe internationallycommonpracticeofthegold3/15economic stability loss ：economic stability lossstandard, a country's international balance of payments can keep equilibrium automatically by the fluctuations of commodity pri

28、ce and the output or input of gold.expenditure-switching policy: The policies which can affect the international competitiveness of commodities and to increase their income relative to spending by changing the spending structure.Chapter 19:destabilizing speculationdestabilizingspeculation ： it means

29、 that if foreign exchange traders saw that a currency wasdepreciating, it was argued, they might sell the currency in the expectation of future depreciationregardless of the currency-terms longerprospects; and as more traders jumped on the bandwagonby selling the currency, the expectations of deprec

30、iation would be realized.Chapter 20:monetary efficiency gain, economic stability loss, optimum currency areasmonetary efficiency gain ： the monetary efficiency gain from joining the fixed exchange rate system equals the joiner saving from avoiding the uncertainty, confusion, and calculation and tran

31、saction costs that arise when exchange rates float.the extra instability caused by the fixed exchange rate is thefixed exchange rates are most appropriate for areas closely integrated through international trade and factor movements.Short AnswerChapter 131.The Effect of Changing Interest Rates on th

32、e Current Exchange RateAn increase in the interest paid on deposit of a currency causes that currency to appreciate against foreign currencies.A rise in dollar interest rates causes the dollar to appreciate against the euro.4/15A rise in euro interest rates causes the dollar to depreciate against th

33、e euro.2.The Effect of Changing Expectations on the Current Exchange RateA rise in the expected future exchange rate causes a rise in the current exchange rate ,similarly ,a fall in the expected future exchange rate causes a fall in the current exchange rate .Chapter 141. the Money Supply and the Ex

34、change Rate in the Short Run in the short run ,the price level and real output are given .5/15理解上面这个图是什么意思就OK 。再分析 M 变化时 Exchange Rate怎么变化。2. Permanent Money Supply Changes and the Exchange Rate.中文版教材 357面，英文版教材87面，看懂并能描绘清楚（a）和（ b）两幅图。Chapter 151.The Relationship Between PPP and the Law of One Price

35、a) The law of one price applies to individual commodities, while PPP applies to the general price level.b) If the law of one price holds true for every commodity, PPP must holdautomatically for the same reference baskets across countries. Proponents of the PPP theory argue that its validity does not

36、 require the law of one price to hold exactly。2.The Fundamental Equation of the Monetary Approachpredicts that levels of average prices across countries adjust so that the quantity of real monetary assets supplied will equal the quantity of real monetary assets demanded:PUS = MsUS/L (R$, YUS)6/15PEU

37、 = MsEU/ L (R?, YEU)3 、 Explaining the Problems with PPPThe failure of the empirical evidence to support the PPP and the law of one price is related to:1)Trade barriers and nontradables2)Departures from free competition3)Differences in measures of average prices for baskets of goods and servicesChap

38、ter 161.Tmporary Changes in Monetary and Fiscal PolicyTwo types of government policy:a) Monetary policyi. It works through changes in the money supply.b) Fiscal policyi. It works through changes in government spending or taxes. Temporary policy shifts are those that the public expects to be reversed

39、 in the near future and do not affect the long-run expected exchange rate.Assume that policy shifts do not influence the foreign interest rate and the foreign price level.Monetary PolicyAn increase in money supply (i.e., expansionary monetary policy) raises the economy s output.-The increase in mone

40、y supply creates an excess supply of money, whichlowers the home interest rate.-As a result, the domestic currency must depreciate (i.e., home productsbecome cheaper relative to foreign products) and aggregate demand increases.Figure 16-10: Effects of a Temporary Increase in the Money SupplyFiscal P

41、olicyAn increase in government spending, a cut in taxes, or some combination of the two (i.e, expansionary fiscal policy) raises output.The increase in output raises the transactions demand for real money holdings,7/15which in turn increases the home interest rate.As a result, the domestic currency

42、must appreciate.Policies to Maintain Full EmploymentTemporary disturbances that lead to recession can be offset through expansionary monetary or fiscal policies.Temporary disturbances that lead to over employment can be offset through contractionary monetary or fiscal policies.8/152. Permanent Shift

43、s in Monetary and Fiscal PolicyA permanent policy shift affects not only the current value of the government policy instrument but also the long-run exchange rate.This affects expectations about future exchange rates.-A Permanent Increase in the Money SupplyA permanent increase in the money supply c

44、auses the expected future exchange rate to rise proportionally.As a result, the upward shift in the AA schedule is greater than that caused by an equal, but transitory, increase (compare point 2 with point 3 in Figure 16-14).Adjustment to a Permanent Increase in the Money SupplyThe permanent increas

45、e in the money supply raises output above its full-employment level.As a result, the price level increases to bring the economy back to full employment.Figure 16-15 shows the adjustment back to full employment.9/15-A Permanent Fiscal ExpansionA permanent fiscal expansion changes the long-run expecte

46、d exchange rate.If the economy starts at long-run equilibrium, a permanent change in fiscal policy has no effect on output.It causes an immediate and permanent exchange rate jump that offsets exactlythe fiscal policy s direct effect ongateaggredemand.A temporary increase in the money supply causes a

47、 depreciation of the currency and a rise in output.Permanent shifts in the money supply cause sharper exchange rate movements and therefore have stronger short-run effects on output than transitory shiftsChapter 171.Stabilization Policies with a Fixed Exchange RateMonetary PolicyUnder a fixed exchan

48、ge rate, central bank monetary policy tools are powerless to affect the economy s money supply or its output.Fiscal Policy-The rise in output due to expansionary fiscal policy raises money demand（.由财政扩张引起的产出增加增加货币需求）10/15-To prevent an increase in the home interest rate and an appreciation of the cu

49、rrency, the central bank must buy foreign assets with money, thereby increasing the money supply).Changes in the Exchange Rate1. Devaluation（币值下调）a) It occurs when the central bank raises the domestic currency price of foreign currency, E.b) It causes:A rise in output. A rise in official reserves. A

50、n expansion of the money supplyc) It is chosen by governments to: Fight domestic unemployment. Improve the current account .Affect the central bank s foreign reserves 2. Revaluation（币值上调）It occurs when the central bank lowersE.3. In order to devalue or revalue, the central bank has to announce its w

51、illingness to trade domestic against foreign currency, in unlimited amounts, at the new exchange rate.Adjustment to Fiscal Policy and Exchange Rate Changes1. Fiscal expansion causesP to rise.（财政扩张引起价格上涨）1) There is no real appreciation in the short-run2) There is real appreciation in the long-run2.

52、Devaluation is neutral in the long-run. （本币贬值长期效用为中性）2、Benefits and Drawbacks of the Gold StandardBenefits:1) It avoids the asymmetry inherent in a reserve currency standard.2)It places constraints on the growth of countries money supplies.Drawbacks:1) It places undesirable constraints on the use of monetary policy to fight unemployment.2) It ensures a stable overall price level only if the relative price of gold and other goods and services is s