世界经济概论（英文版）chapter 03 International Finance

chapter03InternationalFinanceInthischapter,we’llcover:InternationalBalanceofPaymentsReserveCurrency:TwoSidesoftheSameCoinEvolutionofInternationalMonetarySystemsUniformCurrency–BlessingorCurse?InternationalFinanceInstitutionsEconomicAid:ASolutiontotheDebtProblem?InternationalBalanceofPaymentsBalanceofpayments(BOP)recordsthefinancingofanation’sinternationaltradeanditsotherfinancialtransactionswiththerestoftheworld.Credit:ifacountryhasreceivedmoneyDebit:ifacountryhaspaidorgivenmoneyInternationalBalanceofPaymentsTheoretically,theBOPshouldbezero,meaningthatassets(credits)andliabilities(debits)shouldbalance.BOPcantelltheobserverifacountryhasadeficitorasurplusandfromwhichpartoftheeconomythediscrepanciesarestemming.InternationalBalanceofPaymentsTheBOPAccountsCurrentaccount:theinflowandoutflowofgoodsandservicesintoacountry.Balanceoftrade(BOT):goodsandservicestogetherThecapitalaccountrecordsinternationaltransfersinassetsandliabilities.InternationalBalanceofPaymentsFinancialaccount:internationalmonetaryflowsrelatedtoinvestmentinbusiness,realestate,bondsandstocks.Specialdrawingrights(SDRs)InternationalMonetaryFund(IMF)InternationalBalanceofPaymentsBalancingtheAccountsAdeficitinthecurrentaccountbalanceismatchedbyasurplusinthecapitalandfinancialaccountbalance,andviceversa.InternationalBalanceofPaymentsExchangerate:thepriceofonecurrencyintermsofanothercountry’scurrency.Appreciation:ariseinthepriceofanation’scurrency.Depreciation:adeclineinthepriceofanation’scurrencyInternationalBalanceofPaymentsLiberalizingCapitalAccountsCapitalaccountliberalization:aprocessthatremovesrestrictionsoncapitalmovement.Thisunrestrictedmovementofcapitalmeansthatgovernments,corporationsandindividualsarefreetoinvestcapitalinothercountries.ReserveCurrency:TwoSidesoftheSameCoinCountriesexhibitcertainambivalenceabouttheirreservecurrenciesbecausetherearebothbenefitsandcostsassociatedwithreservecurrencystatusReserveCurrency:TwoSidesoftheSameCoinFunctionsthataforeigncurrencycanperform1.

ConveniencefortheCountry’sResidents2.

SeigniorageorExorbitantPrivilegeinGoodTimes3.

SeigniorageorExorbitantPrivilegeinBadTimes4.

PoliticalPowerandPrestigeReserveCurrency:TwoSidesoftheSameCoinThecostofreservecurrencies1.ExorbitantCurseNotPrivilege2.VulnerabilityfromExorbitantPrivilege3.BurdenofResponsibility4.The“Costly”PrerequisitesEvolutionofInternationalMonetarySystemsInternationalmonetarysystem:involvessetsofinternationallyagreedrules,conventionsandsupportinginstitutionsthatfacilitateinternationaltrade,crossborderinvestmentandgenerallythereallocationofcapitalbetweennationstates.EvolutionofInternationalMonetarySystemsThe1stmoderninternationalmonetarysystem:GoldstandardDuringthelate19thandearly20thcenturiesGoldistheonlystandardofvalueEvolutionofInternationalMonetarySystemsDuringthe1920sThegoldstandardwasreplacedbythegoldbullionstandard.Nationsnolongermintedgoldcoinsbutbackedtheircurrencieswithgoldbullionandagreedtobuyandsellthebullionatafixedprice.EvolutionofInternationalMonetarySystemsBritainreturnedtotheGoldStandardin1925atthepre-warrate,muchtothedismayofKeynes.In1931BritainwasforcedtoabandontheGoldStandard.EvolutionofInternationalMonetarySystemsBrettonWoodsinternationalconferenceIn1944Asystemoffixedexchangerateswasadopted.InternationalMonetaryFund(IMF)wascreatedEvolutionofInternationalMonetarySystemsIn1968the

two-tiersystemwascreatedIn1971TheUnitedStateswasforcedtoabandongoldconvertibility.TheBrettonWoodssystemeventuallycollapsedEvolutionofInternationalMonetarySystemsIn1976,G3Centredonthreefloatingcurrencies,theUSdollar,theJapaneseyenandtheDeutscheMark.ValuedeterminedbythemarketEvolutionofInternationalMonetarySystemsIn2002TheeuroreplacedtheEuropeanCurrencyUnit.ThesecondmostcommonlyusedcurrencyafterthedollarintheprimaryinternationalbondmarketUniformCurrency–BlessingorCurse?Merits:Bringsaboutsignificantbenefitstoworldeconomyandinternationaltrade.MakesiteasiertogivebirthtoacashlesssocietywhichisconvenientandsecureUniformCurrency–BlessingorCurse?Defects:PosesthreattonationalsovereigntyUnequaleconomicdecisionsThelimitedfeasibilityofachievingauniformcurrency.InternationalFinancialInstitutionsInternationalfinancialinstitutions(IFIs)Financialinstitutionsthathavebeenestablished(orchartered)bymorethanonecountry,andhencearesubjectsofinternationallaw.InternationalFinancialInstitutionsRegionalBanksInter-AmericanDevelopmentBankAsianDevelopmentBankAfricanDevelopmentBankEuropeanBankforReconstructionandDevelopment.InternationalFinancialInstitutionsTheInternationalMonetaryFund(IMF)aninternationalorganizationthatprovidesfinancialassistanceandadvicetomembercountriesIn1945.29countries.InternationalFinancialInstitutions1.

OrganizationalStructureThemembercountriescontributedtoapoolwhichcouldbeborrowedfrom,onatemporarybasis,bycountrieswithpaymentimbalances.InternationalFinancialInstitutions2.

MajorFunctionsThecreationandmaintenanceoftheinternationalmonetarysystem,thesystembywhichinternationalpaymentsamongcountriestakeplace.ProvideasystematicmechanismforforeignexchangetransactionspromotebalancedglobaleconomictradeInternationalFinancialInstitutions3.

SpecialDrawingRightsAclaimonthefreelyusablecurrenciesofIMFmembers4.

IMFBenefitsStructuralAdjustmentPolicies(SAPs)InternationalFinancialInstitutions5.

DisputesaboutIMFStructuraladjustmentisanundemocraticandinhumanemeansofloaningfundstocountriesfacingeconomicfailure.Foreigncorporationsoftenexploitthesituationbytakingadvantageoflocalcheaplaborwhileshowingnoregardfortheenvironment.6.

FutureOutlookInternationalFinancialInstitutionsTheWorldBankaninternationalfinancialinstitutionthatprovidesloanstodevelopingcountriesforcapitalprogrammswiththegoalofalleviatingpoverty.Establishedbywesternpowersin1944.InternationalFinancialInstitutions1.

OrganizationandOperationsfiveseparateinstitutionsInternationalBankforReconstructionandDevelopment(IBRD)InternationalDevelopmentAssociation(IDA)InternationalFinanceCorporationMultilateralInvestmentGuaranteeAgencyInternationalCentreforSettlementofInvestmentDisputes.InternationalFinancialInstitutions2.

AdaptingtotheTimes3.

OppositiontotheBankDuetothefundamentalstructureoftheBank,thealreadyexistingimbalancebetweentherichandpoorisonlyexacerbated.InternationalFinancialInstitutions4.

OpportunitiesandFutureOutlookCurrentfocus:helpingcountriesachievetheMillenniumDevelopmentGoals(MDGs)InternationalFinancialInstitutionsTheWorldBank’sfocus:1)Increasedtransparency;2)Expandingsocialissuesinthefightonpoverty;3)Improvementsincountries’competitivenessandincreasingexports;4)Improvingefficienciesindiverseindustriesandleveragingtheprivatesector.InternationalFinancialInstitutionsReformsoftheBrettonWoodsInstitutionsWhetherandhowthegovernanceandfunctioningoftheseinstitutionsforinternationalcooperationcanbereformedtobecomemorerepresentativeofthenewgloballandscapewhileretainingWesternnormsandvalues.EconomicAid:ASolutiontotheDebtProblem?Howbeneficialisaid?Bilateralaid:transferreddirectlyfromonecountrytoanotherMultilateralaid:givenbydonorcountriestoaninternationalagency,suchastheWorldBank,whichthendistributesitt