跨国公司理财第3周课件

1、Chapter 2,The International Monetary System,Topics,History of the International Monetary System Contemporary Currency Regimes,History of the International Monetary System,The Gold Standard (1876 1913) “Rules of the game” : each country set the rate at which its currency unit could be converted to a

2、weight of gold Currency exchange rates were “fixed”,History of the International Monetary System,The Inter-War Years & WWII (1914-1944) Currencies were allowed to fluctuate over a fairly wide range in terms of gold. During WWII the US dollar was the only major trading currency that continued to be c

3、onvertible,History of the International Monetary System,Bretton Woods and the International Monetary Fund (IMF) (1944) established a US dollar based international monetary system created two new institutions International Monetary Fund (IMF) World Bank Special Drawing Right (SDR),History of the Inte

4、rnational Monetary System,Eurocurrencies These are domestic currencies of one country on deposit in a second country two valuable purposes: holding excess corporate liquidity a source of short-term bank loans,History of the International Monetary System,Eurocurrency Interest Rates: LIBOR Attract bot

5、h depositors and borrowers to Eurocurrency markets. Loan rate are lower Deposit rate are higher,Contemporary currency regimes,Demonetization of gold Diversification of international reserves Legalization of Floating regime,Contemporary currency regimes,The IMFs Exchange Rate Regime Classifications:

6、Exchange arrangements with no separate legal tender Currency board arrangements Other conventional fixed peg arrangements Pegged exchange rates within horizontal bands Crawling pegs Exchange rates within crawling pegs Managed floating with no pre-announced path Independent floating,Contemporary curr

7、ency regimes,The choice between Fixed and Flexible Rates A nations choice reflects national priorities including: inflation, unemployment, interest rate levels, trade balances, economic growth.,Fixed Versus Flexible Exchange Rates,Countries would prefer a fixed rate regime for the following reasons:

8、 stability in international prices inherent anti-inflationary nature The problems of fixed rate regime: maintain large quantities of international reserves Fixed rates can be maintained at rates that are inconsistent with economic fundamentals,Attributes of the “Ideal” Currency,Possesses three attri

9、butes, often referred to as the Impossible Trinity: Exchange rate stability Full financial integration Monetary independence The forces of economics to not allow the simultaneous achievement of all three,Emerging Markets and Regime Choices,A currency board exists when a countrys central bank commits

10、 to back its monetary base its money supply entirely with foreign reserves at all times. This means that a unit of domestic currency cannot be introduced into the economy without an additional unit of foreign exchange reserves being obtained first. Argentina moved from a managed exchange rate to a c

11、urrency board in 1991 In 2002, the country ended the currency board as a result of substantial economic and political turmoil,Emerging Markets and Regime Choices,Dollarization is the use of the US dollar as the official currency of the country. One attraction of dollarization is that sound monetary

12、and exchange-rate policies no longer depend on the intelligence and discipline of domestic policymakers. Panama has used the dollar as its official currency since 1907 Ecuador replaced its domestic currency with the US dollar in September, 2000,The Euro: Birth of a European Currency,In December 1991

13、, the members of the European Union met at Maastricht, the Netherlands to finalize a treaty that changed Europes currency future. This treaty set out a timetable and a plan to replace all individual ECU currencies with a single currency called the euro.,The Euro: Birth of a European Currency,To prep

14、are for the EMU, a convergence criteria was laid out whereby each member country was responsible for managing the following to a specific level: Nominal inflation rates Long-term interest rates Fiscal deficits Government debt In addition, a strong central bank, called the European Central Bank (ECB)

15、, was established in Frankfurt, Germany.,Effects of the Euro,The euro affects markets in three ways: Cheaper transactions costs in the Euro Zone Currency risks and costs related to uncertainty are reduced All consumers and businesses both inside and outside the Euro Zone enjoy price transparency and

16、 increased price-based competition,Achieving Monetary Unification,If the euro is to be successful, it must have a solid economic foundation. The primary driver of a currencys value is its ability to maintain its purchasing power. The single largest threat to maintaining purchasing power is inflation

17、, so the job of the EU has been to prevent inflationary forces from undermining the euro.,Exchange Rate Regimes: The Future,All exchange rate regimes must deal with the tradeoff between rules and discretion (vertical), as well as between cooperation and independence (horizontal) (see exhibit 2.8) Th

18、e pre WWI Gold Standard required adherence to rules and allowed independence The Bretton Woods agreement (and to a certain extent the EMS) also required adherence to rules in addition to cooperation The present system is characterized by no rules, with varying degrees of cooperation Many believe tha

19、t a new international monetary system could succeed only if it combined cooperation among nations with individual discretion to pursue domestic social, economic, and financial goals,Mini-Case Questions: The Revaluation of the Chinese Yuan,Many Chinese critics had urged China to revalue the yuan by 20% or more. What would the Chinese yuans value be in US dollars if it had indeed been devalued by 20%? Do