金融英语-4-International-Finance.ppt

1、Part 4 International Finance,Chapter Outline： 4.1 International Balance Sheet 4.2 Foreign Exchange Rate 4.3 International Monetary System 4.4 Foreign Exchange Exposure 4.5 Foreign Exchange Market 4.6 International Banking Services 4.7 Foreign Direct Invest,The balance of payments accounts(国际收支平衡表) a

2、re those that record all transactions between the residents（居民） of a country and residents of all foreign nations. They are composed of the following: The Current Account 经常账户 The Capital Account 资本账户 The Official Reserves Account 储备帐户 Statistical Discrepancy 统计误差,4.1 International Balance Sheet,4.1

3、.1 The Current Account,Includes all imports and exports of goods and services, unilateral transfers（经常转移） of foreign aid. The net balance on the merchandise transactions is called the trade balance.,Goods 货物贸易,Exports are entered into the credit side, while imports the debit side. If the debits exce

4、ed the credits, then a country is running a trade deficit（贸易逆差）. If the credits exceed the debits, then a country is running a trade surplus（贸易顺差）.,Services 服务贸易,Services include all receipts and payments between the residents and foreigners on transportation, insurance, travel, communication, inves

5、tment returns such as interest, dividends, and profits generated from loans and investments, technology. Receipts of services are entered into the credit side while payments the debit side.,Unilateral transfers 经常转移,Unilateral transfers are transactions that only one-sided since there is no offsetti

6、ng payment(补偿性支付 ). It includes private transfers and government transfers.,4.1.2 The Capital Account,The capital account measures the difference between a country s sales of assets to foreigners and purchases of foreign assets. The capital account is composed of Foreign Direct Investment (FDI，外商直接投

7、资), portfolio investments（间接投资） and other investments.,Capital account usually consists of three sub-accounts: Direct investment(直接投资): it is usually defined as investment in enterprises located in the country but “effectively” controlled by residents in another country.,Portfolio investments（证券投资，间

8、接投资）: it designates all long-term capital flows that do not give investors effective control over their investments, which involve mainly loans and securities.,other investments mainly refers to the short-term capital records the net changes in international assets and liabilities with an original m

9、aturity of one year or less in which domestic residents (excluding official monetary institutions) are creditors and debtors.,Short-term capital flows include the normal, everyday receipts and payments arising out of international trade and finance that occur mainly through shift in the ownership of

10、 demand deposits（活期存款） and other liquid deposits in banks at home and abroad.,Estimates of private short-term capital movement are the least reliable of the balance of payments items because of their variety, intangibility（无形的） and private character.,4.1.3 The Official Reserves Account,Official rese

11、rves assets comprise: foreign exchange in convertible currencies (可自由兑换外币), reserve position in the International Monetary Fund（IMF储备头寸）, allocation of Special Drawing Rights（SDR）, Gold Stock（黄金储备）.,4.1.4 Statistical Discrepancy,This account is used to describe some omissions（遗漏） and misrecorded（未记录

12、） transactions to make the total debits and credits into an arithmetic equilibrium （算术平衡）.,4.1.5 The Balance of Payments Identity,BCA + BKA + BRA = 0 where BCA = balance on current account BKA = balance on capital account BRA = balance on the reserves account Under a pure flexible exchange rate, BCA

13、 + BKA = 0,Exhibit 4.1 U.S. Balance of Payments Data in 2000,U.S. Balance of Payments Data,In this sheet, the balance of payments identity hold: BCA + BKA = BRA,($444.69) + $444.26 + $0.73 = $0.30= ($0.30),Balance of Payments Trends,Since 1982 the U.S. has experienced continuous deficits on the curr

14、ent account and continuous surpluses on the capital account. During the same period, Japan has experienced the opposite.,Balances on the Current (BCA) and Capital (BKA) Accounts of the United States,Source: IMF International Financial Statistics Yearbook, 2000,Balances on the Current (BCA) and Capit

15、al (BKA) Accounts of Japan,Source: IMF International Financial Statistics Yearbook, 2000,4.2 Foreign Exchange Rate,An exchange rate is the price at which one currency can be exchanged for another. In theory, exchange rates should be in accord with purchasing power parity (PPP,购买力平价理论). If the price

16、level in a country increases because of inflation, its currency should depreciate（贬值）.,4.2.1 Fixed rates,For 25 years after World War , the levels of most major currencies were determined by governments. They were fixed or pegged against the US dollar（与美元挂钩）, and the dollar was pegged against gold （

17、与黄金挂钩）. It was ended in 1971, because of the following inflation in the USA, the Federal Reserve did not have enough gold to guarantee the American currency.,Today, a country can fix its value to another countrys currency. A country can fix its currency to a “basket” of other currencies. Same as div

18、ersifying a portfolio (Not putting all your eggs in one basket) Special Drawing Right (SDR)：A basket of four major world currencies. Governments attempt to keep the value fixed for relatively long periods of time to reduce trade uncertainties.,How to keep exchange rate fixed?,It cant maintain the va

19、lue for long. If the demand for the currency falls, its price would fall as well. The only way the price can be kept up is for the government promising to maintain the original level to enter the foreign exchange market and buy the amount that will bring the quantity demanded back to the original le

20、vel.,Defending a Fixed Exchange Rate,To buy or sell foreign currencies (in order to influence the prevailing exchange rate), a government must have foreign exchange reserves. It is not likely to have enough reserves to defend against a massive and sustained attack on the currency. The government can

21、 also make long-term adjustments of its macroeconomic (monetary and/or fiscal policy). Budget austerity（紧缩预算） avoids inflation and takes downward pressure（贬值） off currency.,4.2.2 Pegged exchange rate 联系汇率制,Pegged exchange rate refers to setting a targeted value for a countrys foreign exchange, and i

22、t indicates the government has some ability to move the peg. The government may change the pegged rate if a substantial disequilibrium（不平衡） in the countrys international position develops (e.g., demand for the currency is too weak to maintain the desired value).,Crawling peg 爬行盯住,A crawling peg can

23、be changed often (monthly, say) according to a set of indicators or the judgment of the countrys monetary authority. Indicators（指示器）: The difference of inflation rates International reserve assets Growth of the money supply The current actual market exchange rate relative to the central par value of

24、 the pegged rate,4.2.3 Floating rates 浮动汇率,Floating exchange rates means that exchange rates are determined by people buying and selling currencies in the foreign exchange markets. Freely floating exchange rate（自由浮动）: fully determined by market forces: the level of supply and demand. Managed floatin

25、g exchange rates（有管理的浮动汇率制）: with governments intervention,KEY WORDS,stimulus plan 刺激计划 active fiscal policies and moderately easy monetary policies 积极的财政政策，适度宽松的货币政策 expand domestic demand 扩大内需 spur domestic consumption 促进消费 infrastructure construction 基础设施建设 value-added tax reform 增值税改革,the stimul

26、us plan with ten big policies involved $586 billion(4 trillion RMB) in a range of areas including the construction of railroads, highways and airports, boosting of services sector, agriculture, education and public health, improvement of peoples income,两年投4万亿扩内需国家出台十大措施促增长,一是加快建设保障性安居工程。 二是加快农村基础设施建

27、设。 三是加快铁路、公路和机场等重大基础设施建设。 四是加快医疗卫生、文化教育事业发展。 五是加强生态环境建设。 六是加快自主创新和结构调整。 七是加快地震灾区灾后重建各项工作。 八是提高城乡居民收入。 九是在全国所有地区、所有行业全面实施增值税转型改革，鼓励企业技术改造，减轻企业负担亿元。 十是加大金融对经济增长的支持力度,4.3.1 Evolution of the International Monetary System 4.3.2 Current Exchange Rate Arrangements 4.3.3 European Monetary System 4.3.4 The M

28、exican Peso Crisis 4.3.5 The Asian Currency Crisis 4.3.6 Fixed versus Flexible Exchange Rate Regimes,4.3 International Monetary System,4.3.1 Evolution of the International Monetary System,Bimetallism（复本位制）: Before 1875 Classical Gold Standard: 1875-1914 Interwar Period: 1915-1944 Bretton Woods Syste

29、m: 1945-1972 The Flexible Exchange Rate Regime: 1973-Present,Bimetallism: Before 1875,A “double standard”（复本位制 ） in the sense that both gold and silver were used as money. Some countries were on the gold standard（金本位）, some on the silver standard （银本位）, some on both. Both gold and silver were used a

30、s international means of payment and the exchange rates among currencies were determined by either their gold or silver contents. Greshams Law（格勒善法则 ，劣币驱逐良币） implied that it would be the least valuable metal that would tend to circulate.,Classical Gold Standard: 1875-1914,During this period in most

31、major countries: Gold alone was assured of unrestricted coinage（制造金币） There was two-way convertibility（双向可兑换） between gold and national currencies at a stable ratio. Gold could be freely exported or imported. The exchange rate between two countrys currencies would be determined by their relative gol

32、d contents.,For example, if the dollar is pegged to gold at U.S.$30 = 1 ounce of gold, and the British pound is pegged to gold at 6 = 1 ounce of gold, it must be the case that the exchange rate is determined by the relative gold contents:,Classical Gold Standard: 1875-1914,$30 = 6 $5 = 1,Classical G

33、old Standard: 1875-1914,Highly stable exchange rates under the classical gold standard provided an environment that was conducive to（有益于） international trade and investment. Misalignment（不一致） of exchange rates and international imbalances of payment were automatically corrected by the price-specie-f

34、low mechanism（价格-货币-流动机制 ）.,Price-Specie-Flow Mechanism,Suppose Great Britain exported more to France than France exported to Great Britain. This cannot persist under a gold standard. Net export of goods from Great Britain to France will be accompanied by a net flow of gold from France to Great Brit

35、ain. This flow of gold will lead to a lower price level in France and, at the same time, a higher price level in Britain. The resultant change in relative price levels will slow exports from Great Britain and encourage exports from France.,Classical Gold Standard: 1875-1914,There are shortcomings: T

36、he supply of newly minted gold（铸造金币） is so restricted that the growth of world trade and investment can be hampered for the lack of sufficient monetary reserves. Even if the world returned to a gold standard, any national government could abandon the standard.,Interwar Period: 1915-1944,Exchange rat

37、es fluctuated as countries widely used “predatory” depreciations（掠夺性贬值） of their currencies as a means of gaining advantage in the world export market. The result for international trade and investment was profoundly detrimental（有害的）.,Bretton Woods System: 1945-1972,Named for a 1944 meeting of 44 na

38、tions at Bretton Woods, New Hampshire. The purpose was to design a postwar international monetary system. The goal was to keep exchange rate stable without the gold standard. The result was the creation of the IMF and the World Bank.,Bretton Woods System:1945-1972,Under the Bretton Woods system, the

39、 U.S. dollar was pegged to gold at $35 per ounce and other currencies were pegged to the U.S. dollar. Each country was responsible for maintaining its exchange rate within 1% of the adopted par value by buying or selling foreign reserves as necessary. The Bretton Woods system was a dollar-based gold

40、 exchange standard(以美元为基础的金汇兑本位制).,The Flexible Exchange Rate Regime: 1973-Present.,Flexible exchange rates were declared acceptable to the IMF members. Central banks were allowed to intervene in the exchange rate markets. Non-oil-exporting countries(非石油输出国 ) and less-developed countries were given

41、greater access to IMF funds.,4.3.2 Current Exchange Rate Arrangements,Free Float The largest number of countries, about 48, allow market forces to determine their currencys value. Managed Float About 25 countries combine government intervention with market forces to set exchange rates. Pegged to ano

42、ther currency Such as the U.S. dollar or euro (through franc or mark). No national currency Some countries do not bother printing their own, they just use the U.S. dollar. For example, Ecuador（厄瓜多尔）, Panama, and El Salvador（萨尔瓦多） have dollarized.,4.3.3 European Monetary System,Objectives of European

43、 Monetary System: To establish a zone of monetary stability in Europe. To coordinate exchange rate policies vis-vis（相对于） non-European currencies. To pave the way for the European Monetary Union欧洲货币联盟）.,What Is the Euro?,The euro is the single currency of the European Monetary Union which was adopted

44、 by 11 Member States on 1 January 1999. These original member states were: Belgium（比利时）, Germany, Spain, France, Ireland, Italy, Luxemburg（卢森堡）, Finland（芬兰）, Austria（奥地利）, Portugal（葡萄牙） and the Netherlands（荷兰）.,What is the official sign of the euro?,The sign for the new single currency looks like an

45、 “E” with two clearly marked, horizontal parallel lines across it. It was inspired by the Greek letter epsilon（第五个希腊字母）, in reference to the cradle of European civilization and to the first letter of the word Europe.,Value of the Euro in U.S. Dollars,January 1999 to October 2008,The Long-Term Impact

46、 of the Euro,The euros success will advance the political integration of Europe in a major way, eventually making a “United States of Europe” feasible. The U.S. dollar loses its place as the dominant world currency. The euro and the U.S. dollar become the two major currencies.,4.3.4 The Mexican Peso

47、 Crisis,On 20 December, 1994, the Mexican government announced a plan to devalue the peso against the dollar by 14 percent. This decision changed currency traders expectations about the future value of the peso. In their rush to get out，the peso fell by as much as 40 percent.,The Mexican Peso Crisis

48、,The Mexican Peso crisis is unique in that it represents the first serious international financial crisis touched off（触发） by cross-border flight of foreign capital （跨国资本外逃）. Two lessons emerge: It is essential to have a multinational safety net（安全网） in place to safeguard the world financial system f

49、rom such crises. An influx（流入） of foreign capital can lead to an overvaluation in the first place.,4.3.5 The Asian Currency Crisis,The Asian currency crisis turned out to be far more serious than the Mexican peso crisis in terms of the extent of the contagion（蔓延） and the severity of the resultant ec

50、onomic and social costs. Many firms with foreign currency bonds were forced into bankruptcy. The region experienced a deep, widespread recession.,Currency Crisis Explanations,In theory, a currencys value mirrors the fundamental strength of its underlying economy, relative to other economies, In the

51、long run. In the short run, currency traders expectations play a much more important role. Thus, fears of depreciation become self-fulfilling prophecies(预言). In todays environment, traders and lenders, using the most modern communications, act by fight-or-flight(战斗或逃跑 ) instincts.,4.3.6 Fixed versus

52、 Flexible Exchange Rate Regimes,Arguments in favor of flexible exchange rates: Easier external adjustments. National policy autonomy. Arguments against flexible exchange rates: Exchange rate uncertainty may hamper international trade. No safeguards to prevent crises.,ChinasCPIRises4%inOctober,Chinas

53、 consumer price index, the main gauge(标尺) of inflation, rose four percent year on year（与去年同期相比 ） in October. The figure, released by the National Bureau of Statistics（国家统计局） on Tuesday, was down 0.6 percent from that of September and it has dropped for six consecutive months.,Qi Jingmei, a senior re

54、searcher with the State Information Centre（国家信息中心）, attributes the decline to the governments macroeconomic controls in dealing with the rapid rise of the CPI in the first half of the year. She adds the drop in food prices also contributed to the decline of Octobers CPI.,Meanwhile, global food price

55、s dropped dramatically after the hike in the first half. It also gradually lowered the domestic food prices. Qi Jingmei says she remains optimistic about the CPI in the upcoming two months.,I think the CPI in the fourth quarter will continue to decline. It will ease pressure on the government to bea

56、t inflation, and shift the focus from macro-economic control to sustaining economic growth. The average CPI in the first 10 months of 2008 rose 6.7 percent year on year, higher than the yearly goal of 4.8 percent.,4.4 Foreign Exchange Exposure,Changes in exchange rates can affect not only firms that

57、 are directly engaged in international trade but also purely domestic firms. Consider a U.S. bicycle manufacturer who sources and sells only in the U.S. Since the firms product competes against imported bicycles, it is subject to foreign exchange exposure.,Economic Exposure 经济风险 Exchange rate risk a

58、s applied to the firms value. Transaction Exposure 交易风险 Exchange rate risk as applied to the firms home currency cash flows. Translation Exposure 折算风险 Exchange rate risk as applied to the firms consolidated financial statements.,Three Types of Exposure,4.4.1 Economic Exposure,Exchange rate risk as a

59、pplied to the firms competitive position. Any anticipated changes in the exchange rates would have been already discounted and reflected in the firms value. Economic exposure can be defined as the extent to which the value of the firm would be affected by unanticipated changes in exchange rates.,How to Measure Economic Exposure,Economic exposure is the sensitivity of the future home currency value of the firms assets and liabilities and the firms operating cash flow to random changes in exchange rates. There exist statistical measurements of sensitivity. Sensitivity of