Exchange Rate and International Finance

Size: px
Start display at page:

Download "Exchange Rate and International Finance"

Transcription

1 Exchange Rate and International Finance Min Shu Waseda University 2018/5/29 International Political Economy 1

2 Outline of the lecture International balance of payment Fixed and floating exchange rate The political economy of exchange rate Trilemma in international finance Regional financial cooperation and integration International financial institution and regulation International financial crisis Group Presentations 2018/5/29 International Political Economy 2

3 Group Presentation in Thematic Classes Contents of the group presentation Related chapter in Global Political Economy Pre-assigned current issues Chapter 8 for Group 7 Ch13: The Political Economy of Development Current issues for Group 8 Development Financing: from World Bank to NDB and AIIB 2018/5/15 International Political Economy 3

4 International balance of payment From the economy of goods to the economy of capital Exchange of goods money-based transaction exchange of money International trade and international finance International balance of payment Current account Balance of trade, net factor income and net transfer payments Capital account Foreign direct investment, portfolio investment, other investment, reserve account 2018/5/29 International Political Economy 4

5 International balance of payment Foreign exchange reserves Foreign reserves: foreign currencies, SDRs, foreign assets, etc. Managing the exchange rate the use of foreign reserves Sovereign wealth fund (SWF) Balancing International payment Adjusting the exchange rate Regulating domestic price and demand, sometimes involuntarily Establishing a rule-based international mechanism 2018/5/29 International Political Economy 5

6 Fixed and floating exchange rate Fixed exchange rate system To achieve foreign exchange stability, the value of the country s currency is matched to the value of another currency Small range of exchange rate movement is allowed Floating exchange rate system The value of the currency fluctuates according to the demand and supply of the foreign exchange market The monetary authority may intervene to prevent extreme appreciation or depreciation Some in-between systems of exchange rate A basket of currencies as a fixed target Managed floating exchange rate 2018/5/29 International Political Economy 6

7 The political economy of exchange rate: Fixed exchange rate Fixed exchange rate and international financial order Hegemonic stability and international finance Gold standards ( ): the hegemony of the UK Bretton Woods System ( ): US hegemony It was still necessary to coordinate the exchange rate among major economies Fixed exchange rate and domestic politics During the inter-war period, the Left governments preferred gold standard: prioritizing stability in international trade Fixed exchange rate is often found in politically stable democratic countries: maintaining stable financial policy Undemocratic countries also prefer fixed exchange rate: to compensate for weak domestic financial institutions 2018/5/29 International Political Economy 7

8 The political economy of exchange rate: Floating exchange rate Coordination of financial and economic policies Locomotive Theory ( ) The coordination among US, Japan and Germany were vital to the growth of world economy Plaza and Louvre Agreements ( ) Japan and Germany agreed to appreciate their currencies against the USD, and take stimulus domestic economic policies to reduce their trade surplus, however The obstacles to policy coordination Analytical uncertainty Policy uncertainty 2018/5/29 International Political Economy 8

9 Plaza Agreement 2018/5/29 International Political Economy 9

10 The trilemma in international finance It is impossible to achieve simultaneously the three (desirable) macro-economic policy objectives Stable currency: fixed exchange rate Autonomous monetary policy Free movement of capitals Empirical examples Japan: floating exchange rate The Euro Zone: non-independent monetary policy China: restriction on transnational capital flows 2018/5/29 International Political Economy 10

11 Regional financial integration Regional financial integration in Europe 1970 the Werner Report Coordinated floating exchange rate: Snake 1979 European Monetary System ECU and ERM 1993 Maastricht Treaty: Economic and Monetary Union 1999 The single currency entered institutional transactions 2002 Euro entered market transactions The Eurozone Crisis Regional financial cooperation in East Asia The Chiang Mai Initiative: from bilateral currency wasp agreements to a multilateral pool of foreign currencies Asian Currency Unit? 2018/5/29 International Political Economy 11

12 International financial institution and regulation International Monetary Fund (IMF) As part of the Bretton Woods System, the IMF was set up in 1944 To provide emergency loans to imbalanced countries Surplus countries vs. deficit countries The US influences on the IMF IMF, US Treasury, the Wall Street Regulating international finance The bankruptcy risk of private financial institutions Bank for International Settlements (BIS) The Basel Accords (I, II, III) Implementation through domestic legislation 2018/5/29 International Political Economy 12

13 International financial crisis Fixed exchange rate and currency crisis Risk: current account deficit + capital account surplus Under fixed exchange rate, speculative attack against overvalued currencies Difficult to keep the fixed exchange rate without adequate foreign reserves East Asian Financial Crisis Thailand, Indonesia, Malaysia and South Korea experienced sudden and substantial currency depreciation in 1997 Domestic property bubble and deficit of the current account Contagion across the East Asian financial markets Conditionality of the IMF loans: domestic financial reforms 2018/5/29 International Political Economy 13

14 International financial crisis Financial crisis resulting from a bubble economy Gap between commodity economy and financial economy In particular, bubble tends to occur in the real estate market Bubble economy burst financial institutions bankruptcy financial flow decelerated/stopped declined economic growth The sub-prime loan problem in the US Due to sub-prime loans, real estate bubble emerged The burst of real estate bubble led to financial insolvency The downturn of US economy led to a global recession Re-building international financial system Financial regulation, IMF, role of emerging economies The rise of G /5/29 International Political Economy 14

15 Group Presentation The evolution of international financial system US interest rate and developing economies 2018/5/29 International Political Economy 15

16 Discussion What does the hegemonic stability theory tell us about the international financial order? Why is it necessary to pursue coordination among major economies to ensure financial stability? How did the Euro influence the international financial system? What is the main cause of international financial crisis: insufficient regulation or self-interested investors? 2018/5/29 International Political Economy 16

Exchange Rate Regimes and Monetary Policy: Options for China and East Asia

Exchange Rate Regimes and Monetary Policy: Options for China and East Asia Exchange Rate Regimes and Monetary Policy: Options for China and East Asia Takatoshi Ito, University of Tokyo and RIETI, and Eiji Ogawa, Hitotsubashi University, and RIETI 3/19/2005 RIETI-BIS Conference

More information

To Fix or Not to Fix?

To Fix or Not to Fix? To Fix or Not to Fix? Linda Tesar, Department of Economics Notes at: http://www.econ.lsa.umich.edu/~ltesar April 5, 2000 Fixed vs. Flexible Exchange rates The Theory: Money demand: M/P = L(Y,I) Interest

More information

Chapter 19 International Monetary Systems: An Historical Overview

Chapter 19 International Monetary Systems: An Historical Overview Chapter 19 International Monetary Systems: An Historical Overview Copyright 2012 Pearson Addison-Wesley. All rights reserved. Preview Goals of macroeconomic policies internal and external balance Gold

More information

The Role of Asian Currencies in the International Monetary System

The Role of Asian Currencies in the International Monetary System The Role of Asian Currencies in the International Monetary System Masahiro Kawai Asian Development Bank Institute The Global Monetary and Financial System and Its Governance Tokyo Club Foundation for Global

More information

Y669 International Political Economy. September 21, 2010

Y669 International Political Economy. September 21, 2010 Y669 International Political Economy September 21, 2010 What is an exchange rate? The price of a currency expressed in terms of other currencies or gold. What the International Monetary System Has to Do

More information

Week 1. Currency Systems and Crises

Week 1. Currency Systems and Crises Week 1 Currency Systems and Crises Definition An exchange rate is the amount of currency that one needs in order to buy one unit of another currency, or the amount of currency that one receive when selling

More information

Economics of Money, Banking, and Fin. Markets, 10e (Mishkin) Chapter 18 The International Financial System

Economics of Money, Banking, and Fin. Markets, 10e (Mishkin) Chapter 18 The International Financial System Economics of Money, Banking, and Fin. Markets, 10e (Mishkin) Chapter 18 The International Financial System 18.1 Intervention in the Foreign Exchange Market 1) A central bank of domestic currency and corresponding

More information

Chapter 9 Essential macroeconomic tools. Baldwin&Wyplosz 2009 The Economics of European Integration, 3 rd Edition

Chapter 9 Essential macroeconomic tools. Baldwin&Wyplosz 2009 The Economics of European Integration, 3 rd Edition Chapter 9 Essential macroeconomic tools 2 Background theory A quick refresher on basic macroeconomic principles Application of these principles to the question of exchange rate regimes 3 Output and prices

More information

Chapter 19 (8) International Monetary Systems: An Historical Overview

Chapter 19 (8) International Monetary Systems: An Historical Overview Chapter 19 (8) International Monetary Systems: An Historical Overview Preview Goals of macroeconomic policies internal and external balance Gold standard era 1870 1914 International monetary system during

More information

Figure: EUR-USD Exchange Rate

Figure: EUR-USD Exchange Rate Figure: EUR-USD Exchange Rate SuSe 2013 1 Monetary Policy and EMU: Open Economy Setting Figure: EUR-USD Exchange Rate SuSe 2013 2 Monetary Policy and EMU: Open Economy Setting Figure: Indirect Quotation

More information

Chapter 18. The International Financial System Intervention in the Foreign Exchange Market

Chapter 18. The International Financial System Intervention in the Foreign Exchange Market Chapter 18 The International Financial System 18.1 Intervention in the Foreign Exchange Market 1) A central bank of domestic currency and corresponding of foreign assets in the foreign exchange market

More information

Prepared by Iordanis Petsas To Accompany. by Paul R. Krugman and Maurice Obstfeld

Prepared by Iordanis Petsas To Accompany. by Paul R. Krugman and Maurice Obstfeld Chapter 22 Developing Countries: Growth, Crisis, and Reform Prepared by Iordanis Petsas To Accompany International Economics: Theory and Policy, Sixth Edition by Paul R. Krugman and Maurice Obstfeld Chapter

More information

New in 2013: Greater emphasis on capital flows Refinements to EBA methodology Individual country assessments

New in 2013: Greater emphasis on capital flows Refinements to EBA methodology Individual country assessments As in 212: Stock-take: multilaterally consistent assessment of external sector policies of the largest economies Feeds into Article IVs Draws on External Balance Assessment (EBA) methodology/other Identifies

More information

The Economics of International Financial Crises 3. An Introduction to International Macroeconomics and Finance

The Economics of International Financial Crises 3. An Introduction to International Macroeconomics and Finance Fletcher School of Law and Diplomacy, Tufts University The Economics of International Financial Crises 3. An Introduction to International Macroeconomics and Finance Prof. George Alogoskoufis Scope of

More information

Why So Much Interest? International Role of the Dollar. Raises General Issues. Key Currencies and Asymmetries

Why So Much Interest? International Role of the Dollar. Raises General Issues. Key Currencies and Asymmetries Why So Much Interest? International Role of the Dollar Rise of Euro US Current Account Deficit Role of Oil Pricing and Iraq War 797 Lecture Raises General Issues The Nature and Role of Reserve Currencies

More information

Cosa ci riserva il 2008?

Cosa ci riserva il 2008? Cosa ci riserva il 28? Scenari e previsioni per l anno in corso Keith Wade Capo Economista The US economy today A re-assessment of risk De-leveraging Financial sector Real economy Historical precedents

More information

Lecture 6: Intermediate macroeconomics, autumn Lars Calmfors

Lecture 6: Intermediate macroeconomics, autumn Lars Calmfors Lecture 6: Intermediate macroeconomics, autumn 2009 Lars Calmfors 1 Topics Systems of fixed exchange rates Interest rate parity under a fixed exchange rate Stabilisation policy under a fixed exchange rate

More information

Index. exchange rates, 104 5, net inflows, 100, 115, Bretton Woods system, 96 7 business cycles, 57

Index. exchange rates, 104 5, net inflows, 100, 115, Bretton Woods system, 96 7 business cycles, 57 Index additional monetary tightening (AMT), 43 4 advanced economies, central banks in, 35 6 agency problems, 153, 163n47 aggregate demand, 18, 138 9, 141 2 Asian financial crisis, 8, 10, 13 15, 57, 65,

More information

Monetary Policy in a Global Economy: Past and Future Research Challenges

Monetary Policy in a Global Economy: Past and Future Research Challenges Monetary Policy in a Global Economy: Past and Future Research Challenges Presentation at the Conference Globalization and the Macroeconomy 24 July 2007 John B. Taylor Stanford University Past Challenges

More information

Currency Crises: Theory and Evidence

Currency Crises: Theory and Evidence Currency Crises: Theory and Evidence Lecture 3 IME LIUC 2008 1 The most dramatic form of exchange rate volatility is a currency crisis when an exchange rate depreciates substantially in a short period.

More information

19.2 Exchange Rates in the Long Run Introduction 1/24/2013. Exchange Rates and International Finance. The Nominal Exchange Rate

19.2 Exchange Rates in the Long Run Introduction 1/24/2013. Exchange Rates and International Finance. The Nominal Exchange Rate Chapter 19 Exchange Rates and International Finance By Charles I. Jones International trade of goods and services exceeds 20 percent of GDP in most countries. Media Slides Created By Dave Brown Penn State

More information

THE IMF: INSTRUMENTS AND STRATEGIES. Lecture 4 LIUC 2008

THE IMF: INSTRUMENTS AND STRATEGIES. Lecture 4 LIUC 2008 THE IMF: INSTRUMENTS AND STRATEGIES Lecture 4 LIUC 2008 WHAT IS THE INTERNATIONAL MONETARY FUND? The IMF is an international cooperative financial institution. Each member deposits a sum of money into

More information

Lecture 7. Unemployment and Fiscal Policy

Lecture 7. Unemployment and Fiscal Policy Lecture 7 Unemployment and Fiscal Policy The Multiplier Model As we ve seen spending on investment projects tends to cluster. What are the two reasons for this? 1. Firms may adopt a new technology at

More information

POST-CRISIS GLOBAL REBALANCING CONFERENCE ON GLOBALIZATION AND THE LAW OF THE SEA WASHINGTON DC, DEC 1-3, Barry Bosworth

POST-CRISIS GLOBAL REBALANCING CONFERENCE ON GLOBALIZATION AND THE LAW OF THE SEA WASHINGTON DC, DEC 1-3, Barry Bosworth POST-CRISIS GLOBAL REBALANCING CONFERENCE ON GLOBALIZATION AND THE LAW OF THE SEA WASHINGTON DC, DEC 1-3, 2010 Barry Bosworth I. Economic Rise of Asia Emerging economies of Asia have performed extremely

More information

Against the Consensus Reflections on the Great Recession. Justin Yifu Lin National School of Development Peking University

Against the Consensus Reflections on the Great Recession. Justin Yifu Lin National School of Development Peking University Against the Consensus Reflections on the Great Recession Justin Yifu Lin National School of Development Peking University Contents What caused the global crisis A win-win path to recovery Can developing

More information

CHINA AND INDIA: SUSTAINING HIGH QUALITY GROWTH

CHINA AND INDIA: SUSTAINING HIGH QUALITY GROWTH CHINA AND INDIA: SUSTAINING HIGH QUALITY GROWTH New Delhi March 19-20, 2012 Session V: Coping with Global Financial Instability Internationalizing the RMB: Pros and Cons Zhang Yuyan Presentation Internationalizing

More information

5. Openness in Goods and Financial Markets: The Current Account, Exchange Rates and the International Monetary System

5. Openness in Goods and Financial Markets: The Current Account, Exchange Rates and the International Monetary System Fletcher School of Law and Diplomacy, Tufts University 5. Openness in Goods and Financial Markets: The Current Account, Exchange Rates and the International Monetary System Macroeconomics Prof. George

More information

MULTINATIONAL FINANCE. Barry Topf April 2014

MULTINATIONAL FINANCE. Barry Topf April 2014 MULTINATIONAL FINANCE Barry Topf April 2014 1 INTRODUCTION Course Goals Methodology Organization Background Course Outline 2 COURSE GOALS Acquire analytical tools Obtain necessary knowledge and perspective

More information

Economics 340 International Economics Prof. Alan Deardorff Second Midterm Exam. Form (KEY) 0. March 27, 2017

Economics 340 International Economics Prof. Alan Deardorff Second Midterm Exam. Form (KEY) 0. March 27, 2017 Page 1 of 14 (15) Economics 340 International Economics Prof. Second Midterm Exam Form (KEY) 0 March 27, 2017 NAME: Student ID No.: INSTRUCTIONS: READ CAREFULLY!!! 1. Please do not open the exam until

More information

Global Imbalances and the U.S. Current Account Deficit. Economics 826 January 2009

Global Imbalances and the U.S. Current Account Deficit. Economics 826 January 2009 Global Imbalances and the U.S. Current Account Deficit Economics 826 January 2009 1 A. What are the facts? B. Why is this trend worrying? C. What are the possible causes? D. What are the possible adjustments?

More information

The Trilemma: Insights and Limitations

The Trilemma: Insights and Limitations The Trilemma: Insights and Limitations Menzie D. Chinn University of Wisconsin, Madison and NBER Universität Leipzig/Universität Duisburg Essen Conference on Exchange Rates, Monetary Policy and Financial

More information

Currency Asymmetry, Global Imbalance, and the Needed Reform of Global Monetary System

Currency Asymmetry, Global Imbalance, and the Needed Reform of Global Monetary System Currency Asymmetry, Global Imbalance, and the Needed Reform of Global Monetary System FAN Gang National Economic Research Institute China Reform Foundation May 2006 1.China s trade balance In most of past

More information

Monetary Integration

Monetary Integration Monetary Integration By Michael Möhnle Table of Contents 1. 6-Stages of Economic Integration 2. International Monetary Integration - Bretton Woods 3. European Monetary Integration 4. European (Economic

More information

POLI 12D: International Relations Sections 1, 6

POLI 12D: International Relations Sections 1, 6 POLI 12D: International Relations Sections 1, 6 Spring 2017 TA: Clara Suong Chapter 9 International Monetary Relations 9 INTERNATIONAL MONETARY RELATIONS Core of the Analysis National Monetary Order Fixed

More information

Chapter 1. Globalization and the Multinational Corporation Cambridge University Press 1-1

Chapter 1. Globalization and the Multinational Corporation Cambridge University Press 1-1 Chapter 1 Globalization and the Multinational Corporation 2018 Cambridge University Press 1-1 1.1 Introduction Globalization Increasing connectivity and integration of countries and corporations and the

More information

Progress towards Strong, Sustainable and Balanced Growth. Figure 1: Recovery from Financial Crisis (100 = First Quarter of Real GDP Contraction)

Progress towards Strong, Sustainable and Balanced Growth. Figure 1: Recovery from Financial Crisis (100 = First Quarter of Real GDP Contraction) Progress towards Strong, Sustainable and Balanced Growth Figure 1: Recovery from Financial Crisis (100 = First Quarter of Real GDP Contraction) Source: OECD May 2014 Forecast, Haver Analytics, Rogoff and

More information

The Case for an Asian Currency?

The Case for an Asian Currency? The Case for an Asian Currency? Robert Mundell Columbia University Institute for International Monetary Affairs (IIMA) Tokyo, Japan November 12, 2004 Topics Lessons from the Euro China and the RMB Issue

More information

4/14/2011. Exchange Rate Policy and Devaluation. The Central Bank Balance Sheet. Central Bank Policy Options in a Crisis

4/14/2011. Exchange Rate Policy and Devaluation. The Central Bank Balance Sheet. Central Bank Policy Options in a Crisis Exchange Rate Policy and Devaluation BOP Surpluses: excess supply of Forex CB buys BOP Deficits: excess demand for Forex CB sells OSB must offset BOP ISLM-FX with an unexpected devaluation ISLM-FX with

More information

Economics 3422 Sample Midterm examination. Part A: Multiple-choice questions. Choose the best alternative. The total for Part A is 25 points.

Economics 3422 Sample Midterm examination. Part A: Multiple-choice questions. Choose the best alternative. The total for Part A is 25 points. Economics 3422 Sample Midterm examination Instruction: Put your name and PeopleSoft ID on the question sheets and the blue book. Put your answers in the blue book only. Turn in both at the end of the examination.

More information

The Evolution of the International Monetary System. Professor Keith Pilbeam City University, London

The Evolution of the International Monetary System. Professor Keith Pilbeam City University, London The Evolution of the International Monetary System Professor Keith Pilbeam City University, London The Postwar International Monetary System some highlights Bretton Woods 1949-72 sets up IMF, fixes dollar

More information

The Possible Use of Asian Monetary Unit - Differences between euro and AMU-

The Possible Use of Asian Monetary Unit - Differences between euro and AMU- The Possible Use of Asian Monetary Unit - Differences between euro and AMU- Japan-China-Korea (A3) Conference: Monetary and Financial Cooperation in the Region 24 May 2012, RIETI, Tokyo Objectives The

More information

The effects of the financial crisis on developing countries mapping out the issues. By Julian Jessop

The effects of the financial crisis on developing countries mapping out the issues. By Julian Jessop The effects of the financial crisis on developing countries mapping out the issues By Julian Jessop 1. Plan of My Talk The outlook for advanced economies. Impact on developing countries. Some losers and

More information

Chapter 18. The International Financial System

Chapter 18. The International Financial System Chapter 18 The International Financial System Unsterilized Foreign Exchange Intervention Federal Reserve System Assets Liabilities Federal Reserve System Assets Liabilities Foreign Assets -$1B Currency

More information

The Financial Crisis, Global Imbalances, and the

The Financial Crisis, Global Imbalances, and the The Financial Crisis, Global Imbalances, and the International Monetary System David Vines Oxford University, Australian National University, and CEPR ICRIER-CEPII-BRUEGEL Conference on International Cooperation

More information

International Finance

International Finance International Finance 19 1 Balance of Payments International economic transactions Flow of transactions period of time May not involve cash payments Double-entry bookkeeping Credits Inflow of receipts

More information

Building Global and Regional Financial Safety Nets

Building Global and Regional Financial Safety Nets Building Global and Regional Financial Safety Nets February 2016 Yung Chul Park Korea University 1. Need for Global and Regional Financial Safety Nets: Market Failure Financial markets are highly susceptible

More information

Economics of European Integration Lecture # 9 Monetary Integration I

Economics of European Integration Lecture # 9 Monetary Integration I Economics of European Integration Lecture # 9 Monetary Integration I Spring Semester 2009 Gerald Willmann Gerald Willmann, Department of Economics, KU Leuven Why Studying History? Monetary union is the

More information

Lessons from the Asian Currency Crisis

Lessons from the Asian Currency Crisis Lessons from the Asian Currency Crisis Is East Asia an optimum currency area? - Issues for East Asian Currency Cooperation Eiji Ogawa and Kentaro Kawasaki Graduate School of Commerce and Management, Hitotsubashi

More information

1)International Monetary System

1)International Monetary System 1) (International Monetary System) 2) 3) (Balance of Payments) 4) (Foreign Exchange Market) 5) Interest Rate Parity (IRP) 6) Covered Interest Arbitrage 1 1)International Monetary System 1.1 The Gold Standard

More information

Exchange Rates and International Finance

Exchange Rates and International Finance Exchange Rates and International Finance Week 12 Vivaldo Mendes Dep. of Economics Instituto Universitário de Lisboa 8 December 2017 (Vivaldo Mendes ISCTE-IUL ) Macroeconomics I (L0271) 8 December 2014

More information

ASIA ECONOMIC MONITOR DECEMBER 2010

ASIA ECONOMIC MONITOR DECEMBER 2010 Asia ECONOMIC Monitor December 2010 ASIA ECONOMIC MONITOR DECEMBER 2010 2010 Asian Development Bank All rights reserved. Published 2010. Printed in the Philippines. Printed on recycled paper. Cataloging-In-Publication

More information

Chapter 13 Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy

Chapter 13 Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy Chapter 13 Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy 1 Goals of Chapter 13 Two primary aspects of interdependence between economies of different nations International

More information

European Monetary Integration

European Monetary Integration /r 1333 European Monetary Integration 2nd edition Daniel Gros and & Niels Thygesen Longman Contents Introduction to the second edition Introduction to the first edition ix xii Part I A brief history of

More information

Economic Policy in PNG:

Economic Policy in PNG: Economic Policy in PNG: 2010-2020 Institute of National Affairs 30 June 2016 Martin Davies Washington and Lee University and Development Policy Center, Crawford School of Public Policy, Australian National

More information

KGRI Working Papers. Prospects for a Multicurrency Clearing System in Asia. No.6. Junichi Shukuwa 1 and Masaya Sakuragawa 2

KGRI Working Papers. Prospects for a Multicurrency Clearing System in Asia. No.6. Junichi Shukuwa 1 and Masaya Sakuragawa 2 KGRI Working Papers No.6 Prospects for a Multicurrency Clearing System in Asia Version1.0 March 2017 Junichi Shukuwa 1 and Masaya Sakuragawa 2 Keio University Global Research Institute Copyright 2017 Junichi

More information

Open Economy AS/AD: Applications

Open Economy AS/AD: Applications Open Economy AS/AD: Applications Econ 309 Martin Ellison UBC Agenda and References Trilemma Jones, chapter 20, section 7 Euro crisis Jones, chapter 20, section 8 Global imbalances Jones, chapter 29, section

More information

The Asian Financial Crisis

The Asian Financial Crisis The Asian Financial Crisis The Asian crisis 1996 Miraculous growth in EA But some signs of worsening current accounts in Korea and Thailand Signs of worsening financial institutions in Thailand 1997 January

More information

Chapter 14: Essential facts of monetary integration

Chapter 14: Essential facts of monetary integration Chapter 14: Essential facts of monetary integration It was the 1992 EMS crisis that provided the immediate impetus for monetary unification. Barry Eichengreen (2002) Prehistory: before paper money Until

More information

How does Hong Kong Monetary Authority use statistics in financial market surveillance? by Tom Fong. Market Research Division Research Department

How does Hong Kong Monetary Authority use statistics in financial market surveillance? by Tom Fong. Market Research Division Research Department How does Hong Kong Monetary Authority use statistics in financial market surveillance? by Tom Fong Market Research Division Research Department The views expressed in this presentation do not necessarily

More information

International Capital Markets Finance 606: 60 Fall Semester 2015

International Capital Markets Finance 606: 60 Fall Semester 2015 1 International Capital Markets Finance 606: 60 Fall Semester 2015 James Winder 5063 BRR Building Office phone: 848-445-2996 Rutgers email: jpwinder@rci.rutgers.edu Office Hours: Wednesday 11:00 am to

More information

Chapter Eleven. The International Monetary System

Chapter Eleven. The International Monetary System Chapter Eleven The International Monetary System Introduction 11-3 The international monetary system refers to the institutional arrangements that govern exchange rates. Floating exchange rates occur when

More information

Progress Towards Strong, Sustainable, and Balanced Growth. Figure 1: Recovery From Financial Crisis (100 = First Quarter of Real GDP contraction)

Progress Towards Strong, Sustainable, and Balanced Growth. Figure 1: Recovery From Financial Crisis (100 = First Quarter of Real GDP contraction) Progress Towards Strong, Sustainable, and Balanced Growth Figure 1: Recovery From Financial Crisis ( = First Quarter of Real GDP contraction) 13 125 196-26 AE Recessions' Range*** 196-26 AE Recessions**

More information

Olivier Blanchard Economic Counsellor and Director of the Research Department, International Monetary Fund

Olivier Blanchard Economic Counsellor and Director of the Research Department, International Monetary Fund Centre for Economic Performance 21st Birthday Lecture Series The State of the World Economy Olivier Blanchard Economic Counsellor and Director of the Research Department, International Monetary Fund Lord

More information

Making the international financial architecture work for development

Making the international financial architecture work for development TRADE AND DEVELOPMENT REPORT 15 Making the international financial architecture work for development Division on Globalization and Development Strategies Trade and Development Board Sixty-second executive

More information

Governments and Exchange Rates

Governments and Exchange Rates Governments and Exchange Rates Exchange Rate Behavior Existing spot exchange rate covered interest arbitrage locational arbitrage triangular arbitrage Existing spot exchange rates at other locations Existing

More information

Financial Crises. Benjamin Graham. Videos in this lecture are from Kahn Academy

Financial Crises. Benjamin Graham. Videos in this lecture are from Kahn Academy Financial Crises Videos in this lecture are from Kahn Academy Today s Plan An updated syllabus is posted Today s topics: Kahn Academy Videos on foreign currency reserves and speculative attacks The Asian

More information

Global/Regional Economic and Financial Outlook. Odd Per Brekk Director IMF Regional Office for Asia and the Pacific APEC SFOM, June

Global/Regional Economic and Financial Outlook. Odd Per Brekk Director IMF Regional Office for Asia and the Pacific APEC SFOM, June Global/Regional Economic and Financial Outlook Odd Per Brekk Director IMF Regional Office for Asia and the Pacific APEC SFOM, June 11-12 2015 2015/SFOM13/002 Session: 1 Global/Regional Economic and Financial

More information

Test Bank Multinational Business Finance 14th Edition by Eiteman Stonehill Moffett

Test Bank Multinational Business Finance 14th Edition by Eiteman Stonehill Moffett Test Bank Multinational Business Finance 14th Edition by Eiteman Stonehill Moffett Solutions Manual for Multinational Business Finance 14th Edition by David K. Eiteman, Arthur I. Stonehill, Michael H.

More information

GLOBAL FINANCIAL SYSTEM. Lecturer Oleg Deev

GLOBAL FINANCIAL SYSTEM. Lecturer Oleg Deev GLOBAL FINANCIAL SYSTEM Lecturer Oleg Deev oleg@mail.muni.cz Contents Concept of the global financial system Evolution of the global financial system International reserve currency Post-Bretton Woods global

More information

The International Monetary System

The International Monetary System INTERNATIONAL FINANCIAL MANAGEMENT Fourth Edition EUN / RESNICK The International Monetary System 2 Chapter Two INTERNATIONAL Chapter Objective: FINANCIAL MANAGEMENT This chapter serves to introduce the

More information

Lecture 17: Mundell-Fleming model with perfect capital mobility

Lecture 17: Mundell-Fleming model with perfect capital mobility Lecture 17: Mundell-Fleming model with perfect capital mobility Fiscal policy fixed vs. floating rates. Monetary policy fixed vs. floating rates. The Impossible Trinity Application to European monetary

More information

Emerging market central banks investment strategies: Tailwind for the euro?

Emerging market central banks investment strategies: Tailwind for the euro? Economic Research Allianz Group Dresdner Bank Working Paper No.:38, 11.04.2005 Autor: Dr. R. Schäfer Emerging market central banks investment strategies: Tailwind for the euro? The euro has appreciated

More information

Chapter 22 (11) Developing Countries: Growth, Crisis, and Reform

Chapter 22 (11) Developing Countries: Growth, Crisis, and Reform Chapter 22 (11) Developing Countries: Growth, Crisis, and Reform Preview Snapshots of rich and poor countries Characteristics of poor countries Borrowing and debt in poor and middle-income economies The

More information

Welcome to: International Finance

Welcome to: International Finance Welcome to: International Finance Introduction & International Monetary System Reading: Chapter 1 (p1-3) & Chapter 2 Why is International Finance Important? ٣ Why is International Finance Important? In

More information

11. The International Monetary and Financial Environment

11. The International Monetary and Financial Environment BUSA 3000 11. The International Monetary and Financial Environment Asst. Prof. Dr. Ilke Kardes Spring 2016 Read chapter 11 Learning Objectives 1. Exchange rates and currencies in intl. business 2. How

More information

4. INTERNATIONAL MONETARY SYSTEMS AND BALANCE OF PAYMENTS

4. INTERNATIONAL MONETARY SYSTEMS AND BALANCE OF PAYMENTS 4. INTERNATIONAL MONETARY SYSTEMS AND BALANCE OF PAYMENTS CHAPTER OVERVIEW INTERNATIONAL MONETARY SYSTEM HISTORY PERFORMANCE OF INTERNATIONAL MONETARY SYSTEMS EUROPEAN MONETARY SYSTEMS INTERNATIONAL DEBT

More information

Yen and Yuan. The Impact of Exchange Rate Fluctuations on the Asian Economies. C. H. Kwan RIETI

Yen and Yuan. The Impact of Exchange Rate Fluctuations on the Asian Economies. C. H. Kwan RIETI Yen and Yuan The Impact of Exchange Rate Fluctuations on the Asian Economies C. H. Kwan RIETI November 21 The Yen-dollar Rate as the Major Determinant of Asian Economic Growth -4-3 -2 Stronger Yen Yen

More information

Christopher Balding Assistant Professor HSBC School of Business Peking University Graduate School Shenzhen

Christopher Balding Assistant Professor HSBC School of Business Peking University Graduate School Shenzhen Christopher Balding Assistant Professor HSBC School of Business Peking University Graduate School Shenzhen Introduction Though potential opportunities for international institutional or policy coordination

More information

LECTURE XIV. 31 July Tuesday, July 31, 12

LECTURE XIV. 31 July Tuesday, July 31, 12 LECTURE XIV 31 July 2012 TOPIC 16 Exchange Rates and Policy BIG PICTURE What are different common exchange rate systems? How can exchange rates be manipulated to affect a country s real variables? What

More information

Exchange Rate Regimes and Structural Realignment of Global Economies. Comments from an Asian perspective

Exchange Rate Regimes and Structural Realignment of Global Economies. Comments from an Asian perspective Exchange Rate Regimes and Structural Realignment of Global Economies Comments from an Asian perspective Yozo Nishimura Institute for International Monetary Affairs November 17, 2009 Tokyo IIMA 1 Main points

More information

Bretton Woods Intentional Interdependence. Bretton Woods New Hampshire. I.M.F.

Bretton Woods Intentional Interdependence. Bretton Woods New Hampshire. I.M.F. Bretton Woods- 1944 Intentional Interdependence Bretton Woods New Hampshire. U.S. and U.K. established funds and rules with U.S. dollar to be the reserve currency. I.M.F. Created to facilitate a return

More information

Journal of Asian Economics xxx (2005) xxx xxx. Risk properties of AMU denominated Asian bonds. Junko Shimizu, Eiji Ogawa *

Journal of Asian Economics xxx (2005) xxx xxx. Risk properties of AMU denominated Asian bonds. Junko Shimizu, Eiji Ogawa * 1 Journal of Asian Economics xxx (2005) xxx xxx 2 3 4 5 6 7 89 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Risk properties of AMU denominated Asian bonds Abstract Junko Shimizu, Eiji

More information

Chapter 21 The International Monetary System: Past, Present, and Future

Chapter 21 The International Monetary System: Past, Present, and Future Chapter 21 The International Monetary System: Past, Present, and Future "...for the international economy the existence of a well-functioning financial system assuring efficient exchange is as important

More information

The Economics of the European Union

The Economics of the European Union Fletcher School of Law and Diplomacy, Tufts University The Economics of the European Union Professor George Alogoskoufis Lecture 10: Introduction to International Macroeconomics Scope of International

More information

The Chiang Mai Initiative Multilateralisation: Origin, Development and Outlook

The Chiang Mai Initiative Multilateralisation: Origin, Development and Outlook The Chiang Mai Initiative Multilateralisation: Origin, Development and Outlook by Chalongphob Sussangkarn Presented at a conference on Regionalism and Reform of the Global Monetary & Financial System:

More information

Evaluating the international monetary system and the availability to move towards one single global currency

Evaluating the international monetary system and the availability to move towards one single global currency Faculty of Commerce Graduate Studies Economics Department A Thesis Summary: Evaluating the international monetary system and the availability to move towards one single global currency Submitted by: Mohammed

More information

How Serious of a Threat Is Global Deflation?

How Serious of a Threat Is Global Deflation? How Serious of a Threat Is Global Deflation? Nariman Behravesh Farid Abolfathi John Mothersole Dan Ryan Todd Lee Howard Archer Global Insight Teleconference December 17, 22 199s: A Deflationary Wave The

More information

International Economics Vocabulary Concepts

International Economics Vocabulary Concepts International Economics Vocabulary Concepts Through midterm exam: Price adjustments and Hayek 1945 Rent-seeking and Kreuger 1974 Trade barriers and rent-seeking Producer and consumer surplus and deadweight

More information

Teetering on the brink: is the world heading for another financial crisis?

Teetering on the brink: is the world heading for another financial crisis? Teetering on the brink: is the world heading for another financial crisis? Adrian Cooper CEO & Chief Economist acooper@oxfordeconomics.com Peter Suomi Director petersuomi@oxfordeconomics.com October 2011

More information

Lecture 19 Interdependence & Coordination

Lecture 19 Interdependence & Coordination Lecture 19 Interdependence & Coordination International Interdependence Theory: Interdependence results from capital mobility, even with floating rates. Empirical estimates of cross-country effects. International

More information

International Monetary and Financial Committee

International Monetary and Financial Committee International Monetary and Financial Committee Thirty-Second Meeting October 9, 2015 IMFC Statement by Tharman Shanmugaratnam Deputy Prime Minister & Coordinating Minister for Economic and Social Policies

More information

ECN 160B SSI Final Exam August 1 st, 2012 VERSION B

ECN 160B SSI Final Exam August 1 st, 2012 VERSION B ECN 160B SSI Final Exam August 1 st, 2012 VERSION B Name: ID#: Instruction: Write your name and student ID number on this exam and your blue book and your scantron. Be sure to answer all multiple choice

More information

Globalization. International Financial (Chap. 8) and Monetary (Chap. 9) Relations

Globalization. International Financial (Chap. 8) and Monetary (Chap. 9) Relations Globalization International Financial (Chap. 8) and Monetary (Chap. 9) Relations The Puzzle of Finance n Every year, approximately $5 trillion is invested abroad. Why is so much money invested in foreign

More information

Appendix: Analysis of Exchange Rates Pursuant to the Act

Appendix: Analysis of Exchange Rates Pursuant to the Act Appendix: Analysis of Exchange Rates Pursuant to the Act Introduction Although reaching judgments about whether countries manipulate the rate of exchange between their currency and the United States dollar

More information

Replies to memo questions, 09/09/03

Replies to memo questions, 09/09/03 Replies to memo questions, 09/09/03 Dear Students, As you know, we did not cover the balance of payments so I ll skip the answer to my question on it. Your answers to the second question (why currency

More information

GLOSSARY Absolute form of purchasing power parity Accounting exposure Appreciation Asian dollar market Ask price

GLOSSARY Absolute form of purchasing power parity Accounting exposure Appreciation Asian dollar market Ask price GLOSSARY Absolute form of purchasing power parity Also called the law of one price, this theory suggests that prices of two products of different countries should be equal when measured by a common currency.

More information

The LBMA Bullion Market Forum June The World Needs New Reserve Currency: from the perspective of global liquidity

The LBMA Bullion Market Forum June The World Needs New Reserve Currency: from the perspective of global liquidity The World Needs New Reserve Currency: from the perspective of global liquidity Yao Yudong People s Bank of China 215-6-25 Outline 1 Global liquidity provision: History and Status quo 2 Global liquidity

More information

Global Imbalances, Currency Wars and the Euro

Global Imbalances, Currency Wars and the Euro DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT A: ECONOMIC AND SCIENTIFIC POLICIES ECONOMIC AND MONETARY AFFAIRS Global Imbalances, Currency Wars and the Euro NOTE Abstract Global current

More information

Capital Markets, Corporate Governance, and Long-term Financing for Development. Chalongphob Sussangkarn. Thailand Development Research Institute

Capital Markets, Corporate Governance, and Long-term Financing for Development. Chalongphob Sussangkarn. Thailand Development Research Institute Capital Markets, Corporate Governance, and Long-term Financing for Development Chalongphob Sussangkarn Thailand Development Research Institute Importance of Financing Structure for Stable Development Lesson

More information

483 Subject Index. Global Depositiory Receipts, 250 Grassman s law, 148, 160

483 Subject Index. Global Depositiory Receipts, 250 Grassman s law, 148, 160 Subject Index Adjustabonos, 401-3 Agency for International Development, 100 American depository receipts (ADRs): considered as foreign securities, 250; traded on over-the-counter market, 245 Arbitrage:

More information