AEM_ECON_2300_Lecture_16___Spring_2009

AEM_ECON_2300_Lecture_16___Spring_2009 - Lecture 16...

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Lecture 16 1 of Professor David Lee AEM-ECON 2300 Importance of Monetary Aspects of Trade 1. International financial market transactions dwarf trade in goods and services: $3+ trillion/day turnover in foreign exchange markets Foreign ex. turnover/world exports: 12:1 (1979) → 69:1 (1998) 2. Important source of increased global integration 3. Exchange rates strongly influence merchandise trade 4. Role of government policies in affecting interest rates, exchange rates and economic growth
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Lecture 16 2 of Professor David Lee AEM-ECON 2300 Balance of Payments A statistical account of the transactions between the residents of one country and the rest-of-the-world for one year or a fraction thereof. Under Bretton Woods system (post WWII through 1973), emphasis on BOP surplus/deficit as indicator of pressure to devalue or revalue currency. Since 1970’s, less stress on BOP due to acceptance of monetarist principle that BOP surplus/deficit is temporary; focus on XC rates as long-run equilibrating mechanism.
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Lecture 16 3 of Professor David Lee AEM-ECON 2300 Balance of Payments BOP accounts based on a system of double-entry bookkeeping with a credit and debit entered for each transaction.
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Lecture 16 4 of Professor David Lee AEM-ECON 2300 Balance of Payments Credit: Any payment to a resident or anything that creates a claim to payment to a resident.
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AEM_ECON_2300_Lecture_16___Spring_2009 - Lecture 16...

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