econ423lec19

econ423lec19 - 7/16/2009 1 INTERNATIONAL FINANCE...

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Unformatted text preview: 7/16/2009 1 INTERNATIONAL FINANCE INTERNATIONAL FINANCE JULY 16 TH , 2009 Lauren Heller Econ 423, Financial Markets The Plan for Today b Homework Quiz #6 b Balance of Payments: A Review b Exchange Rate Regimes b Capital Controls b The Role of the IMF b Homework #7 Distributed Recall from last time… b Central bank intervention in the foreign exchange market can: b Significantly impact the money supply and the monetary base. b Alter the equilibrium exchange rate b With this in mind, we can now examine the impacts of particular exchange rate policies and regimes. Balance of Payments b Balance of Payments- Measures the effects of international financial transactions on the economy. b A booking system for recording movements of funds between nations. b Current Account b Shows international transactions that involve currently produced goods and services. b The trade balance is part of this account Balance of Payments b C apital Account b Shows the net receipts from capital transactions. b Capital flows into a country are recorded as receipts . b Capital outflows are registered as payments . b Given these definitions, the following equation holds: Current Account + Capital Account = Net Change in Governmental International Reserves Balance of Payments b The U.S. current account deficit has grown rapidly in recent years b Recent decreases – Import declines, etc. 7/16/2009 2 Balance of Payments S ource: Bureau of Economic Analysis, http://www.bea.gov/ Balance of Payments b The U.S. current account deficit has grown rapidly in recent years b Recent decreases – Import declines, etc. b This deficit has raised serious concerns about the impact on the U.S. economy. b At the current exchange rate, imports exceed exports. b Foreign claims on U.S. assets are growing, possibly leading to a decreased demand for dollars over time....
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This note was uploaded on 08/31/2009 for the course ECON 423 taught by Professor Vd during the Summer '08 term at UNC.

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econ423lec19 - 7/16/2009 1 INTERNATIONAL FINANCE...

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