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pbs 1 - source for the Balance of Payments accounts would...

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Econ 356 Introduction to International Finance Spring 2011 Department of Economics, University of British Columbia Viktoria Hnatkovska Problem Set 1. Due by 5:00 PM on Tuesday, January 25 2011 (drop your problem set in the box by my o¢ ce (Buchanan Tower 922) door). 1. Work through the following problems from Chapter 12 in Krugman and Obstfeld: Problem 2, 3, 9. 2. For any country of your interest °nd the data for the balance of payments transactions and summarize your °ndings in a table similar to the one presented on page 16 of week1_2 slides for US and Canada. Report the numbers both in national currency units and as a share of country±s GDP. Discuss your °ndings by describing how each component in the balance of payments contributes to the aggregate current account and °nancial account. See course webpage for some useful data sources (i.e. a typical
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Unformatted text preview: source for the Balance of Payments accounts would be country±s statistical o¢ ce). 3. Consider a country that has a large current account surplus (i.e. China). Should China±s &nancial account be in surplus, de&cit, balanced? Explain in details. Provide the de&nition of &nancial account. Assume that capital account in China is small. 4. Based on the concepts discussed in class and three articles posted on the course web-page: (i) IMF article ²Do Current Account De&cits Matter?³; (ii) WSJ article "Global ±Imbalances±and the Crisis"; and (iii) The Economist article "China±s balancing hand" provide a discussion of the reasons behind the 2007-2009 global &nancial crisis related to current account imbalances, as quoted in the articles. Do you agree or disagree with those reasons. Provide your reasoning. 1...
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