march 24 lecture notes

march 24 lecture notes - 03/24/11 Summary of Equations...

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Summary of Equations Domestic Investment-Domestic Savings= Foreign Savings (Foreigners Savings) o I-S D =S F Imports-Exports=Foreign Savings (Foreigners Savings) o Z-E=S F Domestic Investment-Domestic Savings= Foreign Savings= Trade Deficit Example of Double Entry Bookeeping Exports recorded as positive Imports as negative Etc… Balance of Payments Accounts Current Account o Records net balance of transactions between Mexico and the Rest of the World not involving the exchange of assets Begin and finish in this particular period o Includes trade balance Biggest chunk o Includes more items than exports and imports o Net income Positive entries represent earning of Mexican factors of production aborad Negative entries represent payment to foreign factors of production in Mexico o Net transfer Foreign aid Foreign remittances (positive for Mexico) International pension flows Capital Account o Consists of transactions involving exchange of assets o Type of asset exchanged and who exchanges them determines the capital account item in which a transaction is recorded o Item 10 is direct investment or direct foreign investment- consists of money that corporations invest in firms they own in other countries o Item 11 is portfolio investment Includes gov bonds of various maturities, corporate equities, corporate bonds, and bank deposits Unlike direct investment, portfolio investment does not involve an element of management control o Item 12 is other investment such as commercial bank lending Official Reserves Balance o Reflects the actions of the world’s central banks Central banks need to hold reserves of foreign exchange
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This note was uploaded on 05/08/2011 for the course IR 213 taught by Professor Staff during the Spring '08 term at USC.

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march 24 lecture notes - 03/24/11 Summary of Equations...

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