Econ 161 - Lecture 9

Econ 161 - Lecture 9 - Lecture9 c ⃝ Marc-AndreasMuendler...

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Unformatted text preview: GlobalIntegrationofLatinAmerica Lecture9 c ⃝ Marc-AndreasMuendler UniversityofCalifornia,SanDiego May3,2011 9.InternationalLendingandInvestmentinLatinAmerica Econ161, c ⃝ M.Muendler TheInternationalCapitalMarket • Internationalcapitalmarket:Groupofmarketswhereresidentsofdif- ferentcountrieswriteloancontractsandtradesecurities(currencies, stocks,bondsandotherassets) • Howdointernationalcapitalmarketsenhanceacountry’swelfare? • Howintegratedareinternationalcapitalmarkets? • Howcanpolicymakersmitigateproblemswithoutreducingtheben- efitsofcapitalmobility? 9.InternationalLendingandInvestmentinLatinAmerica Econ161, c ⃝ M.Muendler TheInternationalCapitalMarket • Capitalmarketsallowtoreaptwofurthertypesofgainsfromtrade, beyondgainsfromtradeincommoditymarkets: – Gainsfrom intertemporaltrade :tradebetweenperiods – Gainsfrom insuranceopportunities :tradebetweenpossible statesofnature inthefuture • Trademodelsinthefirstpartofclassstressedinternationalexchange whentradeis balanced . Modelsinthelatterpartsofclassstresscapitalflowswhentradeis unbalanced (temporarytradesurplusesarecapitaloutflows). 9.InternationalLendingandInvestmentinLatinAmerica Econ161, c ⃝ M.Muendler MacroeconomicAccounting • NationalIncome – GrossNationalProduct(GNI) Valueofallgoodsandservicesproducedbyacountry’sfactorsofproduction Examples .Expatriats’incomesarecountedinhomecountry,foreigninvest- mentreturnsarecountedinhomecountry – GrossDomesticProduct(GDP) Valueofallgoodsandservicesproducedwithinacountry’sborders • BalanceofPayments(onlyinternationaltransactions) – CurrentAccount( CA ) (alsoFinancialAccountandCapitalAccount) 9.InternationalLendingandInvestmentinLatinAmerica Econ161, c ⃝ M.Muendler DomesticProductionandNationalIncome • GNI: Y ≈ C + I + G + EX- IM – Y :GrossNationalProductisroughlyequaltoGrossNationalIncome – C :(Private)Consumption – I :(Private)Investment – G :GovernmentExpenditures(consumptionandinvestment) – EX :Exports, IM :Imports • GNIis(moreclosely)relatedtoNationalIncome(NI) Adjustments:Depreciation(NNP),Unilateraltransfers,Taxwedgeinprices 9.InternationalLendingandInvestmentinLatinAmerica Econ161, c ⃝ M.Muendler TheCurrentAccount • ApproximatedefinitionofCurrentAccount: CA ≈ EX- IM • DomesticIncomelessDomesticPurchasesequalsNetExports: Y- ( C + I + G )= EX- IM = CA. • ApositiveCAmeansthatUSresidentsgiveupdomesticconsumption (orinvestment)forexports.Whatdotheygain? • USresidentsgainthepromiseofforeigndebtorstopaybackinthe future.Infinancialparlor: Domesticresidentsreceiveforeignassetsfornetexports 9.InternationalLendingandInvestmentinLatinAmerica Econ161, c ⃝ M.Muendler UsesofBrazilianGrossNationalProduct P e r c e n ta g e o f G N P-5 20 40 60 80 100 Consumption/GNP Investment/GNP Government Purchases/GNP...
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This note was uploaded on 08/14/2011 for the course ECON 161 taught by Professor Muendler during the Spring '11 term at San Diego.

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Econ 161 - Lecture 9 - Lecture9 c ⃝ Marc-AndreasMuendler...

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