Econ 161 - Lecture 9

Econ 161 - Lecture 9 - GlobalIntegrationofLatinAmerica...

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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) Howdointernationalcapitalmarketsenhanceacountryswelfare? 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) Valueofallgoodsandservicesproducedbyacountrysfactorsofproduction Examples .Expatriatsincomesarecountedinhomecountry,foreigninvest- mentreturnsarecountedinhomecountry GrossDomesticProduct(GDP) Valueofallgoodsandservicesproducedwithinacountrysborders 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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Econ 161 - Lecture 9 - GlobalIntegrationofLatinAmerica...

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