Chapter 11 An Introduction to International Finance
Chapters 1-10 deal with international trade in goods and services. Chapters 11-21 deal with
trade in financial assets international stocks and bonds, multinational corporations (MNCs)
CHAPTER 13 - FINANCIAL DERIVATIVES
What are the four main financial markets?
Derivative Markets: forward contracts, futures, options, future options, swaps, etc.
Generally, a derivative security "derives" its value from the price movements in some
Chapter 11: Economic Analysis of Banking Regulation
In CH 10, we reviewed the regulations of the U.S. banking industry, which is a) one of
the most regulated sector of the U.S. economy and b) one of the most heavily
regulated banking industries in the wor
Chapter 9 - The Banking Firm and Bank Management
We saw in CH 8, that commercial banks and bank loans play an extremely important
role in the economy, supplying over $5T of credit annually. By efficiently channeling
funds from savers to borrowers, the eco
Chapter 6 - Demand and Consumer Choice
Review graphs on pages 137-139.
Opening quotes and questions page 141.
We start the micro material by looking at markets for specific products, specifically
the demand side of the market. The next four chapters will
CHAPTER 5 - THE BEHAVIOR OF INTEREST RATES
Nominal interest rates for 3 month Tbills were 1% in the early 50s, reached 15% in
1981, fell to 3% in 1993 and rose to 5% in 1995, and are now about 6% (See page 88).
What explains these interest rate movements?
CHAPTER 4 - UNDERSTANDING INTEREST RATES
Interest rates are among the most closely watched economic variables. Reported daily
in the news. Why? Interest have a very powerful effect on the economy. Interest rates
affect stock market, borrowing decisions by
CHAPTER 2 - OVERVIEW OF THE FINANCIAL SYSTEM
Financial markets (bond and stock) and financial intermediaries (banks, ins cos.,
pension funds) perform the econ function of channeling/directing funds from people
who have a surplus of funds ( Y > C) to those
Chapter 1 - Why Study Money and Banking?
News: The stock market reacted today to the expectation that the Fed Reserve will
raise (lower) int rates at their next meeting. Why are financial markets so sensitive to
interest rate changes, even when it is only
Chapter 15 Exchange Rates, Interest Rates, and Interest Parity (IP)
International Trade: Goods/services AND financial assets (stocks, bonds, CDs, FDI), and exrates change in response to both types of trade. PPP and LOP apply to goods, and we learned in
Chapter 14 Prices and Exchange Rates: Purchasing Power Parity (PPP)
We start with the Law of One Price (LOP): PD = E PF , where PD is the domestic price in $;
PF is the foreign price, e.g., in ; and E is the $/ ex-rate. LOP says that a tradable commodity
Chapter 13 The Foreign-Exchange Market
The market for foreign exchange arises for tourism, exports/import, and international
investment. Usually only tourism requires actual currency, the majority of the market for
foreign exchange involves the transfer o
Chapter 12 The Balance of Payments
Balance of Payments (BP) is an accounting record (using double entry bookkeeping)
of a countrys trade in goods, services and financial assets with the rest of the world
(ROW), over some time period - monthly, quarterly,
Chapter 14 - CENTRAL BANKING AND THE FRS
In the next three chapters, we look at central banking and monetary policy, to
understand the important effect that central banks have on the economy. Central
banks regulate the supply of money, which affects what?
CHAPTER 15 - MULTIPLE DEPOSIT CREATION AND THE MS PROCESS
MS PROCESS - the mechanism that determines the money supply, the
implementation of monetary policy. It is important to understand the MS Process to
understand exactly howopen market operations (OMO
CHAPTER 16 - DETERMINANTS OF THE MONEY SUPPLY (M)
In Ch 15, we developed a simple model of multiple deposit creation (and the SDM),
where the FRS can influence the amount of checking deposits (D) and the Money
Supply (M = C + D) by changing the reserve re
Chapter 7 NonTariff Barriers (NTBs) and Arguments for Protection
1. NTBs include quotas, subsidies, health & safety standards, government procurement
2. Arguments for protection protection of jobs, industry restructuring, national
Chapter 6 Tariffs
Intl trade: In the process of raising a countrys overall consumption, production, prosperity,
wealth, and standard of living, there is (are): a) redistribution of production and b) changes in
factor prices (wages, rents). Therefore, ther
Chapter 4 The Heckscher-Ohlin Model
The classical model has several shortcomings:
1. Makes unrealistic predictions like complete specialization that are not consistent with the
real-world. Complete specialization results from constant opportunity cost ass
Chapter 3 Classical Model of International Trade We now have a model to answer question: How and why national engage in trade? CH 3 presents the classical theory of international trade going back to Adam Smith (1776) and David Ricardo (1819). Why Classica
Chapter 2 Tools of Analysis for International Trade Models
See p. 28 in textbook. We construct an economic model of intl trade to answer
the questions like:
Which countries trade what to whom?
Why does int'l. trade occur?
What goods will a country impo
Chapter 1 An Introduction to International Trade
See opening questions on p. 2 in text.
Almost 200 countries in the world goods are produced, exchanged and consumed
in each country Global Economy.
Review of GNP vs. GDP.
GNP: Production/output/income measu
Mishkin Chapter 10 - Banking Industry: Structure and Competition
Preview: U.S. banking industry is very different from the rest of the world. In most
countries (Canada, Germany, France, Japan, UK, etc.) four or five major banks
dominate the banking indust
hapter 8 - ECONOMIC ANALYSIS OF FINANCIAL STRUCTURE
PART III OF TEXT: FINANCIAL INSTITUTIONS
We studied financial markets in Part II, and we now turn to financial institutions
(banks). Remember some of the important functions of financial institutions:
hapter 7 - FOREIGN EXCHANGE MARKET
In mid-80s, lots of Americans traveled to Europe. Why? The US dollar was at an alltime high in 1985. When the dollar is strong, foreign travel is cheap. Strong dollar
makes all foreign goods and services seem cheap to Am
DURATION LECTURE (INTEREST RATE RISK)
Interest Rate Risk: The risk that investors, fund managers, companies, banks,
borrowers, lenders, etc. are exposed to. Risk of an adverse interest rate movement.
There are two types of Interest Rate Risk:
1. CAPITAL O
Chapter 6 - Risk and Term Structure of Interest Rates
In CH 5 we assumed just one interest rate in the economy, the interest rate on bonds.
We now look at why interest rate will vary, either due to differences in risk or
MISHKIN - CHAPTER 3 - WHAT IS MONEY?
What is Money?
From an economic viewpoint, money is anything that is generally accepted as final
payment for goods and services or for the repayment of debt - cash/currency, checks,
gold, tobacco, salt, etc.
To start o