1、二、NI Equality in Opening Economy:3. CA= CA0, surplus; CA0, surplus, capital outflow ;0, deficit, capital inflow6. =p+; CA=(p )+(T G)7. The Current Account includes all international economic transactions with income or payment flows occurring within one year, the current period. It consists of the f
2、ollowing four subcategories:1.Goods trade (Balance of Trade):Import and export of goods2.Services trade (Balance of Services)3. Income (Balance of Income):Income associated with prior investment(Say, a dividend paid by an Australian subsidiary of a US firm to the parent) ; Salaries and wages paid to
3、 nonresident workers4.Current transfers: Any one-way transfer of a gift or grant, say, US aid to a developing country ; Must be financial; transfers a real (fixed) assets is in another account, the Financial/Capital AccountThe Current Account is typically dominated by the first component which is kn
4、own as the Balance of Trade (BOT) even though it excludes service trade.8. The Capital/Financial Account of the balance of payments measures all international economic transactions of real and financial assets. It is divided into two major components: The Capital Account(资本帐户);The Financial Account(
5、金融帐户)The Capital Account is minor (in magnitude), while the Financial Account is significant.9. The Capital Account includes:Acquisition/disposal of nonproduced/nonfinancial assets ;Transfer of fixed assetsNon-financial assets, for example, a physical asset such as landNon-produced assets, which are
6、 needed for production but have not been produced, for example, a mine used for the extraction of diamonds. 10. The Financial Account, however, uses a third method. This focuses on the degree of investor control over the assets or operations.The Financial Account consists of three components;Direct
7、Investment in which the investor exerts some explicit degree of control over the assets(直接投资)Portfolio Investment in which the investor has no control over the assets(证券投资)Other Investment consists of various short-term and long-term trade credits, cross-border loans, currency deposits, bank deposit
8、s and other A/R and A/P related to cross-border trade(其他投资)11. 12. The Official Reserves Account is the total reserves held by official monetary authorities within the country. These reserves are normally composed of the major currencies used in international trade and financial transactions (hard c
9、urrencies).The significance of official reserves depends generally on whether the country is operating under a fixed exchange rate regime or a floating exchange rate systemUnder a fixed exchange regime, these reserves are important in defending the value of a depreciating currencyChanges in the offi
10、cial reserves represents cash in- or outflows that are capture in the Official Reserves Account The Net Errors and Omissions account ensures that the BOP actually balances due to measurement errorsThe errors and omissions in balance of payments accounting arise in large part from the statistical dif
11、ficulties involved in gathering balance of payments data. Because officials do not have the necessary information to make the double entries they make single entries based on the information available to them. This information often comes from multiple sources that vary in coverage and reliability.
12、13. Reserves include monetary gold, special drawing rights (SDRs), the reserve position in the Fund and foreign exchange.14. Fundamentals of BOP Accounting:Credits: real resources exported - Positive Sign Debits: real resources imported - Negative Sign Two empirical rules: All transactions that arou
13、ses foreign exchange income should be credited in BOP;All transactions that arouses foreign exchange expenditure should be debited in BOP.Autonomous Transaction: - credit debit, surplus; - credit debit, deficit.Accommodating Transaction: debit, deficit; debit, surplus.15. X M = the current account b
14、alance16. In theory the BOP must always balance, but statistical errors and misreporting result in substantial imbalances17. The net errors and omissions account ensures that the BOP actually balances due to measurement errors18. Foreign Exchange:Dynamic usage: International exchange transaction in
15、market for shortStatic usage: It means the money of a foreign country and includes:Foreign currency bank balances;Banknotes;Checks and drafts;Currency19. A foreign exchange transaction is an agreement between a buyer and a seller that a fixed amount of one currency will be delivered for some other c
16、urrency at a specified date20. The spot where handles goods is goods market, while the place where deals Foreign Exchange is Foreign Exchange Market.21. Functions of the Foreign Exchange Market:Permit the transfer of purchasing power denominated in one currency into another currency and thereby faci
17、litate transactions;Provide credit for international trade transactions;Minimize exposure to the risks of exchange rate changes22. Speculators and Arbitrageurs:Speculators and arbitrageurs seek to profit from trading in the market itself, not for conducting trade or other forms of business They oper
18、ate in their own interest, without a need or obligation to serve clients or ensure a continuous marketSpeculators seek to profit from their view of exchange rate changesArbitrageurs seek to profit from simultaneous exchange rate differences in different markets23. A foreign exchange rate is the pric
19、e of one currency expressed in terms of another currencyA foreign exchange quotation (or quote) is a statement of willingness to buy or sell at an announced rate.24. A direct quote is a home currency price of a unit of foreign currency;An indirect quote is a foreign currency price of a unit of home
20、currencyThe form of the quote depends on what the speaker regards as “home”25. Measuring a changedepreciation of appreciation of a foreign currencyin the spot rate for quotations expressed in home currency terms: Direct quotations:Example: Suppose the Swiss franc is recently quoted in the spot marke
21、t at SF1.5625/$ (or, equivalently, $0.6400/SF) but then suddenly appreciates to SF1.2800/$ (or, equivalently, $0.78125/SF). What is the percent appreciation of the SF relative to the dollar?26. Measuring a changedepreciation of appreciation of a foreign currencyin the spot rate for quotations expres
22、sed in foreign currency terms: Indirect quotations: All our formulas have been in Indirect terms with the US$ as the home currency Example (continued): The same rate of appreciation for the Swiss Franc relative to the US Dollar!27. Spot rate: adopt a Spot transaction ;Forward rate: adopt a forward t
23、ransaction 28. A Spot transaction in the Interbank market is the purchase of foreign exchange with delivery and payment between banks to take place, normally, on the second following business day.The date of settlement is referred to as the value date.29. An Outright Forward transaction (usually jus
24、t called a Forward) requires delivery at a future date of a specified amount of one currency for a specified amount of another currency.The exchange rate is established at the time of the agreement, but payment and delivery are not required until maturity.Forward exchange rates are usually quoted fo
25、r value dates of one, two, three, six and twelve months.30. Arbitrage:seek to profit from simultaneous exchange rate differences in different marketsDirect arbitrage: operate between two foreign markets Indirect arbitrage: operate in three foreign marketsInterest Arbitrage: seek to profit from simul
26、taneous interest rate differences in different marketsClass Drill 1:1、Assumption:the basic rate between US dollars and the RMB is normally stated: $1=¥8.2500, the basic rate between US dollars and the J¥ is normally stated: $1=J¥100.0000Calculation: whats the cross rate between RMB and J¥ ?2、Assumpt
27、ion:one day, an American exporter dates a contract with a Germany importer for some goods worthy of DM1,500,000. The counting currency is DM. They will pay off after three months. The rate is $1=DM1.5000 when they signed the treaty.Questions: - What does the rate belong to when they are dating? -Whi
28、ch country wouldnt suffer the risk of foreign exchange? -How to avoid it?3、Assumption:One day- first day in May, a speculator anticipates the exchange rate between US dollar and DM is $1=DM1.4580 on first day in Augest, while the three-month exchange rate between US dollar and DM is stated $1=DM1.45
29、00 on first day in Augest. -Whats the former rate and latter rate respectively? -How can get the profit?4、Assumption: At 10 am. on one business day, the exchange rate between US dollar and DM is stated $1=DM1.4500 in New York, while simultaneously the exchange rate between US dollar and DM is stated $1=DM1.4600 in Frankfurt. How to arbitrage?5、Assumption:
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