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international business, 5th editionchapter 7the internationalmonetary systemand the balanceof payments
Chapter Objectives 1      • Discuss the role of the international        monetary system in promoting        international...
Chapter Objectives 2      • Explain the evolution of the flexible        exchange rate system      • Describe the function...
International Monetary System           The international monetary         system establishes the rules by      which coun...
Balance of Payments      The balance of payments (BOP)          accounting system records         international transactio...
History of the International               Monetary System      • The Gold Standard      • The Sterling-Gold Standard     ...
The Gold Standard      Countries agree to buy or sell their        paper currencies in exchange for      gold on the reque...
Fixed Exchange Rate System7-8
Sterling-Based Gold Standard      • British pound sterling was the most        important currency from 1821 to        1918...
Map 7.1 The British Empire, 19137-10
The Collapse of the Gold                    Standard       • Economic pressures of WWI       • Countries suspended pledges...
Figure 7.1 The Contraction of          World Trade, 1929-19337-12
The Bretton Woods Era       • 44 countries met in Bretton Woods, New         Hampshire, in 1944       • Goal: to create a ...
International Bank for Reconstruction and       Development (the World Bank)       • Goal 1: to help finance reconstructio...
Figure 7.2 Organization of the                  World Bank Group                  International Bank for             Recon...
Objectives of the           International Monetary Fund 1       • To promote international monetary cooperation       • To...
Objectives of the          International Monetary Fund 2       • To give confidence to members by         making the gener...
Membership in the IMF       • Open to any country willing to agree to         rules and regulations       • 184 member cou...
The IMF plays a key role in stabilizing the              world’s monetary system.7-19
The Bretton Woods System       • Countries agreed to peg the value of         currencies to gold       • U.S. $ keystone o...
The End of the Bretton Woods System       • Susceptible to speculative “runs on the bank”       • U.S. $ became only sourc...
Post-Bretton Woods System       • Most currencies began to float       • Value of U.S. $ fell relative to most major      ...
Table 7.1 The Groups of             Five, Seven, and Ten         Group of 5       Group of 7      Group of 10        Unite...
International Monetary System                     since 1971       • Development of floating exchange rate         system ...
Table 7.2 Key Central Banks       Country          Bank       Canada           Bank of Canada       European Union   Europ...
European Union       • Believed flexible system would hinder         ability to create integrated economy       • Created ...
International Debt Crisis       • OPEC quadrupled world oil prices          – Resulted in inflationary pressures in oil-im...
Approaches to Resolve the          International Debt Crisis       The Baker Plan   The Brady Plan7-28
Figure 7.4       The Asian Contagion7-29
The Balance of Payments             Accounting System       The BOP accounting system is a        double-entry bookkeeping...
Balance of Payments (BOP)                 Accounting System       • Measures and records all economic transactions        ...
Aspects of the BOP                  Accounting System       • Records international transactions made in         some time...
Major Components of the BOP            Accounting System              Current Account              Capital Account        ...
Types of Current Account                   Transactions       • Exports and imports of goods       • Exports and imports o...
Capital Account       Foreign Direct     Portfolio        Investment      Investment7-35
Table 7.4 Capital Account Transactions                             Maturity           Motivation            Typical       ...
Table 7.5 BOP Entries, Capital Account                                        Debt (Outflow)               Credit (Inflow)...
Official Reserves Account       • Records level of official reserves       • Four types of assets         – Gold         –...
Official Reserves Account       Reserve       positions              Gold                   Assets                        ...
Errors and Omissions       • BOP must balance       • Current Account + Capital Account         + Official Reserves Accoun...
Figure 7.7 The U.S. BOP According to Various Reporting Measures7-41
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Международная денежная система и платежный баланс

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Международная денежная система и платежный баланс

  1. 1. international business, 5th editionchapter 7the internationalmonetary systemand the balanceof payments
  2. 2. Chapter Objectives 1 • Discuss the role of the international monetary system in promoting international trade and investment • Explain the evolution and functioning of the gold standard • Summarize the role of the World Bank Group and the International Monetary Fund in the post-World War II international monetary system established at Bretton Woods7-2
  3. 3. Chapter Objectives 2 • Explain the evolution of the flexible exchange rate system • Describe the function and structure of the balance of payments accounting system • Differentiate among the various definitions of a balance of payments surplus and deficit7-3
  4. 4. International Monetary System The international monetary system establishes the rules by which countries value and exchange their currencies and provides a mechanism for correcting imbalances between a country’s international payments and receipts.7-4
  5. 5. Balance of Payments The balance of payments (BOP) accounting system records international transactions and supplies vital information about the health of a national economy and likely changes in its fiscal and monetary policies.7-5
  6. 6. History of the International Monetary System • The Gold Standard • The Sterling-Gold Standard • The Collapse of the Gold Standard • The Bretton Woods Era • The End of the Bretton Woods Era7-6
  7. 7. The Gold Standard Countries agree to buy or sell their paper currencies in exchange for gold on the request of any individual or firm and to allow the free export of gold bullion and coins.7-7
  8. 8. Fixed Exchange Rate System7-8
  9. 9. Sterling-Based Gold Standard • British pound sterling was the most important currency from 1821 to 1918. • Most firms would accept either gold or British pounds.7-9
  10. 10. Map 7.1 The British Empire, 19137-10
  11. 11. The Collapse of the Gold Standard • Economic pressures of WWI • Countries suspended pledges to buy or sell gold at currencies’ par values • Gold standard readopted in 1920s • Dropped during Great Depression • British pound allowed to float in 1931 – Float: value determined by supply and demand7-11
  12. 12. Figure 7.1 The Contraction of World Trade, 1929-19337-12
  13. 13. The Bretton Woods Era • 44 countries met in Bretton Woods, New Hampshire, in 1944 • Goal: to create a postwar economic environment to promote worldwide peace and prosperity • Renewed gold standard on modified basis (dollar-based) • Created International Bank for Reconstruction and Development and International Monetary Fund7-13
  14. 14. International Bank for Reconstruction and Development (the World Bank) • Goal 1: to help finance reconstruction of European economies – Accomplished in mid-1950s • Goal 2: to build economies of the world’s developing countries7-14
  15. 15. Figure 7.2 Organization of the World Bank Group International Bank for Reconstruction and Development Multilateral International International Investment Development Finance Guarantee Association Corporation Agency7-15
  16. 16. Objectives of the International Monetary Fund 1 • To promote international monetary cooperation • To facilitate the expansion and balanced growth of international trade • To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation • To assist in the establishment of a multilateral system of payments7-16
  17. 17. Objectives of the International Monetary Fund 2 • To give confidence to members by making the general resources of the IMF temporarily available to them and to correct maladjustments in their balances of payments • To shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members7-17
  18. 18. Membership in the IMF • Open to any country willing to agree to rules and regulations • 184 member countries as of April 2006 • Membership requires payment of a quota7-18
  19. 19. The IMF plays a key role in stabilizing the world’s monetary system.7-19
  20. 20. The Bretton Woods System • Countries agreed to peg the value of currencies to gold • U.S. $ keystone of system • Fixed exchange rate system • Adjustable peg • Functioned well in times of economic prosperity7-20
  21. 21. The End of the Bretton Woods System • Susceptible to speculative “runs on the bank” • U.S. $ became only source of liquidity necessary to expand international trade • People questioned the ability of U.S. to meet obligations (Triffin Paradox) • IMF created special drawing rights (SDRs) – paper gold • Bretton Woods system ended August 15, 19717-21
  22. 22. Post-Bretton Woods System • Most currencies began to float • Value of U.S. $ fell relative to most major currencies • Group of Ten agreed to restore fixed exchange rate system with restructured rates of exchange7-22
  23. 23. Table 7.1 The Groups of Five, Seven, and Ten Group of 5 Group of 7 Group of 10 United States United States United States Japan Japan Japan Germany Germany Germany United Kingdom United Kingdom United Kingdom France France France Italy Italy Canada Canada Netherlands Switzerland Belgium Sweden7-23
  24. 24. International Monetary System since 1971 • Development of floating exchange rate system – Supply and demand for a currency determine its price in the world market – Managed float – central banks can affect supply and demand • Legitimized in 1976 with the Jamaica Agreement7-24
  25. 25. Table 7.2 Key Central Banks Country Bank Canada Bank of Canada European Union European Central Bank Japan Bank of Japan United Kingdom Bank of England United States Federal Reserve Bank7-25
  26. 26. European Union • Believed flexible system would hinder ability to create integrated economy • Created European Monetary System to manage currency relationships • ERM participants maintained fixed exchange rates among their currencies • Facilitated creation and adoption of euro7-26
  27. 27. International Debt Crisis • OPEC quadrupled world oil prices – Resulted in inflationary pressures in oil-importing countries – Exchange rates adjusted – Transfer of wealth • Countries borrowed more than they could repay7-27
  28. 28. Approaches to Resolve the International Debt Crisis The Baker Plan The Brady Plan7-28
  29. 29. Figure 7.4 The Asian Contagion7-29
  30. 30. The Balance of Payments Accounting System The BOP accounting system is a double-entry bookkeeping system designed to measure and record all economic transactions between residents of one country and residents of all other countries during a particular time period.7-30
  31. 31. Balance of Payments (BOP) Accounting System • Measures and records all economic transactions between residents of one country and residents of all other countries during specified time period • Provides understanding of performance of each country’s economy in international markets • Signals fundamental changes in country competitiveness • Assists policy makers in designing appropriate public policies7-31
  32. 32. Aspects of the BOP Accounting System • Records international transactions made in some time period • Records only economic transactions • Records transactions between residents of one country and all other countries – Residents include individuals, businesses, government agencies, nonprofit organizations • Uses a double-entry system7-32
  33. 33. Major Components of the BOP Accounting System Current Account Capital Account Official Reserves Errors and Omissions7-33
  34. 34. Types of Current Account Transactions • Exports and imports of goods • Exports and imports of services • Investment income • Gifts7-34
  35. 35. Capital Account Foreign Direct Portfolio Investment Investment7-35
  36. 36. Table 7.4 Capital Account Transactions Maturity Motivation Typical Investments Portfolio (short- One year or less Investment in or Checking account term) facilitation of balances international Time deposits commerce Commercial paper Bank loans Portfolio (long- More than one Investment Government bills, term) year income notes, bonds Corporate stocks, bonds Foreign Direct Indeterminate Active control of Foreign subsidiaries Investment organization Foreign factories Joint ventures7-36
  37. 37. Table 7.5 BOP Entries, Capital Account Debt (Outflow) Credit (Inflow) Portfolio (short-term) Receiving a payment from a Making a payment to a foreigner foreigner Buying a short-term foreign Selling a domestic short- asset term asset to a foreigner Portfolio (long-term) Buying back a short-term Selling a short-term domestic asset from its foreign asset acquired foreign owner previously Buying back a long-term Selling a domestic long- domestic asset from its term asset to a foreigner foreign owner Foreign direct Buying a foreign asset for Selling a long-term investment purposes of control foreign asset previously acquired Buying back from its foreign Selling a domestic asset owner a domestic asset to a foreigner7-37
  38. 38. Official Reserves Account • Records level of official reserves • Four types of assets – Gold – Convertible currencies – SDRs – Reserve positions at the IMF7-38
  39. 39. Official Reserves Account Reserve positions Gold Assets Convertible SDRs securities7-39
  40. 40. Errors and Omissions • BOP must balance • Current Account + Capital Account + Official Reserves Account = 0 • Current Account + Capital Account + Official Reserves Account + Errors and Omissions = 07-40
  41. 41. Figure 7.7 The U.S. BOP According to Various Reporting Measures7-41

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