This document discusses the balance of payments and capital account. It provides an overview of key concepts such as the balance of payments framework, double-entry bookkeeping, and the different components of the capital account. It also analyzes trends in global capital flows, sources of external financing, and foreign direct investment patterns around the world with a focus on emerging markets like China and Vietnam.
2.2. Balance Of Payment Capital Account To Finance Ca DeficitHai Vu
International Finance related issues.
The Capital Account of the balance of payments measures all international economic transactions of financial assets. It is divided into two components:
+ The Capital Account
+ The Financial Account.
Capital Accounts consist of:
- Direct Investment – in which the investor exerts some explicit degree of control over the assets.
- Portfolio Investment – in which the investor has no control over the assets nor any participation in the management.
- Other Investment – consists of various short-term and long-term trade credits, cross-border loans, currency deposits, bank deposits and other capital flows related to cross-border trade.
DSR - Debt Service Ratio:
The Debt Service Ratio - DSR is the percentage of a borrower's income that will be used to pay off a loan. It is one of the factors a lender will use to assess your application. Most lenders set the maximum DSR from 30% to 30%, which means that the loan repayments should not take up more than that part of your salary. This ensures that you will be able to pay off your loan comfortably, with little to no risk of defaulting or going bankrupt. The DSR may be calculated based on your monthly, weekly or fortnightly earnings.
Global imbalances have declined since the financial crisis due to changes in demand and output in deficit and surplus countries. Real exchange rates do not fully explain changes in trade balances, as many other macroeconomic, financial, and structural factors are also at play. Assessing real exchange rates and current accounts requires analyzing exchange rate fundamentals in the context of external balances and net foreign asset positions over time. This is a complex task with different considerations for countries like China, the United States, and emerging markets experiencing large capital inflows. A multilateral approach is needed for sustainable global rebalancing.
MCM will offer the lowest cost global index funds by managing labor costs. It will outsource all labor except sales to India, where costs are one-fourth of U.S. rates. MCM will track the MSCI All Country World Investable Market Index for stocks and the Barclays Global Aggregate Float Adjusted Bond Index for bonds, charging only 0.25% for each fund. This low cost structure takes advantage of trends showing investor capital increasingly flowing into low cost, global index funds due to their benefits of diversification and minimized fees. By keeping costs lower than competitors, MCM aims to maximize its assets under management.
This document summarizes a working paper that estimates capital flight from developing countries from 1971-1998 using multiple methods. It acknowledges that while capital flight is assumed to be prevalent, estimation methods may not fully capture capital fleeing due to economic and political instability. The paper evaluates different estimation methods and definitions of capital flight used in literature. Estimates of capital flight, resident outflows, misinvoicing, and hot money flows are presented for regions and time periods. The estimates reveal high resident outflows from some countries and regions even in the 1990s, and that capital leaves countries with both liberalized and controlled capital accounts. Outflows have been large recently from East Asia, Europe, Central Asia and Latin America. The paper provides a
Vivek Tulpule Analyst Roundtable April 2010Rio Tinto plc
- The document is a presentation by Rio Tinto's chief economist from April 2010 discussing global economic trends and outlooks, with a focus on China.
- It notes that consensus projections show global growth accelerating in 2010, led by developing economies like China, after contracting in 2009.
- Data on China's economy in 2008-2010 shows strong rebounds in industrial production, exports, and retail sales after the financial crisis, supported by fiscal stimulus and abundant liquidity.
2.2. Balance Of Payment Capital Account To Finance Ca DeficitHai Vu
International Finance related issues.
The Capital Account of the balance of payments measures all international economic transactions of financial assets. It is divided into two components:
+ The Capital Account
+ The Financial Account.
Capital Accounts consist of:
- Direct Investment – in which the investor exerts some explicit degree of control over the assets.
- Portfolio Investment – in which the investor has no control over the assets nor any participation in the management.
- Other Investment – consists of various short-term and long-term trade credits, cross-border loans, currency deposits, bank deposits and other capital flows related to cross-border trade.
DSR - Debt Service Ratio:
The Debt Service Ratio - DSR is the percentage of a borrower's income that will be used to pay off a loan. It is one of the factors a lender will use to assess your application. Most lenders set the maximum DSR from 30% to 30%, which means that the loan repayments should not take up more than that part of your salary. This ensures that you will be able to pay off your loan comfortably, with little to no risk of defaulting or going bankrupt. The DSR may be calculated based on your monthly, weekly or fortnightly earnings.
Global imbalances have declined since the financial crisis due to changes in demand and output in deficit and surplus countries. Real exchange rates do not fully explain changes in trade balances, as many other macroeconomic, financial, and structural factors are also at play. Assessing real exchange rates and current accounts requires analyzing exchange rate fundamentals in the context of external balances and net foreign asset positions over time. This is a complex task with different considerations for countries like China, the United States, and emerging markets experiencing large capital inflows. A multilateral approach is needed for sustainable global rebalancing.
MCM will offer the lowest cost global index funds by managing labor costs. It will outsource all labor except sales to India, where costs are one-fourth of U.S. rates. MCM will track the MSCI All Country World Investable Market Index for stocks and the Barclays Global Aggregate Float Adjusted Bond Index for bonds, charging only 0.25% for each fund. This low cost structure takes advantage of trends showing investor capital increasingly flowing into low cost, global index funds due to their benefits of diversification and minimized fees. By keeping costs lower than competitors, MCM aims to maximize its assets under management.
This document summarizes a working paper that estimates capital flight from developing countries from 1971-1998 using multiple methods. It acknowledges that while capital flight is assumed to be prevalent, estimation methods may not fully capture capital fleeing due to economic and political instability. The paper evaluates different estimation methods and definitions of capital flight used in literature. Estimates of capital flight, resident outflows, misinvoicing, and hot money flows are presented for regions and time periods. The estimates reveal high resident outflows from some countries and regions even in the 1990s, and that capital leaves countries with both liberalized and controlled capital accounts. Outflows have been large recently from East Asia, Europe, Central Asia and Latin America. The paper provides a
Vivek Tulpule Analyst Roundtable April 2010Rio Tinto plc
- The document is a presentation by Rio Tinto's chief economist from April 2010 discussing global economic trends and outlooks, with a focus on China.
- It notes that consensus projections show global growth accelerating in 2010, led by developing economies like China, after contracting in 2009.
- Data on China's economy in 2008-2010 shows strong rebounds in industrial production, exports, and retail sales after the financial crisis, supported by fiscal stimulus and abundant liquidity.
MergeGlobal - 2009 Containerized demand in main markets presentation final3GIntermodal
This document provides an analysis of global containerized sea freight demand drivers and outlook. It finds that containerized freight flows are concentrated in Asia, North America, and Europe. Demand is primarily driven by consumer spending in North America and Europe ("demand-pull"). The document forecasts a slow recovery in global container volumes from 2009 to 2014, with peak pre-recession volumes restored by 2012. Volumes are expected to rebound in key trade lanes like Asia-North America and Asia-Europe as underlying economic growth returns.
The document summarizes the global economic outlook following the 2008 financial crisis. It discusses different theories on the shape and strength of economic recoveries after financial crises. It then analyzes the economic situations and outlooks of various regions and countries around the world, including challenges faced by developed economies in Europe and growth prospects for emerging economies such as China, India, and countries in the Middle East.
Indranil Deb presented at the Symbiosis Institute of Management Studies on November 11, 2008. The presentation covered several topics related to the global financial crisis including the growth of global financial assets from $12 trillion in 1980 to $118 trillion in 2003, the shift away from banks towards market institutions, and the impact of the US subprime crisis which began surfacing in 2007. Effects of the crisis included losses totaling over $512 billion, the bankruptcy of Lehman Brothers, and declines in global stock markets and currencies from late 2007 through 2008.
Indian Economy: The Curious Case of Household Savings-Investment GapAshutosh Bhargava
1) Household savings rates in India peaked in 2008 but have since experienced a steep decline, with the household savings-investment gap currently at its lowest level since the late 1980s.
2) This decline in household savings has negatively impacted potential growth by reducing capital availability to the private sector and decreasing overall capital productivity.
3) Policymakers should pursue more accommodative monetary policy to further support balance sheet repair and strengthen India's domestic macroeconomic profile while foreign liquidity remains favorable globally. Prioritizing growth over inflation targeting will help maximize the current window of opportunity.
Indian Economy: the curious case of household savings-investment gapAshutosh Bhargava
1) The document discusses India's declining household savings rate and growing household savings-investment gap in recent years.
2) Historically, Indian households had the largest positive savings-investment gap, but this has declined significantly in recent years as households have invested more in gold and real estate.
3) The declining household savings-investment gap has negatively impacted India's potential growth by reducing capital availability to the private sector and decreasing overall capital productivity.
The document discusses India's balance of payments position in 2013. It provides definitions and explanations of key terms like balance of payments, current account, and capital account.
India had a current account deficit of $88.16 billion in 2013, which was 4.2% of GDP. The trade deficit was $195.66 billion due to higher imports, especially of oil. Software exports and private transfers helped offset this deficit. Foreign direct investment and portfolio investment contributed to the capital account surplus of $88.16 billion, balancing out the current account deficit. However, more policy measures were needed to attract long term funds and improve the external accounts position.
This document discusses the global financial crisis that began in 2007-2008 and its impacts. It provides background on how the crisis started with the US housing market collapse and spread globally. It then summarizes recent news headlines reflecting ongoing issues and debates around global economic recovery efforts. Charts on international trade flows and GDP statistics by country are also presented.
Capital flows management in emerging countries: Some lessons from the recent ...Mahmoud Sami Nabi
- International capital flows and economic development
- Rationale for the capital flows management (CFM)
- Impacts of the COVID-19 crisis on capital flows in emerging countries
- Some lessons from the CFM during the COVID-19 crisis
Venezuela's economy is heavily dependent on oil exports, which have declined significantly due to falling oil prices. This will lead to a large deficit in the country's balance of payments. The government has devalued the currency in the parallel market but not officially, and has restricted dollars at the official rate to try to manage imports and finances. However, with lower oil revenues, it will be difficult for the government to continue funding social programs and employment as it has in the past. The economic outlook for Venezuela is challenging without a recovery in oil prices.
The Curious Case of Savings-Investment Gap and its Implications for IndiaAshutosh Bhargava
Their has been a remarkable shift in the savings-investment gap at the global level as well as in India. While this has had a tangible impact on global potential growth, the recovery is likely to differ from one country to another. In the Indian context, the recovery in trend growth is likely to be much higher than what is generally peceived and thus requires a more proactive response from policy makers, especially the monetary authorities.
Provides an overview of the reseach of Ghosh and Ramakrishnan on current account deficits: what they are, how they are measured and whether they matter.
COI1-1This is an optional chapter for assignment by inst.docxmonicafrancis71118
COI1-1
This is an optional chapter for assignment by
instructors who desire to cover international trade
early in the course but do not want to assign the more
graphical Chapter 37 (Chapter 20 in Macroeconomics
and Chapter 23 in Microeconomics) for that purpose.
If this updated Chapter 5 of Economics is assigned,
Chapter 37 should not also be assigned in the same
course. Much of the content in Chapter 5 of the 18e is
now in Chapter 37 of the 19e. In some places, the
transfer of content is word-for-word.
AFTER READING THIS CHAPTER, YOU SHOULD BE
ABLE TO:
1 State several key facts about U.S. international
trade.
2 Define comparative advantage and explain how it
relates to specialization and international trade.
3 Explain how exchange rates are determined in
currency (foreign-exchange) markets.
4 Explain how and why government sometimes
interferes with free international trade.
5 Describe the purpose and function of the World
Trade Organization and discuss trade topics such
as trade adjustment assistance, offshoring of jobs,
and fair-trade products.
The United States in the
Global Economy
Backpackers in the wilderness like to think they are “leaving the world behind,” but, like Atlas, they
carry the world on their shoulders. Much of their equipment is imported—knives from Switzerland, rain
gear from South Korea, cameras from Japan, aluminum pots from England, sleeping bags from China,
and compasses from Finland. Moreover, they may have driven to the trailheads in Japanese-made Toyotas
or German-made BMWs, sipping coffee from Brazil or snacking on bananas from Honduras.
International trade and the global economy affect all of us daily, whether we are hiking in the wil-
derness, driving our cars, listening to music, or working at our jobs. We cannot “leave the world be-
hind.” We are enmeshed in a global web of economic relationships, such as the trading of goods and
services, multinational corporations, cooperative ventures among the world’s firms, and ties among
C
o
n
te
n
t
O
p
ti
o
n
s
fo
r
In
st
ru
ct
o
rs
(
C
O
I)
w
w
w
.m
cc
o
n
n
e
ll1
9
e
.c
o
m
1
COI
mcc11447_coi1_001-021.indd Page COI1-1 09/10/10 8:09 AM F-497mcc11447_coi1_001-021.indd Page COI1-1 09/10/10 8:09 AM F-497 204/MHCE015/atk75187_disk1of1/0073375187/atk75187_pagefiles204/MHCE015/atk75187_disk1of1/0073375187/atk75187_pagefiles
COI1-2
The United States and
World Trade
Our main goal in this chapter is to examine trade flows
and the financial flows that pay for them. What is the ex-
tent and pattern of international trade, and how much has
that trade grown? Who are the major participants?
Volume and Pattern
Table COI 1.1 suggests the importance of world trade for
selected countries. Many countries, with restricted re-
sources and limited domestic markets, cannot efficiently
produce the variety of goods their citizens want. So they
must import goods from other nations. That, in turn.
This document contains a quiz for an economics course on multinational challenges and the global economy. It includes multiple choice, true/false, and essay questions covering topics such as multinational enterprises, comparative advantage, corporate ownership structures, and models of corporate governance. Some key points covered are the definition of multinational enterprises, reasons why firms become multinationals, phases of globalization for firms, agency problems that limit financial globalization, and differences between the shareholder wealth maximization and stakeholder capitalism models of corporate governance.
This document summarizes trends in the wealth management industry from 2010-2014. It finds that the number and wealth of high-net-worth individuals will continue growing significantly in coming years, especially in Asia, the Middle East, and Latin America. It also reports that new clients in this decade will increasingly demand international investment strategies and holistic family advisory services. The document recommends that financial professionals develop well-rounded international experience and perspectives to best serve the needs of these new high-net-worth clients.
How Could Arab Oil Exporters Respond to the New Global Oil Order: Graduate t...Economic Research Forum
Ibrahim Ahmed Elbadawi - Economic Research Forum
ERF Conference on “Arab Oil Exporters: Coping with a New Global Oil Order”
How Could Arab Oil Exporters Respond to the New Global Oil Order: Graduate to Rule-based Macroeconomic Institutions
Kuwait, November 26-27, 2017
www.erf.org.eg
The document is a letter from Alexander Chartres, Investment Director at Ruffer LLP, discussing pensions and the global world order. Ruffer LLP is an independent investment management firm founded in 1994 that manages over £26 billion in assets and has achieved strong long-term returns with low correlation to other asset classes. The letter provides commentary on geopolitical and macroeconomic trends that may impact pensions and global markets.
Invbots training materials 20210104 - Macro StrategyInvbots Limited
1) 2021 will see key events that could impact global equity market performance such as US elections, central bank meetings, and earnings seasons.
2) A global macro strategy bases holdings on overall economic and political views, using combinations of strategies across asset classes like currencies, interest rates, and stock indexes.
3) Factors like market cap, sectors, currencies, and macroeconomic data influence different equity indexes differently and studying these relationships is important for understanding market moves.
2009. Jürgen Pfister. The global and European environment for CEE economies. ...Forum Velden
- The presentation discusses the impact of the global financial crisis on Central and Eastern European economies.
- CEE economies experienced a dramatic fall in foreign direct investment inflows and a reversal of private capital flows as a result of the crisis.
- Recovery from the recession will be slow, with an outright upswing not expected until 2011 due to weaknesses in the banking sector and rising unemployment in Europe.
- Medium-term growth prospects for CEE economies remain positive as the process of economic convergence with Western Europe continues, but growth will be dampened in the short-term by slow growth among EU trading partners.
This document discusses international finance issues in Vietnam. It covers 3 main topics: 1) Balance of payments and the current account deficit issues Vietnam faced during the 2008 global crisis, including rising trade and fiscal deficits, unemployment, and inflation. 2) Managing capital flows, including increasing foreign direct investment, official development assistance, and portfolio investment flows into Vietnam. 3) Vietnam's exchange rate policy of unofficially pegging its currency to the US dollar. The document recommends Vietnam focus on institutional reforms, moving up the value chain, improving infrastructure, and strengthening financial supervision and statistics.
This document discusses various capital budgeting techniques for analyzing investment projects under uncertainty, including sensitivity analysis, scenario analysis, break even analysis, and real options analysis. It provides examples of how to apply these techniques to evaluate projects. Sensitivity analysis involves changing assumptions like sales, costs, and investments to see their impact on NPV. Scenario analysis evaluates projects under different combinations of assumptions. Break even analysis finds the sales level where costs and revenues break even. Real options analysis uses decision trees to value the flexibility inherent in investment opportunities.
This document summarizes key concepts related to the time value of money, including future values, present values, perpetuities, annuities, inflation, and effective interest rates. It provides examples and formulas for calculating future values, present values, perpetuities, annuities, real interest rates, and effective annual interest rates. The document is from Chapter 4 of a corporate finance textbook and covers topics such as compound interest, discount rates, discount factors, and applications related to the time value of money.
MergeGlobal - 2009 Containerized demand in main markets presentation final3GIntermodal
This document provides an analysis of global containerized sea freight demand drivers and outlook. It finds that containerized freight flows are concentrated in Asia, North America, and Europe. Demand is primarily driven by consumer spending in North America and Europe ("demand-pull"). The document forecasts a slow recovery in global container volumes from 2009 to 2014, with peak pre-recession volumes restored by 2012. Volumes are expected to rebound in key trade lanes like Asia-North America and Asia-Europe as underlying economic growth returns.
The document summarizes the global economic outlook following the 2008 financial crisis. It discusses different theories on the shape and strength of economic recoveries after financial crises. It then analyzes the economic situations and outlooks of various regions and countries around the world, including challenges faced by developed economies in Europe and growth prospects for emerging economies such as China, India, and countries in the Middle East.
Indranil Deb presented at the Symbiosis Institute of Management Studies on November 11, 2008. The presentation covered several topics related to the global financial crisis including the growth of global financial assets from $12 trillion in 1980 to $118 trillion in 2003, the shift away from banks towards market institutions, and the impact of the US subprime crisis which began surfacing in 2007. Effects of the crisis included losses totaling over $512 billion, the bankruptcy of Lehman Brothers, and declines in global stock markets and currencies from late 2007 through 2008.
Indian Economy: The Curious Case of Household Savings-Investment GapAshutosh Bhargava
1) Household savings rates in India peaked in 2008 but have since experienced a steep decline, with the household savings-investment gap currently at its lowest level since the late 1980s.
2) This decline in household savings has negatively impacted potential growth by reducing capital availability to the private sector and decreasing overall capital productivity.
3) Policymakers should pursue more accommodative monetary policy to further support balance sheet repair and strengthen India's domestic macroeconomic profile while foreign liquidity remains favorable globally. Prioritizing growth over inflation targeting will help maximize the current window of opportunity.
Indian Economy: the curious case of household savings-investment gapAshutosh Bhargava
1) The document discusses India's declining household savings rate and growing household savings-investment gap in recent years.
2) Historically, Indian households had the largest positive savings-investment gap, but this has declined significantly in recent years as households have invested more in gold and real estate.
3) The declining household savings-investment gap has negatively impacted India's potential growth by reducing capital availability to the private sector and decreasing overall capital productivity.
The document discusses India's balance of payments position in 2013. It provides definitions and explanations of key terms like balance of payments, current account, and capital account.
India had a current account deficit of $88.16 billion in 2013, which was 4.2% of GDP. The trade deficit was $195.66 billion due to higher imports, especially of oil. Software exports and private transfers helped offset this deficit. Foreign direct investment and portfolio investment contributed to the capital account surplus of $88.16 billion, balancing out the current account deficit. However, more policy measures were needed to attract long term funds and improve the external accounts position.
This document discusses the global financial crisis that began in 2007-2008 and its impacts. It provides background on how the crisis started with the US housing market collapse and spread globally. It then summarizes recent news headlines reflecting ongoing issues and debates around global economic recovery efforts. Charts on international trade flows and GDP statistics by country are also presented.
Capital flows management in emerging countries: Some lessons from the recent ...Mahmoud Sami Nabi
- International capital flows and economic development
- Rationale for the capital flows management (CFM)
- Impacts of the COVID-19 crisis on capital flows in emerging countries
- Some lessons from the CFM during the COVID-19 crisis
Venezuela's economy is heavily dependent on oil exports, which have declined significantly due to falling oil prices. This will lead to a large deficit in the country's balance of payments. The government has devalued the currency in the parallel market but not officially, and has restricted dollars at the official rate to try to manage imports and finances. However, with lower oil revenues, it will be difficult for the government to continue funding social programs and employment as it has in the past. The economic outlook for Venezuela is challenging without a recovery in oil prices.
The Curious Case of Savings-Investment Gap and its Implications for IndiaAshutosh Bhargava
Their has been a remarkable shift in the savings-investment gap at the global level as well as in India. While this has had a tangible impact on global potential growth, the recovery is likely to differ from one country to another. In the Indian context, the recovery in trend growth is likely to be much higher than what is generally peceived and thus requires a more proactive response from policy makers, especially the monetary authorities.
Provides an overview of the reseach of Ghosh and Ramakrishnan on current account deficits: what they are, how they are measured and whether they matter.
COI1-1This is an optional chapter for assignment by inst.docxmonicafrancis71118
COI1-1
This is an optional chapter for assignment by
instructors who desire to cover international trade
early in the course but do not want to assign the more
graphical Chapter 37 (Chapter 20 in Macroeconomics
and Chapter 23 in Microeconomics) for that purpose.
If this updated Chapter 5 of Economics is assigned,
Chapter 37 should not also be assigned in the same
course. Much of the content in Chapter 5 of the 18e is
now in Chapter 37 of the 19e. In some places, the
transfer of content is word-for-word.
AFTER READING THIS CHAPTER, YOU SHOULD BE
ABLE TO:
1 State several key facts about U.S. international
trade.
2 Define comparative advantage and explain how it
relates to specialization and international trade.
3 Explain how exchange rates are determined in
currency (foreign-exchange) markets.
4 Explain how and why government sometimes
interferes with free international trade.
5 Describe the purpose and function of the World
Trade Organization and discuss trade topics such
as trade adjustment assistance, offshoring of jobs,
and fair-trade products.
The United States in the
Global Economy
Backpackers in the wilderness like to think they are “leaving the world behind,” but, like Atlas, they
carry the world on their shoulders. Much of their equipment is imported—knives from Switzerland, rain
gear from South Korea, cameras from Japan, aluminum pots from England, sleeping bags from China,
and compasses from Finland. Moreover, they may have driven to the trailheads in Japanese-made Toyotas
or German-made BMWs, sipping coffee from Brazil or snacking on bananas from Honduras.
International trade and the global economy affect all of us daily, whether we are hiking in the wil-
derness, driving our cars, listening to music, or working at our jobs. We cannot “leave the world be-
hind.” We are enmeshed in a global web of economic relationships, such as the trading of goods and
services, multinational corporations, cooperative ventures among the world’s firms, and ties among
C
o
n
te
n
t
O
p
ti
o
n
s
fo
r
In
st
ru
ct
o
rs
(
C
O
I)
w
w
w
.m
cc
o
n
n
e
ll1
9
e
.c
o
m
1
COI
mcc11447_coi1_001-021.indd Page COI1-1 09/10/10 8:09 AM F-497mcc11447_coi1_001-021.indd Page COI1-1 09/10/10 8:09 AM F-497 204/MHCE015/atk75187_disk1of1/0073375187/atk75187_pagefiles204/MHCE015/atk75187_disk1of1/0073375187/atk75187_pagefiles
COI1-2
The United States and
World Trade
Our main goal in this chapter is to examine trade flows
and the financial flows that pay for them. What is the ex-
tent and pattern of international trade, and how much has
that trade grown? Who are the major participants?
Volume and Pattern
Table COI 1.1 suggests the importance of world trade for
selected countries. Many countries, with restricted re-
sources and limited domestic markets, cannot efficiently
produce the variety of goods their citizens want. So they
must import goods from other nations. That, in turn.
This document contains a quiz for an economics course on multinational challenges and the global economy. It includes multiple choice, true/false, and essay questions covering topics such as multinational enterprises, comparative advantage, corporate ownership structures, and models of corporate governance. Some key points covered are the definition of multinational enterprises, reasons why firms become multinationals, phases of globalization for firms, agency problems that limit financial globalization, and differences between the shareholder wealth maximization and stakeholder capitalism models of corporate governance.
This document summarizes trends in the wealth management industry from 2010-2014. It finds that the number and wealth of high-net-worth individuals will continue growing significantly in coming years, especially in Asia, the Middle East, and Latin America. It also reports that new clients in this decade will increasingly demand international investment strategies and holistic family advisory services. The document recommends that financial professionals develop well-rounded international experience and perspectives to best serve the needs of these new high-net-worth clients.
How Could Arab Oil Exporters Respond to the New Global Oil Order: Graduate t...Economic Research Forum
Ibrahim Ahmed Elbadawi - Economic Research Forum
ERF Conference on “Arab Oil Exporters: Coping with a New Global Oil Order”
How Could Arab Oil Exporters Respond to the New Global Oil Order: Graduate to Rule-based Macroeconomic Institutions
Kuwait, November 26-27, 2017
www.erf.org.eg
The document is a letter from Alexander Chartres, Investment Director at Ruffer LLP, discussing pensions and the global world order. Ruffer LLP is an independent investment management firm founded in 1994 that manages over £26 billion in assets and has achieved strong long-term returns with low correlation to other asset classes. The letter provides commentary on geopolitical and macroeconomic trends that may impact pensions and global markets.
Invbots training materials 20210104 - Macro StrategyInvbots Limited
1) 2021 will see key events that could impact global equity market performance such as US elections, central bank meetings, and earnings seasons.
2) A global macro strategy bases holdings on overall economic and political views, using combinations of strategies across asset classes like currencies, interest rates, and stock indexes.
3) Factors like market cap, sectors, currencies, and macroeconomic data influence different equity indexes differently and studying these relationships is important for understanding market moves.
2009. Jürgen Pfister. The global and European environment for CEE economies. ...Forum Velden
- The presentation discusses the impact of the global financial crisis on Central and Eastern European economies.
- CEE economies experienced a dramatic fall in foreign direct investment inflows and a reversal of private capital flows as a result of the crisis.
- Recovery from the recession will be slow, with an outright upswing not expected until 2011 due to weaknesses in the banking sector and rising unemployment in Europe.
- Medium-term growth prospects for CEE economies remain positive as the process of economic convergence with Western Europe continues, but growth will be dampened in the short-term by slow growth among EU trading partners.
This document discusses international finance issues in Vietnam. It covers 3 main topics: 1) Balance of payments and the current account deficit issues Vietnam faced during the 2008 global crisis, including rising trade and fiscal deficits, unemployment, and inflation. 2) Managing capital flows, including increasing foreign direct investment, official development assistance, and portfolio investment flows into Vietnam. 3) Vietnam's exchange rate policy of unofficially pegging its currency to the US dollar. The document recommends Vietnam focus on institutional reforms, moving up the value chain, improving infrastructure, and strengthening financial supervision and statistics.
This document discusses various capital budgeting techniques for analyzing investment projects under uncertainty, including sensitivity analysis, scenario analysis, break even analysis, and real options analysis. It provides examples of how to apply these techniques to evaluate projects. Sensitivity analysis involves changing assumptions like sales, costs, and investments to see their impact on NPV. Scenario analysis evaluates projects under different combinations of assumptions. Break even analysis finds the sales level where costs and revenues break even. Real options analysis uses decision trees to value the flexibility inherent in investment opportunities.
This document summarizes key concepts related to the time value of money, including future values, present values, perpetuities, annuities, inflation, and effective interest rates. It provides examples and formulas for calculating future values, present values, perpetuities, annuities, real interest rates, and effective annual interest rates. The document is from Chapter 4 of a corporate finance textbook and covers topics such as compound interest, discount rates, discount factors, and applications related to the time value of money.
The document summarizes key concepts from Chapter 7 of a corporate finance textbook, including net present value (NPV), internal rate of return (IRR), mutually exclusive projects, and investment timing. It provides examples and formulas for calculating NPV and IRR. The key investment decision rules are to accept projects with a positive NPV and projects with an IRR higher than the opportunity cost of capital. When choosing between mutually exclusive projects, select the project with the highest positive NPV. For investment timing, defer investments if doing so lowers costs in present value terms.
The document discusses the weighted average cost of capital (WACC) and how it is used to value companies. It provides examples of calculating WACC based on a company's capital structure and required rates of return on debt and equity. WACC is the weighted average of the cost of the company's various sources of financing and provides the minimum return needed to attract investors. The document outlines the steps for determining a company's WACC, including calculating market values for debt and equity and determining required rates of return for each.
The document is a chapter from a corporate finance textbook that discusses various methods for valuing stocks, including the dividend discount model and constant growth dividend discount model. It also covers the efficient market hypothesis and random walk theory, which suggest that stock price movements cannot be predicted from past trends and reflect all available information.
This document summarizes key topics from Chapter 3 of a corporate finance textbook, including the balance sheet, income statement, statement of cash flows, accounting practices, and taxes. The balance sheet shows assets and liabilities, the income statement shows revenues and expenses over time, and the statement of cash flows shows cash inflows and outflows. Accounting allows some flexibility, while taxes significantly impact financial decisions. The chapter covers core financial statements and how accounting and taxes factor into corporate finance.
The document summarizes key topics from Chapter 11 of a corporate finance textbook, including measuring market risk using beta, the relationship between risk and return as defined by the Capital Asset Pricing Model (CAPM), and applying the CAPM to determine the appropriate cost of capital for capital budgeting decisions based on a project's individual risk level. Examples are provided to illustrate calculating beta and determining the cost of capital for projects with different risk profiles.
This document discusses using discounted cash flow analysis to make investment decisions. It covers topics such as identifying and calculating cash flows, using cash flows rather than accounting profits, using incremental cash flows, treating inflation, and separating investment and financing decisions. An example project for Blooper Industries is presented, showing the capital investment, revenues, expenses, taxes, depreciation, cash flows from operations, and net cash flows over several years to calculate the net present value.
This document summarizes chapter 2 of a corporate finance textbook. It discusses why corporations need financial markets and institutions to access capital from investors. It covers the topics of the flow of savings to corporations, the functions of financial markets and intermediaries, and value maximization and cost of capital. Financial markets allow corporations to raise funds from investors through primary and secondary markets, as well as money markets. Financial intermediaries such as banks and insurance companies pool funds from many investors and allocate them to corporations.
This document appears to be from a chapter on corporate finance and governance. It discusses various topics related to corporate financing including common stock, preferred stock, corporate debt, convertible securities, and patterns of corporate financing. The chapter defines key terms related to these topics such as treasury stock, book value, market value, bond ratings, and convertible bonds. It also provides examples and discusses how firms can raise funds from external sources like debt and equity or retain profits.
The document is a chapter from a corporate finance textbook that discusses risk, return, and the opportunity cost of capital. It covers topics such as rates of return, measuring risk through variance and standard deviation, diversification and its effects on risk, and historical data on market volatility and country risk premiums. The chapter aims to define key terms and concepts regarding risk and return and provide students with tools to analyze and think about risk in financial markets.
This document provides an overview of bond valuation concepts including bond characteristics, interest rates and prices, yields, and default risk. It discusses how to calculate bond prices using present value techniques and how prices are affected by changes in interest rates, maturity, and credit quality. Examples are provided to illustrate bond pricing and yield calculations. Risks associated with changes in interest rates over the bond's life are also examined.
The document is a chapter from a corporate finance textbook. It introduces topics that will be covered in the chapter such as the corporation, the financial manager, and investment and financing decisions. It describes the roles and responsibilities of financial managers, which include making capital budgeting and financing decisions. It also discusses what a corporation is, different types of business organizations, and various careers in finance.
This document provides an overview of short-term financial planning. It discusses links between long-term and short-term financing, working capital, cash budgeting, short-term financing plans and sources. Specific topics covered include calculating a firm's cash conversion cycle, forecasting changes in cash and working capital, preparing a cash budget, and the costs of bank loans and sources of short-term financing. Examples are provided to illustrate key concepts.
The document discusses various topics relating to corporate finance outside of initial public offerings. It covers venture capital, where money is invested in new firms with restrictions on management and funds dispersed in stages contingent on success. It also discusses seasoned equity offerings by public companies, shelf registrations, and private placements. Rights issues are defined as offerings only to current stockholders to raise additional funds. An example calculates the value of rights in a 1 for 3 rights offer.
This document summarizes key topics related to mergers and acquisitions from Chapter 21 of the textbook "Fundamentals of Corporate Finance". It discusses sensible and dubious reasons for mergers, how to evaluate mergers, merger tactics such as white knights and poison pills, and leveraged buyouts. The main topics covered are the market for corporate control, motives and evaluation of mergers, merger tactics, and leveraged buyouts.
This document discusses payout policy and how companies pay cash to shareholders through dividends and stock repurchases. It covers topics such as dividend payments, stock dividends, stock repurchases, and how companies decide on their payout policy. The document also discusses whether payout policy matters according to different theories, and how dividends may increase or decrease firm value through factors like market imperfections, signaling effects, and tax consequences. Slides include examples and balance sheet information to illustrate key concepts.
This chapter discusses various risk management tools used by companies, including options, futures contracts, forward contracts, and swaps. It provides examples of how companies can use these derivatives to hedge or reduce risks from fluctuations in commodity prices, interest rates, and currencies. New types of derivatives continue to be created as the market seeks ways to hedge increasingly specialized risks.
This document discusses long-term financial planning. It provides examples of financial planning models for two companies, Executive Cheese and Executive Fruit. For Executive Fruit, the document shows projected income statements and balance sheets for 2006 that estimate a 10% increase in revenue and assets. It also calculates that Executive Fruit will require $64,000 in external financing to support its planned growth. Finally, it notes some limitations of financial planning models and defines sustainable growth rate.
This document provides an overview of key topics in working capital management, including accounts receivable and credit policies, inventory management, and cash management. It discusses establishing credit terms, performing credit analyses using tools like credit scoring and Z-scores, developing collection policies, and techniques for reducing inventory levels and managing cash flow through tools like lockbox systems and concentration banking. The goal is to efficiently manage working capital by minimizing cash tied up in receivables and inventory while maximizing returns from short-term investment of idle cash.
Discover the Future of Dogecoin with Our Comprehensive Guidance36 Crypto
Learn in-depth about Dogecoin's trajectory and stay informed with 36crypto's essential and up-to-date information about the crypto space.
Our presentation delves into Dogecoin's potential future, exploring whether it's destined to skyrocket to the moon or face a downward spiral. In addition, it highlights invaluable insights. Don't miss out on this opportunity to enhance your crypto understanding!
https://36crypto.com/the-future-of-dogecoin-how-high-can-this-cryptocurrency-reach/
Fabular Frames and the Four Ratio ProblemMajid Iqbal
Digital, interactive art showing the struggle of a society in providing for its present population while also saving planetary resources for future generations. Spread across several frames, the art is actually the rendering of real and speculative data. The stereographic projections change shape in response to prompts and provocations. Visitors interact with the model through speculative statements about how to increase savings across communities, regions, ecosystems and environments. Their fabulations combined with random noise, i.e. factors beyond control, have a dramatic effect on the societal transition. Things get better. Things get worse. The aim is to give visitors a new grasp and feel of the ongoing struggles in democracies around the world.
Stunning art in the small multiples format brings out the spatiotemporal nature of societal transitions, against backdrop issues such as energy, housing, waste, farmland and forest. In each frame we see hopeful and frightful interplays between spending and saving. Problems emerge when one of the two parts of the existential anaglyph rapidly shrinks like Arctic ice, as factors cross thresholds. Ecological wealth and intergenerational equity areFour at stake. Not enough spending could mean economic stress, social unrest and political conflict. Not enough saving and there will be climate breakdown and ‘bankruptcy’. So where does speculative design start and the gambling and betting end? Behind each fabular frame is a four ratio problem. Each ratio reflects the level of sacrifice and self-restraint a society is willing to accept, against promises of prosperity and freedom. Some values seem to stabilise a frame while others cause collapse. Get the ratios right and we can have it all. Get them wrong and things get more desperate.
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
Scotland is in many ways a microcosm of this challenge. It has become a hub for creative industries, is home to several world-class universities and a thriving community of businesses – strengths that need to be harness and leveraged. But it also has high levels of deprivation, with homelessness reaching a record high and nearly half a million people living in very deep poverty last year. Scotland won’t be truly thriving unless it finds ways to ensure that all its inhabitants benefit from growth and investment. This is the central challenge facing policy makers both in Holyrood and Westminster.
What should a new national economic strategy for Scotland include? What would the pursuit of stronger economic growth mean for local, national and UK-wide policy makers? How will economic change affect the jobs we do, the places we live and the businesses we work for? And what are the prospects for cities like Glasgow, and nations like Scotland, in rising to these challenges?
Dr. Alyce Su Cover Story - China's Investment Leadermsthrill
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
How to Invest in Cryptocurrency for Beginners: A Complete GuideDaniel
Cryptocurrency is digital money that operates independently of a central authority, utilizing cryptography for security. Unlike traditional currencies issued by governments (fiat currencies), cryptocurrencies are decentralized and typically operate on a technology called blockchain. Each cryptocurrency transaction is recorded on a public ledger, ensuring transparency and security.
Cryptocurrencies can be used for various purposes, including online purchases, investment opportunities, and as a means of transferring value globally without the need for intermediaries like banks.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Optimizing Net Interest Margin (NIM) in the Financial Sector (With Examples).pdfshruti1menon2
NIM is calculated as the difference between interest income earned and interest expenses paid, divided by interest-earning assets.
Importance: NIM serves as a critical measure of a financial institution's profitability and operational efficiency. It reflects how effectively the institution is utilizing its interest-earning assets to generate income while managing interest costs.
New Visa Rules for Tourists and Students in Thailand | Amit Kakkar Easy VisaAmit Kakkar
Discover essential details about Thailand's recent visa policy changes, tailored for tourists and students. Amit Kakkar Easy Visa provides a comprehensive overview of new requirements, application processes, and tips to ensure a smooth transition for all travelers.
Economic Risk Factor Update: June 2024 [SlideShare]Commonwealth
May’s reports showed signs of continued economic growth, said Sam Millette, director, fixed income, in his latest Economic Risk Factor Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
Economic Risk Factor Update: June 2024 [SlideShare]
balance of paymentS
1. MH BOUCHET/CERAM (c)
Country Risk Analysis
The Balance of Payments II
Capital Account
February 2008
Professor: M.H. Bouchet
2. MH BOUCHET/CERAM (c)
Balance of payments
Accounting framework and statistical record of
all the economic and financial flows that take place
over a specified time period between residents of
the reporting country and the rest of the world
The time period itself is arbitrary but it is common practice to
supply balance of payments data on a monthly, quarterly and
yearly basis (IMF)
Flows refer to income and expenditure or changes in levels of
outstanding assets and liabilities.
The accumulation of flows leads to asset or debt stocks.
3. MH BOUCHET/CERAM (c)
Double bookkeeping: Summary statement that records
as a credit (+) any transaction resulting in a receipt from the
rest of the world and as a debit (-) any transaction resulting
in a payment
These transactions lead to changes in supply and demand
for foreign exchange, hence an impact on exchange rates,
reserve assets and on foreign exchange markets
4. MH BOUCHET/CERAM (c)
Risk assessment is rooted in balance of
payments analysis!
1. Trade flows and competitiveness
2. Structural or short-term deficits?
3. Exchange rate variations
4. External financing flows
5. Capital flight
6. Debt crisis!
6. MH BOUCHET/CERAM (c)
* The US CAD dilemma *
2006 Trade deficit= US=760 billion (6% of GDP)
CAD= -6,6% of GDP
= - US$ 870 billion
Need to shrink the deficit by boosting exports and
reducing import growth with a weaker $
BUT need to finance the deficit by attracting US$2,4
billion/day foreign capital inflows with stronger $!
Capital sources = surplus countries = Germany + China +
Japan + Korea
Need to maintain positive real interest rates to enhance the
dollar attractiveness and competitiveness
Engine of world growth
7. MH BOUCHET/CERAM (c)
The US CAD dilemma… revisited
(1)
Large US CAD, though:
1. The US net liabilities have risen less than the
cumulative CAD
2. Decline in US net liabilities/GDP
3. Minimal debt servicing burden
NYFed staff report n°271 12/2006
8. MH BOUCHET/CERAM (c)
The US CAD dilemma… revisited
(2)
A dollar depreciation alone will NOT curb the US deficit,
because:
1. Use of the dollar in international trade transactions (all US
exports and imports are invoiced in $, hence insensitivity
to exchange rate changes): Asia
2. Market share concern of foreign exporters, hence desire to
remain competitive in the large US market)
3. High marketing and distribution costs of US imports
might insulate the final consumption price of imported
goods
However, foreign demand for US goods will increase
Fed RB NY, June 2007
9. MH BOUCHET/CERAM (c)
Capital account
– Reflects changes in country’s ownership of assets
– Reflects international market access
– Financing flows lead to changes in external debt stock,
and to future debt servicing payment outflows
– Financing sources: debt, equity/FDI, international
borrowing in the capital markets (Eurobonds,
Eurocredits, official financing, ODA, short-term
flows…)
10. MH BOUCHET/CERAM (c)
Capital account
The financial analyst must focus not only on the
volume of financing to match the financing
requirements of the current account deficit, but also
the nature of financing sources (private/public) and
the sustainability of the financing (short term/long
term, volatility, floating/fixed rates, repayment
conditions…)
11. MH BOUCHET/CERAM (c)
The capital account
Capital account
+ (-) Direct investment (non debt creating flows)
+ (-) Portfolio investment (NDCF)
+ (-) Other long-term capital (private + official)
+ (-) Other short-term capital (private + official)
+ (-) Net errors and omissions
+ (-) Counterpart items
+ (-) Change in reserves
= Capital account balance
+ Exceptional Financing
From less liquid items to more liquid items!
12. MH BOUCHET/CERAM (c)
The Capital/Financial Account
The Capital Account of the balance of
payments measures all international
economic transactions of financial assets. It
is divided into two major components:
– The Capital Account
– The Financial Account
The Capital Account is minor (in
magnitude), while the Financial Account is
significant.
Source: Eiteman/Pearson
13. MH BOUCHET/CERAM (c)
The Financial Account
Financial assets can be classified in a number
of different ways including the length of the
life of the asset (maturity) and the nature and
source of the ownership (public or private).
The Financial Account, however, uses a third
method. This focuses on the degree of
investor control over the assets or operations.
14. MH BOUCHET/CERAM (c)
The Financial Account consists of three
components:
– Direct Investment – in which the investor exerts
some explicit degree of control over the assets
– Portfolio Investment – in which the investor has
no control over the assets nor any participation in
the management
– Other Investment – consists of various short-
term and long-term trade credits, cross-border
loans, currency deposits, bank deposits and other
capital flows related to cross-border trade
16. MH BOUCHET/CERAM (c)
Sources of external financing
Official bilateral +
multilateral
Paris Club (government
to government credits)
Export credit agencies
IFIs
RDBs
Private
FDI
Portfolio Investment
International bank
loans
Working capital lines
ST Trade credits
Bonds
21. MH BOUCHET/CERAM (c)
Net external capital sources for EMCs
-100
0
100
200
300
400
500
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
private
public
IIF/IMF
US$ billion
22. MH BOUCHET/CERAM (c)
Net Private Capital Flows to EMCs (Equity, FDI,
Portfolio, Banks + non-banks)
0
100
200
300
400
500
600
1990 1994 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Total
Asia
Lat America
Billion of US$
Source: IIF/IMF
23. MH BOUCHET/CERAM (c)
Net FDI and portfolio capital flows to EMCs
0
50
100
150
200
250
300
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Equity
ASIA
Am Latina
US$ billion
Source: IMF/IIF
24. MH BOUCHET/CERAM (c)
1. Direct investment and portfolio investment
The difference between direct investment and portfolio investment
resolves around whether or not the investor intends to take an
active role in the management of the enterprise whose assets are
being acquired.
When the investor’s purpose is to have an effective voice in the
management of the foreign enterprise, it is considered as a direct
investment. Examples:
Bonds, debentures and the like are portfolio investments in so far
as they confer no management or voting rights on their owners (ST
and relatively volatile investment)
Foreign branches, wholly owned subsidiaries and joint ventures
are clearly direct investments (depending on percentage!)
25. MH BOUCHET/CERAM (c)
FDI Flows worldwide 2006
in % of total volume
0
2
4
6
8
10
12
14
16
USA UK China/HK France Netherlands Canada Germany Belgium Spain Russia
Source: CNUCED/2006 Total= $1230 billion
* IDE In = $81 billion, et IDE Out= $115 billion (OCDE et BDF)
France= $81 billion* (7,1% of total)
26. MH BOUCHET/CERAM (c)
Total FDI inflows in US$ trillion
Post-2003 bounceback has been
driven by OECD markets.
FDI flows to EMCs will remain
buoyant in 2007-10, averaging
over US$400bn per year, but
growth rates will be modest as
privatisation tails off and the
global economy slows.
27. MH BOUCHET/CERAM (c)
OECD
(81%)
EMCs (19%)
ASIA
(64%)
LATIN
AMERICA
(29%)
GLOBAL ECONOMY
EMCs
LATIN AMERICA
MEXICO
(32%)
CHILE
(10%)
PERU
(4%)
CHINA
(80%)
ASIA
GLOBAL FDI FLOWS 2006-07
Source: IIF, OECD
28. MH BOUCHET/CERAM (c)
3%
1%
75%
4%
12%
4% 1%
Argentina
Chile
China,P.R.:Hong Kong
Korea
Mexico
Thailand
Peru
FDI FLOWS
(US$ billion)
-10 000
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006f
Argentina Chile China,Hong Kong Korea Mexico Thailand Peru Vietnam
IIF/FMI
29. MH BOUCHET/CERAM (c)
30 most attractive
Emerging markets
for FDI
1. India
2. Russia
3. Vietnam
4. Ukraine
5. China
6. Chile
7. Latvia
8. Slovenia
9. Croacia
10. Turkey
11. Tunisia
12. Thailand
13. Korea
14. Malaysia
15. Macedonia
16. UAE
17. Arabia Saudita
18. Slovakia
19. México
20. Egypt
21. Bulgaria
22. Rumania
23. Hungary
24. Taiwan
25. Bosnia
26. Lituania
27. Brasil
28. Morroco
29. Colombia
30. Kazajstan
Σ Economic + Political risk
Market potential
AT Kearney GRDI 2006
31. MH BOUCHET/CERAM (c)
World Economic
Forum
Global
Competitiveness
Ranking
Switzerland 1
Finland 2
Sweden 3
Denmark 4
Singapore 5
United States 6
Japan 7
Germany 8
Netherlands 9
United Kingdom 10
Hong Kong SAR 11
Norway 12
Taiwan, China 13
Island 14
Israel 15
Canada 16
Austria 17
France 18
33. MH BOUCHET/CERAM (c)
FDI Flows in Vietnam
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
FDI
registered
In millions of US$
Source: IMF
34. MH BOUCHET/CERAM (c)
Overview of FDI in Vietnam
Opening of the Vietnamese economy to FDI in 1987, fast
growth of the 1990s, rapid increase in FDI inflows 1988-
1996, drop in the 1997-98 Asian crisis, rise since 2004
35. MH BOUCHET/CERAM (c)
Main sources of FDI in Vietnam
WHO?
Japan
Singapore
South Korea
Netherlands
Taiwan
Hongkong
France
Thailand
USA
WHERE?
Sectors
Industry
Oil
Mining
Tourism
38. MH BOUCHET/CERAM (c)
Contribution of FDI to Vietnam’s Economy
FDI companies contribute 13.3 % to GDP, 23% to
export, 25% to state budget revenues.
On other hand the FDI attracted into Vietnam is by
regional standards quite modest ( about 2% of FDI
into China)
Employment: 750,000 workers
39. MH BOUCHET/CERAM (c)
France: FDI Flows In & Out
Flux d'IDEEntrants et Sortants en milliards de US$ 1975-2006
-200
-150
-100
-50
0
50
100
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005
OUT
IN
Ratio OUT/IN= 1,8
Source: FMI & OCDE 2007
40. MH BOUCHET/CERAM (c)
Cumulative negative net FDI flows 1997-2006
-400
-350
-300
-250
-200
-150
-100
-50
0
France Japon RU Suisse Pays-Bas Espagne Italie Canada Allemagne Norvège
In billions of US$
France= - $391 billion (15% GDP)
Source: FMI/2007
41. MH BOUCHET/CERAM (c)
Outsourcing and job losses in Europe
Source: European Fondation for the improvement of living and working conditions/2006
44. MH BOUCHET/CERAM (c)
Distribution of FDI benefits for the capital
exporting countries
0 0,2 0,4 0,6
USA
France
Germany
Cost reduction
Larger profits
Productivity
Source McKinsey Report 08/2005
1. Cost reduction and better
price competitiveness
2. Export income and
dividend remittences
3. Growing jobs in new high
value added activities
0,74/1$
0,86/1$
1,15/1$
45. MH BOUCHET/CERAM (c)
FDI’s Benefits and challenges
Benefits Challenges
Additional resources available for productive
investment
Risk sharing with the rest of the world (equity)
Greater external market discipline on
macroeconomic policy
Greater exploitation of comparative economic
advantages
Enhanced access to technology, information, ideas
and management skills
Broader access to export markets through foreign
partners
Training and broader exposure of national staff
Greater liquidity to meet domestic financing needs
Broadening and deepening of national capital
markets
Improvement of financial sector skills
Currency appreciation
Reduced scope for independent
macroeconomic policy actions
Greater exposure to external shocks
Demands for protection in local markets
Lesser control of foreign owned domestic
industry
Disruption of national capital markets,
asset inflation
Risk of rising volatility in financial and
exchange markets
46. MH BOUCHET/CERAM (c)
2. Other capital is a residual category that groups all the capital
transactions that have not been included in direct investment,
portfolio investment end reserves.
Two categories:
# Long-term capital
# Short-term capital
Non-negotiable instruments > 1 year or more such as London
Club bank loans and mortgages, syndicated credits, euroloans...
* Financial assets < 1 year, such as currency, deposits and bills,
interbank credit lines, trade credits… (Source: BIS)
48. MH BOUCHET/CERAM (c)
3. Change in reserves
Reserves include:
Hard currency assets + Monetary gold (gold held by
the authorities as a financial asset)
Special drawing rights (SDRs): reserves created by
IMF as book-keeping entries and credited to the
accounts of IMF member countries according to
quotas
Reserve position in the Fund: (member’s quota +
other claims on the Fund)
49. MH BOUCHET/CERAM (c)
Foreign Exchange Reserves
The largest component of total international liquidity. It
includes monetary authorities’ claims on non-residents in
the form of bank deposits, treasury bills, short-term and
long-term government securities, and other claims usable in
the event of balance of payments need, including non-
marketable claims from inter-central bank and
intergovernmental arrangements, without regard as to
whether the claim is denominated in the currency of the
debtors or the creditors.
A + sign in the BOP means a financing flow in
the capital account, i.e., a decrease in the stock
of reserves!
51. MH BOUCHET/CERAM (c)
4. Counterpart items: offsetting amounts
Counterparts items are analogous to unrequited
transfers in the current account.
They arise because of the double entry system in
balance of payments accounting and refer to
adjustments in reserves owing to monetization of gold,
allocation or cancellation of SDRs and revaluation of
the various components of total reserves.
These BOP items do not stem from international
transactions.
52. MH BOUCHET/CERAM (c)
5. Net errors and omissions
Statistical difficulties involved in
gathering balance of payments data (and
capital flight!).
Other sources of E&Os:
leads and lags in trade flows,
underinvoicing of exports and
overinvoicing of imports, undeclared
short-term capital movements…
53. MH BOUCHET/CERAM (c)
Net errors and omissions ?
An examination of the size and direction of
NE&Os may shed some light on the accuracy
of BoP estimates. The adoption of the double
entry accounting system means that the net
sum of all credit and debit entries should equal
zero.
In practice, any discrepancies are recorded in
NE&Os, reflecting the net effect of differences
in coverage, timing and valuation. An amount
> 5% of the gross sum of merchandise exports
and imports is a source of concern!
54. MH BOUCHET/CERAM (c)
EMCs: Errorsand omissions, net
-80000
-60000
-40000
-20000
0
20000
2001 2002 2003 2004 2005 2006e 2007f
In millions of US$ Source: IIF
57. MH BOUCHET/CERAM (c)
6. Exceptional Financing
IMF Drawings
World Bank’s HIPC Initiative
London Club debt reduction and
restructuring workouts
Paris Club debt relief
Debt swap transactions
58. MH BOUCHET/CERAM (c)
Table of Uses and Sources
SOURCES USES
Exports of Goods
Services (shipment, travel)
Investment Income
Official transfers
Workers’ remittances
FDI (equity capital)
Portfolio Investment
Long-term Capital Inflows
Short-term Capital Inflows
Reserve Increase
Imports of Goods
Payments of services
Long-term Debt Payments
Short-term Debt Payments
Reserve Decrease
59. MH BOUCHET/CERAM (c)
+ Export of goods f.o.b.
- Imports of goods f.o.b.
= Trade balance
+/- Exports/Imports of non-financial services
+ /- Investment income/expenditures (credit/debit)
+ (-) Private/Official unrequited transfers
= Current account balance
+/- FDI
+/- Portfolio capital Flows
+ LT Capital Inflows
- Debt Servicing Payments
+/- ST Capital Flows
Reserve Variation
Risk Management and BOP Analysis
60. MH BOUCHET/CERAM (c)
External Finance Analysis:
The dual face of Country Risk
Liquidity Risk
Debt Service Ratio:
(P+I/X)
Interest Ratio (I/X)
Current account/GDP
Reserve/Import ratio
Elasticity of exports
Growth rate of exports/
Average external interest
rate
Solvency Risk
Debt/Export ratio
Debt/GDP ratio
Debt/Reserves
ST Debt/Reserves
61. MH BOUCHET/CERAM (c)
Liquidity and Solvency Thresholds
Stock variable
Solvency = Debt/GDP < 100%
Debt/Exports < 150%
Reserves/months of Imports > 6 months
Flow variable
Liquidity = Debt Service ratio < 33% of X
Interest/X ratio < 25%
62. MH BOUCHET/CERAM (c)
US Payments statistics: the basic balance
Basic balance = balance on current account
and long-term capital
It puts “below the line” changes in reserves
and all short-term capital movements
(including errors & omissions). It stresses
the importance of demand management
policies affecting net international
transactions in goods and services
63. MH BOUCHET/CERAM (c)
US International Investment Position
US-owned assets
abroad: $6473
US government assets:
$244 (official reserves)
US private assets: $6229
FDI: $2302
Foreign securities: $1847
Non-bank claims: $891
US Bank claims: $1455
Foreign-owned assets in
the US: $9079
Foreign official assets:
$1133
FDI: $2007
US Treasury securities:
$504
Corporate bonds: $1690
Corporate stocks: $1170
US currency: $297
US bank liabilities: $1407
64. MH BOUCHET/CERAM (c)
Net US external investment position
in US$ billion
-3000
-2500
-2000
-1500
-1000
-500
0
500
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2003 2004
NEP
65. MH BOUCHET/CERAM (c)
Net US external investment position
in US$ billion
FRB of NY: Current issues in economics and finance, December 2005, N°12:
End-2004: - 2500 billion, or 22% of GDP, but the US
earned US$36 billion more on its foreign assets than it
paid out to service its foreign liabilities!
Despite the surge in net liabilities, investment income
has remained positive, largely because US MNCs earn a
higher rate of return than do foreign firms operating in
the US. The continuing buildup in liabilities, however,
will push the US income balance negative, hence
boosting the CAD!
66. MH BOUCHET/CERAM (c)
The History of the U.S. Balance of Payments
Stage I: The U.S. is a young debtor nation (1770-1870) -Current
account deficit due to the need to import most goods and inability to
produce many goods for export. -Capital account surplus due to a great
deal of foreign investment in the U.S. in the areas of roads, farming,
cattle ranches, railroads, and canals.
Stage II: The U.S. is a mature debtor nation (1870-1920) - Current
account deficit due to large investment income being paid back to
foreign investors based on the investment of stage I. Merchandise
account in surplus -- exports > imports.
Stage III: The U.S. is a young creditor nation (1920-1945) -Huge
surplus in the current account due to large volume of postwar (WWI)
exports. -Capital account in deficit due to a great deal of U.S.
investment in Europe for postwar reconstruction.
Source: http://www.digitaleconomist.com/bop_4020.html
67. MH BOUCHET/CERAM (c)
Stage IV: The U.S. is a mature creditor nation (1945-1980) -
Merchandise deficit -- exports < imports but an investment income
surplus with a slight net surplus overall. -Capital account is in deficit
largely due to postwar (WW II) reconstruction in Europe and Japan.
Stage V: (1980- ) -Large (and growing) deficit in the merchandise
accounts (Trade Deficit) and slight surplus in the investment income
accounts. -Large surplus in the capital account partially to finance the
above merchandise deficit (foreign individuals and banks lending
money to individuals in the U.S.) Additionally, since the U.S. has had
a low inflation rate since 1982 and consistent economic growth , the
U.S. has been a good place to invest relative to the rest of the world.
However the current inflow of capital investment could eventually
lead to large investment income payments in the near future. The
investment income surplus may soon be eroded thus worsening the
current account deficit.