金融市场与金融机构英文课件-(16).ppt

1、Copyright 2012 Pearson Education.All rights reserved.CHAPTER 16The International Financial System 2012 Pearson Education.All rights reserved.16-1 Chapter PreviewThe international financial system has grown in importance as the U.S.economy has become more interdependent with the economies of the rest

2、 of the world.In this chapter,we examine the differences between fixed and managed exchange rate systems.2012 Pearson Education.All rights reserved.16-2 Chapter PreviewWe also look at the controversial role of capital controls and the IMF in the international setting.Topics include:Intervention in t

3、he Foreign Exchange Market Balance of Payments Exchange Rates Regimes in the International Financial System Capital Controls The Role of the IMF 2012 Pearson Education.All rights reserved.16-3 Intervention in the Foreign Exchange Market Foreign exchange markets are not free of government interventio

4、n.Foreign exchange interventions occur when central banks engage in international transactions to influence exchange rates.2012 Pearson Education.All rights reserved.16-4 Intervention in the Foreign Exchange Market:the Money Supply The first step is to understand the impact on the monetary base and

5、the money supply when a central bank intervenes in the foreign exchange market.International reserves refers to a central banks holdings in a foreign currency.2012 Pearson Education.All rights reserved.16-5 Intervention in the Foreign Exchange Market:the Money Supply Suppose the Fed sells$1 billion

6、in a foreign currency in exchange for$1 billion in U.S.currency.Results:Fed holding in international reserves falls by 1 billion.Currency in circulation falls by 1 billion.2012 Pearson Education.All rights reserved.16-6 Intervention in the Foreign Exchange Market:the Money Supply Suppose the Fed sel

7、ls$1 billion in a foreign currency in exchange for a check written on a domestic bank.2012 Pearson Education.All rights reserved.16-7 Intervention in the Foreign Exchange Market:the Money SupplyIn either case,we draw the same conclusion:a central banks purchase of domestic currency and corresponding

8、 sale of a foreign currency leads to an equal decline in its international reserves and the monetary base.2012 Pearson Education.All rights reserved.16-8 Intervention in the Foreign Exchange Market:the Money SupplyObviously,the opposite is true if the transaction reversed:a central banks sale of dom

9、estic currency and corresponding purchase of a foreign currency leads to an equal increase in its international reserves and the monetary base.2012 Pearson Education.All rights reserved.16-9 Inside the FedBefore we move on,its worth spending a moment to talk about the actual process of intervention.

10、First,the U.S.Treasury and the Feds FOMC decide to intervene.This occurs through a variety of conference calls during the day between the Treasury,the BOG,and the New York Fed.2012 Pearson Education.All rights reserved.16-10 Inside the Fed If an intervention is called for,the manager of the desk at

11、the New York Fed has his traders carry-out the prescribed purchase or sale of currency on behalf of the Treasury.In the interim,the staff of the FOMC continues to develop reports and other information about developments in domestic and foreign markets.2012 Pearson Education.All rights reserved.16-11

12、 Intervention in the Foreign Exchange Market:the Money Supply Once we understand the impact of purchases or sales,the Fed still has a decision to make.A central bank,knowing these results,can engage in one of two types of foreign exchange interventions:Unsterilized Sterilized 2012 Pearson Education.

13、All rights reserved.16-12 Intervention in the Foreign Exchange Market:Unsterilized Intervention Unsterilized:Results:International reserves,+1 billion Monetary base,+1 billion The analysis is in Figure 16.1,Et 2012 Pearson Education.All rights reserved.16-13 Intervention in the Foreign Exchange Mark

14、et:Unsterilized Intervention1.Initially,the purchase of dollars decreases the money supply,and demand shifts from D1 to D2.2.The equilibrium exchange rate rises from E1 to E2 as the expected return on dollar assets rises.2012 Pearson Education.All rights reserved.16-14 Intervention in the Foreign Ex

15、change Market:Sterilized Intervention Sterilized:Results:International reserves,+1 billionMonetary base unchangedEt unchanged:no shift in demand 2012 Pearson Education.All rights reserved.16-15 Balance of Payments This is the method for measuring the effects of international financial transactions o

16、n the economy.The balance of payments is a booking system for recording all receipts and payments that have a direct bearing on the movement of funds between nations.2012 Pearson Education.All rights reserved.16-16 Balance of Payments The current account shows international transactions that involve

17、 currently produced goods and services.The trade balance is part of this account,and shows the difference between exports and imports 2012 Pearson Education.All rights reserved.16-17 Balance of Payments The capital account shows the net receipts from capital transactions.Capital flows into a country

18、 are recorded as receipts,whereas outflows are registered as payments 2012 Pearson Education.All rights reserved.16-18 Balance of PaymentsGiven these definitions,the following equation holds:Current Account+Capital Account=Net Change in Governmental International Reserves 2012 Pearson Education.All

19、rights reserved.16-19 Balance of PaymentsThe rapid growth in the U.S.current account deficit in recent years,which is now close to$1 trillion,has raised serious concerns about the impact(negative)on the U.S.economy.Well explore this briefly.2012 Pearson Education.All rights reserved.16-20 Global:Eco

20、nomist Concerns about the Current Account DeficitThe deficit(about$250b in 2009)concerns economists for several reasons:1.Indicates that at the current exchange rate,foreigners demand fewer U.S.exports than Americans demand imports.2.Foreigners claims on U.S.assets are growing,possibly leading to a

21、decreased demand for dollars over time.2012 Pearson Education.All rights reserved.16-21 Exchange Rate Regimes in the International Financial System There are two basic types of exchange rate regimes in the international financial system:Fixed exchange rate regime Floating exchange rate regime 2012 P

22、earson Education.All rights reserved.16-22 Exchange Rate Regimes in the International Financial System:Fixed Exchange Rate In a fixed exchange rate regime,the values of currencies are kept pegged relative to one currency so that exchange rates are fixed.The currency against which the others are pegg

23、ed is known as the anchor currency.2012 Pearson Education.All rights reserved.16-23 Exchange Rate Regimes in the International Financial System:Floating Exchange Rate In a floating exchange rate regime,the values of currencies are allowed to fluctuate against one another.When countries attempt to in

24、fluence exchange rates via buying and selling currencies,the regime is referred to as a managed float regime(or a dirty float).2012 Pearson Education.All rights reserved.16-24 Fixed Exchange Rate Systems Bretton Woods1.Created the International Monetary Fund(IMF),which sets rules and provides loans

25、to deficit countries2.Setup the International Bank for Reconstruction and Development(World Bank),which provides loans to developing countries 2012 Pearson Education.All rights reserved.16-25 Fixed Exchange Rate Systems Bretton Woods3.The U.S.emerged from WWII as the worlds largest economic power.Th

26、e U.S.dollar was called the reserve currency,meaning it was used by other countries to denominate the assets they held in international reserves.4.The system was abandoned in 1971.5.Even post-1971,the dollar was the“reserve currency”in which most international financial transactions were conducted.B

27、ut,as we will see next,the euro has challenged that status.2012 Pearson Education.All rights reserved.16-26 Euros Challenge to the US dollarWith the introduction of the euro in 1999,the dollar is losing position as the reserve currency.With the euro integrating European finance,it is more likely tha

28、t international transactions will use the euro.However,the European Union must start to function as a cohesive political entity for the euro to gain further ground which is unlikely in the near future.2012 Pearson Education.All rights reserved.16-27 Fixed Exchange Rate SystemsNow we turn to how fixe

29、d exchange rate systems work.The next slide shows this using the supply and demand analysis of the foreign exchange market that we examined in previous chapters.2012 Pearson Education.All rights reserved.16-28 Fixed Exchange Rate Systems:How they work There are essentially two situations where a cen

30、tral bank will act in the foreign exchange market.There are when the domestic currency is either:Overvalued Undervalued 2012 Pearson Education.All rights reserved.16-29 Fixed Exchange Rate Systems:How they work When the domestic currency is overvalued,the central bank must purchase domestic currency

31、 to keep the exchange rate fixed.As a result,the central bank loses international reserves.When the domestic currency is undervalued,the central bank must sell domestic currency to keep the exchange rate fixed.As a result,the central bank gains international reserves.2012 Pearson Education.All right

32、s reserved.16-30 Fixed Exchange Rate Systems:How they work These results can be seen in the figure on the next slide.Part(a)shows the impact of central bank actions when the domestic currency is overvalued.Part(b)shows the impact when the domestic currency is undervalued.2012 Pearson Education.All r

33、ights reserved.16-31 Intervention in a Fixed Exchange Rate System 2012 Pearson Education.All rights reserved.16-32 Analysis of Figure 16.2:Intervention in a Fixed Exchange Rate System In panel a,exchange rate at Epar is over-valued.Central bank buys domestic currency to shift demand curve to D2 In p

34、anel b,exchange rate at Epar is under-valued.Central bank sells domestic currency to shift demand curve to D2 2012 Pearson Education.All rights reserved.16-33 Fixed Exchange Rate Systems:How they work Devaluation can occur when the domestic currency is overvalued.Eventually,the central bank may run

35、out of international reserves,eliminating its ability to prevent the domestic currency from depreciating.Revaluation will occur when the central bank decides to stop intervening when its domestic currency is undervalued.Rather than acquiring international reserves,it lets the par value of the exchan

36、ge rate reset to a higher level.2012 Pearson Education.All rights reserved.16-34 Fixed Exchange Rate Systems:How they work If there is perfect capital mobility,then a sterilized exchange rate intervention keep the exchange rate at Epar.An important implicationif a country ties its exchange rate to a

37、n anchor currency of a larger country,it loses control of its monetary policy.However,this does force the more disciplined policies of the larger country on the smaller countryusually ensuring a low inflation rate.2012 Pearson Education.All rights reserved.16-35 Fixed Exchange Rate Systems:How they

38、work Currency boards are the extreme example of the last point.With a currency board,the domestic currency is backed 100%by a foreign currency.These have been established in Hong Kong,Argentina,and Estonia,to name a few.The most extreme example is dollarization,where a country adopts the currency of

39、 a foreign country.2012 Pearson Education.All rights reserved.16-36 Argentinas Currency Board Adopted in 1991 to end a long history of monetary instability.Peso/dollar exchange rate fixed,and rate guaranteed by the central bank.Early success was stifled by a mass exchange of pesos for dollarsreal GD

40、P shrunk and unemployment rose to 15%in 1995.2012 Pearson Education.All rights reserved.16-37 Argentinas Currency Board Central bank could do nothing to control thisexchange rate was fixed.But world organizations(World Bank,IMF)helped out.Another recession in 1999 eventually lead to the collapse of

41、the currency board in 2002.The peso depreciated by 70%,and a financial crisis ensued.2012 Pearson Education.All rights reserved.16-38 Dollarization Panama has been dollarized since its inception,and El Salvador and Ecuador have recently adopted dollarization.Avoids a central bank creating inflation,

42、and eliminates speculative attacks on a currency.However,a country cannot pursue its own monetary policy,and it loses the revenue a government receives by issuing currency(known as seigniorage).2012 Pearson Education.All rights reserved.16-39 Foreign Exchange Crisisof September 1992 Following the re

43、unification of Germany in October 1990,the German central bank faced inflationary pressure.To control monetary growth,the central bank raised interest rates to double-digits.The consequences are detailed on the next slide.2012 Pearson Education.All rights reserved.16-40 Exchange Rate Crisis of Septe

44、mber 19921.The increase in German interest rates lowered expected returns on British pounds,shifting demand from D1 to D2.2.The equilibrium rate was below the lower exchange rate limit for the time.3.Required England pursue a contraction or Germany to lower rates.Neither would do this.4.Demand shift

45、ed to D3a huge sell-off of pounds!2012 Pearson Education.All rights reserved.16-41 The Practicing Manager:Profiting from a FX Crisis September 1992,overvalued Once traders know central banks cant intervene enough,only head one direction,One-sided bet,“heads I win,tails I win”Traders sell,buy DM 10%a

46、fter September 16 Citibank makes$200 million Soros makes$1 billion 2012 Pearson Education.All rights reserved.16-42 Case:Recent Foreign Exchange Crisis Emerging markets have experienced recent foreign exchange crisis.These include Mexico(1994),East Asia(1997),Brazil(1999),and Argentina(2001).In each

47、 case,demand shifted to the left,and the resulting equilibrium was below the pegged value for the currency.Central banks needed to sell dollars and buy domestic currency.2012 Pearson Education.All rights reserved.16-43 Case:Recent Foreign Exchange Crisis At first successful,each central bank was lat

48、er faced with further speculative attacks.Demand curve moved further to the left!The central bank was eventually forced to give up its defense and let the domestic currency depreciate.2012 Pearson Education.All rights reserved.16-44 Case:How China Accumulated over$2 trillion in International Reserve

49、s In 1994,China pegged the yuan to the dollar.High productivity and low inflation rate lead to an increase in value of the yuan.Expected return for yuan assets increased,and demand shifted to the right.To keep the yuan from appreciating,the central bank purchased dollars.2012 Pearson Education.All r

50、ights reserved.16-45 This has created problems for Chinese authorities.They now own a lot of low-return U.S.assets Chinese goods have become so cheap that countries are threatening to enact trade barriers.Policy may lead to high inflation in the future.Case:How China Accumulated over$2 trillion in I